How 2 Years Without Student Loan Bills Changed the Game for America’s Borrowers

How 2 Years Without Student Loan Bills Changed the Game for America’s Borrowers

A new washing machine, a car, brand-name pants for work. In a world without student loan payments, millions of borrowers have gotten a taste over the past 20 months at what they could afford if they weren’t, well, borrowers.

That world without student loans has been a temporary one, of course. At the end of January, the pandemic-era reprieve that paused federal student loan payments will come to an end. For many of the country’s more than 40 million borrowers, the looming deadline means they’ll soon have to change spending habits they’ve grown comfortable with over a nearly two-year period.

Four in 10 Americans with student loan debt aren’t ready for that, saying in a recent survey from financial services company D.A. Davidson & Co. that they wanted the government to extend the pause past January 2022 . That may be, in part, because people are relying on that money for other things: In another survey from Pew Charitable Trusts, 59% of borrowers who had not been making voluntary payments during the pause said they were instead using that money for “needed expenses,” including rent, food or utilities.

The absence of monthly payments, for some people, was a necessary buffer from financial strain. For others, the extra money went toward future goals they’d been neglecting while paying down their debt. Either way, Kevin Mahoney, a financial advisor in Washington, D.C. and founder of Illumint , says the break from payments and interest has been a breath of fresh air for borrowers.

For once, borrowers could spend on what really mattered to them, without worrying about loans.

“This time can provide so much insight on what people would do in the absence of having to devote such a large percentage of resources to debt,” Mahoney says.

From saving for retirement to paying off credit card debt, here are six stories of borrowers and how they used the money they’d otherwise spend on student loans. Paying down expensive credit card debt

Jennifer Cardenas, a first-generation Latina college grad, finished up her anthropology degree from Columbia University in 2021 with just over $67,000 in student loan debt. Luckily, she graduated into the period of paused student loan payments, because 34-year-old Cardenas says she’d have struggled to come up with money for the $800 payments, after she lost her college tutoring job. She ended up racking up about $7,000 credit card debt during college on the essentials she needed to live.

She used the money she would have otherwise spent on student loan payments to pay down her credit cards and boost her savings. She also bought a washing machine for her parents, who she’s been staying with since graduation. Cardenas is grateful for the ability to pay her bills without stress — she didn’t have to worry as much about unexpected expenses since the payment pause gave her a little wiggle room in her budget.

By the time her loan payments start in 2022, she hopes to have her credit cards totally paid off and some money saved. But she doesn’t anticipate transitioning to pay down her debt quickly. In fact, she plans to take out student loans to attend law school.

“The playing field is so uneven for people of color, who don’t have the same access to education as other people,” she says. “Having a law degree, even if it adds more debt, will create more socioeconomic mobility for me.” Having freedom to save and donate to causes he’s passionate about

Lewis Eggleston, a 35-year-old American expat in Germany, graduated college in 2008, during the Great Recession. In such a lackluster job market, he chose to serve two terms in Americorps, before returning to school. He borrowed $70,000 to attend seminary. Now 35, he knows that debt enabled him to get a job he loves as a queer minister at a nonprofit organization. But Eggleston says the stress of owing that much money also constantly lurks.

“Millennials listened to their elders when they said education was essential to get ahead, and now I’m in stressful crushing debt with an interest rate I can only describe as sinful,” he says.

Even though he’s made payments for years before the payment pause, his debt has actually grown to $79,000. (He’s been in an income-based repayment plan , in which his monthly payments are based on his salary, not how much he owes.)

He’s used the months off to boost his savings so he can afford to pay his loans again when the time comes. He’s also increased his giving to other nonprofit organizations. With […]

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