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When Student Loan Debt Paused, These Borrowers Kept Paying

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Rather than skipping payments during the Biden administration’s student-loan freeze, a small but committed percentage of borrowers chose to keep paying anyway.

As of December 2021, 1.2% of borrowers continued paying down loans, said Mark Kantrowitz, a student loan expert. Mr. Kantrowitz’s estimate is based on repayment data released by the Education Department. 

The…

Rather than skipping payments during the Biden administration’s student-loan freeze, a small but committed percentage of borrowers chose to keep paying anyway.

As of December 2021, 1.2% of borrowers continued paying down loans, said Mark Kantrowitz, a student loan expert. Mr. Kantrowitz’s estimate is based on repayment data released by the Education Department. 

The student-loan pause was a pandemic-relief measure that began in March 2020, and which President Biden recently extended through the end of August. The Federal Reserve Bank of New York estimates that borrowers skipped nearly $200 billion in payments during this period.

The two-plus years of optional, interest-free payments allowed these borrowers to put a dent in their loans. Some managed to wipe out their debt entirely. 

Heather Hamilton, a search engine optimization specialist in Denver, originally took out a mix of private and federal student loans to pay for her two degrees, a bachelor’s in kinesiology and a master’s in applied health science, both from Indiana University. 

In February 2022, she was able to eliminate her private education loans entirely, which she did in one extra-large payment. She credits the achievement to the financial latitude afforded her by the pause. 

“The pandemic, as unfortunate as it was, turned things around for me with the freeze,” Ms. Hamilton said. “It gave me a chance to get ahead instead of feeling like I was just constantly making the minimum payment.” 

Heather Hamilton, at her home in Wheat Ridge, Colo., said the student-loan payment pause ‘turned things around for me.’
Photo: Rachel Woolf for The Wall Street Journal

The 1.2% figure might seem small, Mr. Kantrowitz said, but given the enormous number of student loan borrowers—nearly 43 million as of 2021—that means nearly half a million people continued making some payments even as policy makers in Washington debate the possibility of student loan forgiveness.  

To some borrowers, the suspension of payments provided an opportunity to reset financial priorities. 

Katie Brown, a staffing recruiter in Omaha, Neb., had managed to pay down nearly $30,000 of her original $40,000 student loan debt in 2020. Between March 2020 and December 2021, she took advantage of the pause and stashed the amount she had usually earmarked for her monthly payment away in savings. She planned to pay off the remaining $10,000 by December 2021, when she would then be able to live debt-free. 

“I was aggressive, trying to get that weight off my shoulders,” she said. “You feel the effect of it on you physically. You feel the weight of ‘I can’t go out and do something because I have $300 due at the end of the month.’ ” 

Ms. Brown credits her ability to wipe out the remainder of her student loans to curtailed spending during the pandemic. Like many Americans, she made big strides in saving during the past two years. After that, she moved in with her cousin to drastically cut down on housing costs. Finally, she took any sales bonus or commission from her job and immediately applied it to her remaining debt. 

By December 2021, she was sitting at her work-from-home desk in sweatpants, ready to hit the big button: “pay off remaining balance.” 

Navient’s recent $1.7 billion settlement will erase student debt for about 66,000 borrowers. WSJ’s Josh Mitchell breaks down the settlement and explains which borrowers will receive debt relief. Photo: Storyblocks

“There’s no showers, there’s no registries, no confetti,” she says of the moment. “I turned to my cousin and said, ‘I just paid off my student loans. So, hey, go me.’ ” Her cousin went into the kitchen and retrieved a single mini Reese’s cup to celebrate. 

“We laughed so hard. What else do you do?” she said.

Sixty-nine percent of student loan borrowers also hold at least one additional debt, like a credit card or auto loan, according to Education Department data analyzed by the Census Bureau, and those with those additional debts likely carry higher student loan burdens.

Given the pause on interest accrual for federal student loans, Ms. Hamilton decided to instead give priority to paying down her private loans. She wasn’t alone: The New York Fed data show that from April 2020 to December 2021, the percentage of borrowers paying at least $2,000 toward their private student loans increased from 40% to 49%. 

Ian Coon, a 24-year-old recent college graduate living in Washington, D.C., is making bigger payments on his private student loans while leaving his federal loans on pause. Mr. Coon is paying close attention to the debate around student loan forgiveness.

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“They’re not going anywhere,” he said of his private student loans. “But there’s so much conversation about forgiveness, so I’m holding out hope for something for federal loans there.”

Despite paying off her loans entirely, Ms. Brown said it is tough to build her savings up again. Recently, her car transmission blew out, and the expensive repairs got her thinking about her decision to pay off her loans entirely. 

“I did a good thing. I paid off my student loan,” she said. “Now, I need to go buy a car or a new vehicle and I’m like, ‘Gosh, I could really use that [money].’ ”

Write to Julia Carpenter at julia.carpenter@wsj.com

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