The federal student loan system saw millions of borrowers who were expected to make payments on their loans on October 1, 2023 — for the first time in nearly three-and-one-half years since the pandemic-era payment pause began in April 2020. The reports build on the Philadelphia Fed’s previous examinations of student loan borrowers’ financial well-being during the payment pause, published in May 2022 and November 2023.

The reports draw on novel data from two consumer surveys that our Consumer Finance Institute collected during 2023. The first is a quarterly survey of more than 5,000 consumers — both those with student loans and those without — fielded in early January, April, July, and October 2023. These rich quarterly data on consumer financial well-being provide a view into student loan borrowers’ expectations and concerns regarding payments resumption beginning on October 1 and borrowers’ expected capacity to make payments once they resumed. The second data are drawn from an ad hoc survey of more than 2,000 student loan borrowers that was fielded in early November 2023 and provide a view into the actual October 2023 payment patterns of borrowers, their reasons for not making payments, their expected repayment capacity later in 2023, their awareness of and enrollment in reduced payment plans, and their anticipated budget adjustments in response to the resumption of federal student loan payments.

With the expiration of the payment pause affecting tens of millions of federal student loan borrowers in repayment, the new research sheds light on the effects of the payments resumption on student loan borrowers’ financial lives and the economy at large. 

Part 1: “Borrower Transitions into Student Loan Repayment: Evidence from Fall 2023 Consumer Survey Data”

January 18, 2024

This report launches our special series on student loan payments resumption and focuses on borrowers’ expectations for repayment capacity in Q4 2023, as well as providing the first view into actual payments made in October 2023 on resumed federal student loans. Our data show that most borrowers have successfully resumed payments, and most expected to continue being able to make payments through the end of 2023, without a significant burden to their overall economic outcomes or sentiment. On the other hand, there is clear evidence that borrower distress has not been eliminated by the on-ramp provided thus far, with some 22 percent of borrowers anticipating missing at least one of their scheduled payments in Q4 (11 percent expecting to miss all three scheduled payments, and another 11 percent expecting to miss at least one of the three scheduled payments). Of the borrowers who made less than their full payment in October 2023, about one-half did so because they found their scheduled payment to be unaffordable, about one-quarter experienced servicing frictions, and about one-fifth strategically skipped or postponed their payments because missed payments will not be reported until October 2024.

View the Full Report

Part 2: “Beyond the Minimum: Excess Student Loan Payments in Summer and Fall 2023”

January 25, 2024

The second report in our series considers those borrowers who reported making one-time lump-sum or excess payments in the months leading up to the expiration of the interest-free provision of the federal student loan payment pause on September 1 and the resumption of payments on October 1, 2023. Our data show that approximately 30 percent of borrowers made lump-sum or excess payments toward their federal student loans in July–September 2023. Higher-income borrowers were considerably more likely to make lump-sum payments — and in larger amounts — though lower-income borrowers still accounted for a larger share of aggregate lump-sum payments because they represent such a large proportion of all borrowers. Among respondents in our data who reported lump-sum payments, most made modest payments in relation to their estimated scheduled monthly payments (with a median lump-sum payment of 1.5 times their regular monthly payment), and most borrowers made lump-sum payments on the order of 1–10 times their scheduled monthly payment. We estimate that borrowers in the payment pause made upward of $15 billion of lump-sum payments — or nearly 1 percent of outstanding federal student debt — during July–September 2023, consistent with the publicly available payment receipts data from the U.S. Department of the Treasury.

View the Full Report

Part 3: “SAVE Your Guesses: Borrower Expectations for Enrollment in the New SAVE Income-Driven Repayment Plan”

February 1, 2024

In the third report in our series, we report on student loan borrowers’ awareness of and reported intention to apply for the Saving on a Valuable Education (SAVE) income-driven repayment (IDR) plan. We also provide estimates of potential payment reductions for eligible borrowers not already enrolled in the SAVE plan. The patterns in our data suggest that many borrowers remained unaware of the SAVE plan as of November 2023, with one-third of federal student loan borrowers in repayment never hearing about the SAVE plan as of November 2023. Borrower groups with the lowest awareness of the SAVE plan included the lowest-income borrowers, as well as borrowers who are over 55, female, or have some college education but no bachelor’s degree. Once we explained the plan’s features and eligibility criteria in more detail, we found that 8 percent of borrowers not already enrolled in the SAVE plan reported already being in a different type of IDR plan and having no intentions of switching to the SAVE plan. Another 16 percent reported being ineligible because of holding primarily parent or private student loans, and 20 percent were eligible for the plan but had no interest in applying. A full one-third of borrowers not already enrolled in the SAVE plan continued to be unsure about applying for it, indicating a continued role for borrower outreach. Finally, we find that more than one-half of prospective enrollees — those eligible for and not already enrolled in the SAVE plan — might see a reduction in their scheduled monthly payments if they were to enroll in the plan. More than one-third of prospective enrollees would not be required to make payments on their loans at all because their incomes were below the applicable income threshold.

View the Full Report

Part 4: “Resetting Wallets: Survey Evidence on Household Budget Adjustments with Student Loan Payments Resumption”

February 8, 2024

This final report in our series examines student loan borrowers’ expectations for how their household budgets might adjust in terms of earning, borrowing, saving, and spending behavior coinciding with the return to repayment that began on October 1, 2023. We find that a majority of student loan borrowers expected a change in at least one budget category in our survey, and that more than one-quarter expected changes in all categories. The budget categories with the largest expected change (as a share of household income) were in borrowing and savings. The average expected budget changes contemplated in our report could be the result of many factors that these borrowers were experiencing or anticipating: overall economic conditions, life transitions, the resumption of student loan payments, and policy changes introduced by the U.S. Department of Education (primarily, a new income-driven repayment plan and targeted debt cancellation). In fact, based on our analysis, a sizable portion of the reported expected changes in budget categories appears to be related to factors other than the payments resumption. Yet, we find that borrowers with nonzero scheduled monthly payments on their federal loans were more likely to anticipate budget changes, and those changes were expected to be larger than changes reported by borrowers who were not directly affected by the payments resumption. In the aggregate, our best estimate places the total expected effect on borrowers’ net available funds somewhere between one-third and two-thirds of the aggregate resumed payments, or between $2.4 billion and $4.2 billion. Contrary to popular discourse, the primary vehicle of budget adjustment for student loan borrowers resuming payments appears to be borrowing and savings, and less so spending. Overall, we find weak evidence that student loan borrowers expected to change their earning, borrowing, saving, or spending behavior following the payments resumption in a way that significantly contributes to observed trends in aggregate consumption, borrowing, or savings.

View the Full Report