Forbearance Isn’t Forever: How 6 Student Loan Borrowers Prepare to Pay

• The temporary federal student loan deferment period will end May 1, 2022.
• Nearly 7 in 10 federal student loan borrowers will need to adjust their repayment strategy.
• Just 36% of borrowers continued to make payments throughout the deferment period.
• During the moratorium, about one-fifth of borrowers put money that would have gone toward student loan payments into savings.

Around 43 million Americans with federal student loan debt can expect to face some big financial decisions when the interest-free deferment period enacted at the start of the COVID-19 pandemic officially ends May 1, 2022.

A new survey by Bankrate and BestColleges found that 69% of Americans with federal student loans will need to reconsider how they handle monthly payments once deferment ends.

In March 2020, the Department of Education announced a temporary interest-free deferment for federal student loans. This allowed borrowers to stop making payments on their loans without fear of incurring interest or penalties.

The moratorium on student loan payments also enabled many Americans to focus on other goals and necessities, such as paying for housing, buying essentials, supporting family, saving for emergencies, and paying off other debt.

End of Deferment May Result in Long-Term Financial Impacts

With inflation at its highest since 1990 and no end in sight for the pandemic, COVID-19-related financial hardship may persist long after the student loan deferment period ends.

Many borrowers will soon have to make decisions about how to resume making payments or find alternative ways to defer. One-fourth of survey respondents reported worrying about their ability to pay for housing. Just 31% plan to continue regular repayments when deferment ends.

The survey also revealed that 36% of Americans continued to make payments on their federal student loans during the deferment period. Borrowers making interest-free payments on their principal loans effectively lower the amount of interest they'll owe during the lifetime of that loan.

To shed some more light on these survey findings, we spoke with six borrowers about their experiences during the deferment period and what they plan to do once it ends in May.

Around One-Fifth of Americans Put Money Toward Savings During Deferment

The new survey found that 21% of respondents used money that would have gone to student loan payments to instead build up an emergency fund and savings.

For Corina Palagruto, a retail dietitian from Philadelphia, the deferment period was a welcome break from living paycheck to paycheck. "We were able to start necessary home improvements, pay down car loans, and build up our savings," she said.

Palagruto has between $30,000 and $50,000 in remaining student loan debt and plans to return to regular payments once the deferment period ends. She has also decided to pick up additional part-time work in order to continue growing her emergency fund.

Luke Wonderly, a nursery technician based in Washington, also used the deferment period to boost his rainy-day fund.

"I did not make payments on my student loans during the deferment period for a few reasons," he explained. "One is the possibility of loan forgiveness in the future (or another extension of the deferment program). Another reason is that without interest accruing, it wasn't doing any harm to put off the payments until a later date."

Wonderly can afford to make the payments when deferment ends but will cut back on entertainment and personal spending.

"I did not make payments on my student loans during the deferment period. … Without interest accruing, it wasn't doing any harm to put off the payments until a later date."

— Luke Wonderly, Nursery Technician

"I was able to get a new job during COVID-19 at an opportune time, and because of that my income has increased and I feel more secure in my work," he said.

All interviewees mentioned the same silver lining from the pandemic's economic impact: a newfound financial awareness and proactivity when it comes to saving and budgeting. Those skills will remain especially important as we continue to face an ever-changing, tumultuous economy.

"The unfortunate financial side effects of the pandemic were the increased costs of consumer goods and the skyrocketing prices among rentals in my area," said Wonderly. "It all plays a role in student loan management and budgeting, but adjustments can be made and by no means do I feel like I can't afford to make these payments."

Roughly One-Third of Americans Continued to Make Payments on Student Loans

Mariah Ackary, a content editor from Charlotte, continued to make payments on her loans despite the moratorium. She has maintained her full-time job throughout the pandemic and was financially able to stick to her original payment schedule.

According to the findings, 22% of Americans continued to make payments of the same amount throughout the deferment period, while 15% paid less than normal.

"I was lucky to keep my job (and even got a raise) during the pandemic," said Ackary. "And with stay-at-home orders, I was actually saving a lot of money."

Ackary explained how the pandemic gave her budget more wiggle room because she was spending less on entertainment and travel.

"It's really the (slow) return to semi-normal life that's been an adjustment," she said. "It's like learning to budget all over again."

"I have continued to [make payments] because it is a wonderful opportunity to lower the principal balance, which will reduce the amount of interest I will pay over the life of the loan."

— Caleb Reed, Finance Blogger and Student

Despite rising inflation, consumer spending has consistently increased in retail and entertainment over the last several months. After the sharp decline in spending in 2020, many people are now spending money on services and experiences they missed out on last year.

Caleb Reed, a finance blogger and student, continued to make payments during the pandemic but at a lower amount, dedicating the rest to other high-interest debt.

"I have continued to [make payments] because it is a wonderful opportunity to lower the principal balance, which will reduce the amount of interest I will pay over the life of the loan," he said.

Reed now has less than $10,000 in student loan debt. When the deferment period ends in May, he plans to continue making regular payments. Reed also said he will cut back on discretionary spending in order to continue saving money.

Nearly 3 in 10 Americans Plan to Enroll in Income-Driven Repayment Plans

Some of the actions federal student loan borrowers plan to take after the deferment period ends May 1 include enrolling in an income-driven repayment plan (29%), applying for more deferment (16%), and getting a second job (25%).

Brittany Darby, a creative strategist from Los Angeles, plans to apply for an income-driven repayment plan once deferment ends.

"I'm in no rush to pay these loans off before I'm financially secure," she explained. "Paying the debt off does nothing to improve my day-to-day financial situation, and as long as I pay my bills on time, my credit score isn't negatively impacted."

Darby used to pay larger amounts on her student loans in an effort to pay them off quicker, but the pandemic-driven moratorium changed her approach to how she deals with student debt.

"More than anything, I got to see exactly where my money was going, and I didn't like how much of it went to student loans," she said. "I've seen how much more I can do with my money without student loan payments, [and] it's not worth sacrificing saving and investing for the future."

Darby currently has between $50,000 and $80,000 remaining in student loan debt. The end of the deferment period will impact her ability to save for a home.

Meanwhile, Bethany McCarter has taken a different approach and decided to reenroll in graduate school in order to defer payments past May 1. McCarter is a former teacher who left the classroom during the pandemic to stay home and care for her two young children.

Since the start of the pandemic, about 400,000 more women than men have left the workforce, with most choosing to become caregivers for their children amid school closures.

"I was so worried about exposing my family and children to the virus," said McCarter. "Now, I can't imagine paying for childcare just so I can work longer hours."

During the deferment period, McCarter used the money that would have gone toward her student loan payments for essentials like groceries and gas. In order to continue prioritizing her role as a caregiver, she must find other ways to defer those payments.

What Are Borrowers' Options When Deferment Ends?

The ongoing student loan deferment period has impacted borrowers in a number of ways. Debt management is a unique and personal journey that will look a little different for everyone.

Though many may be able to continue making regular payments once the moratorium ends, a large portion will need to adjust their budgets, find new income, and/or apply for additional financial assistance.

Those interested in extending their deferment or applying for an income-driven repayment plan can visit the Federal Student Aid website.

With Contributions From:

Corina Palagruto

Corina Palagruto works as a retail dietitian in the Philadelphia area. She started paying off her student loans in 2017. Corina and her husband live just outside Philly with their pup and two cats.

Luke Wonderly

Luke Wonderly grew up in the small town of Sekiu on the northwest tip of the Olympic Peninsula in Washington. There, he attended school with his nine brothers and sisters and loved every minute of it. After earning his associate degree at a community college, he pursued many different careers trying to find what he was passionate about. Most recently, Luke finds himself as an orchard tech for a Douglas fir seed orchard in Sequim, Washington. Outside work, he enjoys working on projects, riding his bike, and spending time outdoors with friends and family.

Mariah Ackary

Mariah Ackary is a content editor for Bankrate, a personal finance news and advice site. She graduated from the University of South Carolina in 2019 and currently lives in Charlotte, North Carolina. When she's not working, she loves trying new recipes and exploring the ever-growing brewery scene in Charlotte.

Mariah Ackary is a Red Ventures employee.

Caleb Reed

Caleb Reed is a self-taught personal finance expert and founder of TheDollarBudget. He is currently a senior at Boise State University where he is pursuing a major in finance.

Brittany Darby

Brittany Darby is a content creator and creative strategist living in Los Angeles. She earned her bachelor's in filmmaking from Woodbury University in Burbank, California.

Bethany McCarter

Bethany McCarter is a former teacher who left the classroom during the pandemic to stay home and care for her two young children. She currently works as a freelance writer and is developing curricula for homeschool parents.

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