While the coronavirus pandemic has posed financial challenges for many over the past nearly two years, student loan borrowers have enjoyed some relief in this period. In March 2020, the government paused student loan payments and interest on eligible federal loans.
Since then, the student loan moratorium has been extended five times, most recently through May 1, 2022. (UPDATE: The moratorium in early April was extended for a sixth time, through Aug. 31, but this study was based on the May 1 end to the pause.) This long-term, zero-interest forbearance is resulting in major savings for borrowers — $145 billion in total, according to Student Loan Hero researchers.
Analysts estimate the typical borrower in active repayment will have kept $6,949 that would have otherwise gone to their student loans — including $834 amid this extension.
- Eligible borrowers in active repayment across the U.S. will have kept $145 billion in their pockets by the time the student loan moratorium is due to expire early in May 2022. The average student loan borrower in repayment will save $6,949 during the 25-month student loan forbearance period.
- Student loan borrowers in the District of Columbia, Alaska and Washington are estimated to have saved more per resident than in all other states. However, when adding up the total savings, the amounts are greatest in California, Texas and New York.
- The amount of money that student loan borrowers are expected to save represents 0.08% of the national gross domestic product (GDP) and 0.08% of total personal income.
- The moratorium extension from Jan. 31, 2022 to May 1, 2022, will save borrowers $17 billion, with an average per-borrower savings of $834.
Student loan borrowers will have kept $145 billion in their pockets
Americans owe more than $1.71 trillion in student loans. Although not every borrower was in active repayment when the student loan moratorium began, the group that was will reap major savings — $5.8 billion a month, for a total of $145 billion over 25 months, according to Student Loan Hero researchers.
In total, analysts estimate the typical student loan borrower in active repayment will have kept an extra $6,949 after the 25-month moratorium. While between 300,000 and 500,000 borrowers chose to keep making payments on their student loans during this time to cut down on their principal, others may have used that money for emergency expenses, living costs or their own savings.
However borrowers chose to use this money, it was likely a welcome relief during the coronavirus pandemic.
|How much Americans are saving during the student loan moratorium|
|Estimated borrowers in active repayment each month (millions)||20.8|
|Estimated monthly amount saved (billions)||$5.8|
|Estimated amount saved over 25-month moratorium (billions)||$144.5|
|Estimated average amount saved per borrower in repayment over 25-month moratorium||$6,949|
Borrowers in D.C., Alaska and Washington are saving at least $8,400
While the average student loan borrower in active repayment is saving $6,949 during the moratorium, that number is higher or lower by state depending on what borrowers’ pre-moratorium payments looked like.
According to Student Loan Hero findings, borrowers in the District of Columbia will have saved the most when the moratorium is complete, with an average savings per borrower of $9,700.
Borrowers in Alaska and Washington also will have reaped relatively high savings at $8,665 — $8,409, respectively. Before the pandemic, borrowers in D.C. paid an average of $388 a month in student loans, while borrowers in Alaska and Washington state paid $347 and $336, respectively.
On the flip side, borrowers in North Dakota, Mississippi and Arkansas saved $5,289, $5,629 and $5,673, respectively. Residents of these states had average monthly payments of $227 or lower.
California, Texas and New York top list of states that saved most
Along with estimating the amount of money saved per borrower, Student Loan Hero took a look at how the student loan moratorium has impacted states as a whole.
According to the analysis, California has been infused with more than half a billion a month — $584 million, to be exact — that would have otherwise been earmarked for student loan payments. Texas and New York follow at $477 million and $366 million, respectively, in total student loan money saved each month.
For the most part, analysts found that states with bigger populations had greater savings, since they likely had a larger number of student loan borrowers. In fact, the five most populous states comprise 36% of the total savings per month.
Meanwhile, Wyoming, North Dakota and Vermont — among the least populated states — saw significantly lower monthly savings. Borrowers in these states saved a monthly total of $7 million, $9 million and $11 million, respectively.
Having highest total savings doesn’t mean moratorium has had greatest impact on that state’s economy
According to the Student Loan Hero analysis, the amount of money withheld from student loan payments represented 0.08% of the national GDP and 0.08% of total personal income.
Between April 2020 and September 2021 — the latest available data — the savings from the student loan moratorium totaled nearly $104 billion. By the time the moratorium ends in 2022, those total savings are expected to reach $145 billion.
|Moratorium savings as a percentage of GDP, total personal income|
|Student loan moratorium savings from April 2020 through September 2021* (billions)||$103.8|
|U.S. gross domestic product from April 2020 through September 2021* (billions)||$130,075.1|
|Total personal income in the U.S. from April 2020 through September 2021* (billions)||$122,887.3|
|Moratorium savings as a percentage of GDP||0.080%|
|Moratorium savings as a percentage of total personal income||0.084%|
|*Latest available data at the time of publication|
Despite having the largest cash infusion, California’s savings only represent 0.06% of their state GDP, the fourth-lowest among the states.
Mississippi’s economy enjoyed the biggest benefit from the moratorium, as its estimated infusion of $880 million over the April 2020 to September 2021 period represented the equivalent of 0.08% of its GDP and 0.08% of total personal earnings within the state.
Of course, these numbers will differ by borrower, and the interplay between state size, average monthly payment and each state’s economy is complex. While the pause in student loan payments might have represented a drop in the bucket for some, it may have been a serious financial lifeline for others during this difficult time.
REPORTERS: Looking for state-specific data on the moratorium savings as a percentage of GDP or total personal income? Contact [email protected]
Most recent extension will save borrowers $17 billion
Since the student loan moratorium began in March 2020, it was extended five times, twice by the Trump administration and three times by the Biden administration. Most recently, it was set to expire at the end of January 2022 when the current administration extended it again through May 1, 2022.
This added three-month extension was significant for borrowers, representing a savings of $17 billion in student loan payments overall — and $834 per borrower. Notably, the Biden administration initially indicated that the extension through January would be the last. However, the White House news release on this latest extension doesn’t use similar language, so stay tuned.
If you owe federal student loans, make sure to sign in to your accounts and review your information, including your:
- Interest rate
- Monthly payment
If your payments are burdensome, you might consider applying for an alternative repayment plan, such as income-driven repayment or extended repayment.
Federal Student Aid also offers forbearance and deferment options on a case-by-case basis. Speak with your loan servicer about your options, but remember that interest will accrue on most loan types during normal forbearance periods.
Refinancing your student loans might be another avenue worth pursuing, particularly if you have strong credit and a stable income. Interest will resume on federal student loans when the moratorium ends, so it might make sense to refinance your loans for better rates. (Still, note that refinancing federal loans makes them private — and you’ll lose access to their benefits. Before doing so, make sure it’s the right decision for you.)
Student Loan Hero analysts first estimated the amount that student loan borrowers would have spent on student loan payments absent the moratorium. Researchers used anonymized credit reports of LendingTree users in the first quarter of 2020 to calculate the average student loan payment for those with active payments. Analysts multiplied that figure by the estimated number of federal loan borrowers in active repayment each month between April 2020 (when the moratorium began) and May 2022 (when the moratorium is scheduled to expire).
Next, analysts used U.S. Department of Education data to project the number of borrowers who would have made payments absent the moratorium. Researchers found the average percentage of borrowers in repayment between the first quarter of 2017 and the first quarter of 2020. Analysts multiplied that by the number of federal loan borrowers at the end of each quarter to estimate the number of borrowers in repayment each month within that quarter. Future months were calculated by multiplying the three-year average change in borrowers, quarter over quarter.
In addition, analysts compared the amount of money that would have gone to student loan payments to the gross domestic product of the nation and each state, as well as to the total amount of personal income. This period covered the second quarter of 2020 through the third quarter of 2021. The data came via the U.S. Bureau of Economic Analysis — the latest available data at the time of publication.
Correction: Because of a data error, the average savings per federal student loan borrower was incorrect in the initial version of this study. The figure has been updated based on the latest extension.