While the coronavirus pandemic has posed financial challenges for many, student loan borrowers have enjoyed some relief. Beginning in March 2020, the government suspended payments and interest on eligible federal student loans.
Since then, the moratorium on student loans has been extended four times, most recently to January 31, 2022. This long-term, interest-free forbearance translates into significant savings for borrowers – $ 154 billion in total , according to researchers at Student Loan Hero. .
Analysts estimate that the typical borrower in repayment will have kept $ 7,431 that would otherwise have gone to his student loans. However, borrowers should not rely on another extension.
Main conclusions
- Eligible borrowers in repayment in the United States will have kept $ 154 billion in their pockets by the time the moratorium on student loans expires in January 2022. The average current student loan borrower will save $ 7,431 over the 22-month student loan forbearance period.
- Student loan borrowers in the District of Columbia, Alaska and Washington are estimated to have saved more than residents of any other state. However, when you add up the total savings by state, the amounts are highest in California, Texas and New York.
- The amount of money student loan borrowers are expected to save is 0.08% of national gross domestic product (GDP) and total personal income.
- The most recent extension of the moratorium from September 30, 2021 to January 31, 2022, will save borrowers $ 28 billion, with an average savings per borrower of $ 1,351.
Student loan borrowers will have kept $ 154 billion in their pockets
Americans must over $ 1.71 trillion in student loans. While not all borrowers were in repayment when the student loan moratorium began, the group that did it will see significant savings – $ 7 billion per month, for a total of $ 154 billion. dollars over 22 months, according to researchers at Student Loan Hero.
In total, analysts estimate that the typical student loan borrower in repayment will have kept an additional $ 7,431 after the 22-month moratorium. While between 300,000 and 500,000 borrowers chose to continue to repay their student loans during this period to reduce their principal, others may have used this money for emergency expenses, living expenses or their expenses. own savings.
Regardless of how 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 repayment each month (millions) | 20.8 |
| Estimated monthly amount saved (in billions) | $ 7.0 |
| Estimated amount saved on 22-month moratorium (billions) | $ 154.3 |
| Estimate of the average amount saved per borrower in repayment over a 22-month moratorium | $ 7,431 |
DC, Alaska and Washington borrowers save at least $ 7,400
While the average student loan borrower in repayment saves $ 7,431 during the moratorium, that number is higher or lower depending on the state depending on the appearance of the borrower’s pre-moratorium payments.
According to the findings of Student Loan Hero, District Columbia borrowers will have saved the most when the moratorium is over, with an average savings per borrower of $ 8,536. Alaskan and Washington borrowers will also have seen relatively large savings, at $ 7,625 and $ 7,400, respectively. Before the pandemic, borrowers in DC paid an average of $ 388 per month in student loans, while borrowers in Alaska and Washington state paid $ 347 and $ 336, respectively.
On the other hand, borrowers in North Dakota, Mississippi and Arkansas saved $ 4,655, $ 4,954 and $ 4,993, respectively. Residents of these states had average monthly payments of $ 227 or less.
California, Texas and New York topped list of states with the most savings
In addition to estimating the amount of money saved per borrower, Student Loan Hero examined the impact of the moratorium on student loans across states.
According to the analysis, California received more than half a billion per month – $ 581 million, to be exact – which would otherwise have been allocated to student loan repayment. Texas and New York follow with $ 472 million and $ 364 million, respectively, for total student loans saved each month.
For the most part, analysts found that the more populous states had larger savings, as they likely had more student loan borrowers. In fact, the five most populous states account for 36% of total savings per month.
Meanwhile, Wyoming, North Dakota, and Vermont saw significantly lower monthly savings. Borrowers in these states saved a monthly total of $ 7 million, $ 9 million, and $ 11 million, respectively.
Having the highest total savings doesn’t mean the moratorium had the biggest 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 GDP and total personal income of the United States as a whole.
Between April 2020 and March 2021 – the latest data available – savings from the student loan moratorium totaled nearly $ 70 billion. By the end of the moratorium in 2022, these total savings are expected to reach $ 154 billion.
| Moratorium savings as a percentage of GDP, total personal income | |
|---|---|
| Moratorium savings on student loans from April 2020 to March 2021 * (billions) | $ 68.9 |
| Gross domestic product of the United States from April 2020 to March 2021 * (in billions) | $ 84,246.6 |
| Total personal income in the United States from April 2020 to March 2021 * (in billions) | $ 82,005.3 |
| Moratorium savings as a percentage of GDP | 0.082% |
| Moratorium savings as a percentage of total personal income | 0.084% |
| * Latest data available at the time of publication | |
Despite the largest cash injection, California savings account for just 0.06% of state GDP, the third lowest among states. Mississippi’s economy benefited the most from the moratorium, as its estimated $ 590 million brew was the equivalent of 0.13 percent of their GDP and 0.11 percent of the state’s total personal income.
Of course, these numbers vary by borrower, and the interplay between state size, average monthly payment, and the economy of each state is complex. While the pause in student loan payments may have been a drop in the bucket for some, it may have been a serious financial lifeline for others during this difficult time.
JOURNALISTS: Looking for state-specific data on moratorium savings as a percentage of GDP or total personal income? Contact [email protected].
Latest expansion will save borrowers nearly $ 28 billion
Since the student loan moratorium began in March 2020, it has been extended four times, twice by the Trump administration and then twice by the Biden administration. More recently, it was due to expire at the end of September 2021 when the current the administration extended it again until January 31, 2022.
This additional four-month extension was significant for borrowers, saving $ 28 billion in student loan repayments and $ 1,351 per borrower. However, borrowers should not count on another extension, as officials have indicated payments will resume after January 2022.
If you owe federal student loans, be sure to log into your accounts and review your information, including your:
- Balance
- Interest rate
- Monthly payment
If your payments are heavy, you might consider requesting another repayment plan, such as income-based reimbursement Where extended refund.
Federal student aid also offers abstention and adjournment options case by case. Talk to your loan officer about your options, but remember that interest will accrue on most types of loans during normal forbearance periods.
Refinancing your student loans could be another way to go, especially if you have good credit and a stable income. Interest on federal student loans will resume when the moratorium ends, so it might be a good idea to refinance your loans for better rates.
Student Loan Hero analysts first estimated how much student loan borrowers would have spent on student loan repayments in the absence of the moratorium. The researchers used the anonymized credit reports of LendingTree users in Q1 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 repayment each month between April 2020 (the start date of the moratorium) and January 2022 (the expected expiration date of the moratorium).
Next, analysts used data from the US Department of Education to project the number of borrowers who would have made payments without the moratorium. The researchers found the average percentage of borrowers in repayment between the first quarter of 2017 and the first quarter of 2020. Analysts multiplied this percentage by the number of federal loan borrowers at the end of each quarter to estimate the number of borrowers in repayment each month during that period. trimester. The months to come were calculated by multiplying the three-year average change in borrowers from quarter to quarter.
Additionally, analysts compared the amount of money that would have been spent on student loan repayments to the gross domestic product of the nation and each state, as well as the total amount of personal income. This period covered the second quarter of 2020 through the first quarter of 2021. Data was provided by the US Bureau of Economic Analysis – the latest data available at the time of publication.
