California Policy Lab

At the start of the COVID-19 pandemic, the federal government stopped requiring payment on most federal student loans. This “payment pause” was originally set to expire in September 2020, but after several extensions it is set to expire May 1, 2022. Using anonymized credit records, we describe who was affected by the payment pause, how it impacted their finances, and what might happen when the payment pause ends. The payment pause affected the vast majority of student loan borrowers, and their average overall debt obligations fell by $210 (equivalent to one-third of their installment loan payments). The payment pause improved credit standing among affected borrowers. Delinquency rates dropped from 7% to 0%, and credit scores increased by an average of nearly 30 points, concentrated especially among borrowers with lower starting credit scores. We predict that three in ten borrowers — or nearly 8 million people — are at high risk of missing payments when the payment pause ends. These borrowers owe nearly $280 billion in paused student loans. Though we cannot directly observe the racial identity of these borrowers, they are more likely to live in neighborhoods with a high proportion of Black residents than other paused borrowers. 

This work has been supported, in part, by the University of California Multicampus Research Programs and Initiatives grants MRP-19-600774 and M21PR3278.