Who is at risk when student loan repayments resume?

When the global pandemic began in March 2020, the United States Department of Education took the bold step of suspending payments on eligible federal student loans while fixing interest rates at 0%. In the meantime, all federal student loan collection activity has been halted, which has proven crucial as millions of Americans have lost their jobs and incomes due to the initial lockdowns caused by COVID-19.

This emergency adjournment period was meant to be temporary, but the federal government has extended it six times so far. The current extension is scheduled to last until August 31, 2022, although there is always a chance that the deferment period will be extended again.

Either way, it’s pretty safe to say that payments on federal student loans will eventually resume, even if some loans are eventually canceled before that happens. Unfortunately, this will likely negatively impact some people more than others, as we’ll explain below.

  • To help protect consumers from the financial effects of the pandemic, the U.S. Department of Education issued an emergency deferral of eligible federal student loans in March 2020. In addition to the lack of payment, the activity of recovery was halted and interest rates were set at 0%. .
  • The deferral period is currently set to expire on August 31, 2022. It is possible that the emergency action will be extended again, but no one knows for sure yet.
  • When student loan payments resume later this year or next, the hardest hit will likely be black and African American borrowers, women, and people who have student loans but no credentials to prove.

Which groups will the end of the adjournment hurt the most?

When the pause on student loan payments and interest finally ends, anyone with above-average debt will understandably have a bigger financial challenge ahead of them than those with less college debt. Thus, the following three groups are particularly at risk once the current period of student debt deferral ends:

Black and African American borrowers

According to a January 2022 poll by CNBC and Momentive, 68% of American adults surveyed have some form of debt, including student loans. One in four black adults (24%) have federal student loans, compared to 15%, 14% and 11% for Hispanic, White and Asian Americans, respectively.

Not only are black and African American borrowers more likely to have student loan debt, but they also owe more on average. According to the Board of Governors of the Federal Reserve System, black borrowers took out the highest average amount of federal student loans in 2019 at $44.88k, compared to $40.17k and $30.89k for their white and Hispanic counterparts, respectively.


The CNBC and Momentive poll also found that women (19%) are more likely than men (11%) to have student loan debt overall, and this is true across all racial and ethnic groups surveyed. They also note that black and Hispanic women are twice as likely as their male counterparts to have student loan debt after graduation.

The study also showed that six in 10 adults (62%) with federal student loans had experienced mental health issues as a result of this financial burden. However, women (65%) were more likely than men (54%) to experience a negative impact on their mental health due to student debt.

Non-graduate borrowers

Finally, people who attended college but never graduated will likely face a significant financial challenge once student loan repayments resume. After all, the financial benefits of attending college are felt most deeply by those with a degree to prove.

Although it is difficult to find exact figures on the number of people who borrow for college without having graduated, recent data from the National Center for Education Statistics (NCES) shows that 59% of students at full-time for the first time graduated with a bachelor’s degree in six years. to enter school in a public institution of higher education. Imagine the amount of student loan debt someone could rack up in six years, and then consider how difficult it would be to pay it off without a college degree.

Remember that there is also an income disparity between workers based on their level of education. According to figures from the US Department of Labor, men with a college education but no degree reported a median weekly income of $1,027 in 2020, while women with a college education but no degree earned $779 per week. Meanwhile, male bachelor’s degree holders earned $1,504 per week, while female bachelor’s degree holders earned $1,135 in weekly wages.

When will the student loan deferral end?

Currently, emergency federal student loan assistance is set to expire on August 31, 2022.

Will the student loan deferral be extended again?

No one knows for sure if the pause on federal student loan payments and the 0% fixed interest rate will be extended again after August 31, 2022.

Should You Make Student Loan Payments While Deferred?

You can make student loan payments during the deferment period if you wish, but you should only do so if you can easily afford it. By making payments now, every penny you pay will go directly to your balance principal. This can help you save money on interest later, which can also help speed up your repayment schedule.

The essential

Payments will eventually resume for federal student loans, but not everyone will feel the impacts of this decision in the same way. Black and African American borrowers, women, borrowers who did not graduate. and anyone already struggling with their finances will understandably have a harder time getting started or getting back on track with their monthly student loan payments.

That said, there are steps borrowers can take if they are concerned that their repayments will resume on September 1, 2022 (or later if the deferral is extended again). If you find yourself in this situation, you may want to consider working with your loan manager to change your repayment plan to a more affordable monthly payment. You can even consider income-oriented repayment plans, which allow low-income borrowers to pay as little as $0 for their student loans each month.

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