‘Anxious and Discouraged:’ 100+ Student Loan Borrowers Weigh in Ahead of Biden’s Decision on Forgiveness, Payment Pause

updated: President Joe Biden announced Wednesday the cancellation of $10,000 in student debt for borrowers earning $125,000 or less per year and households earning $250,000 a year or less. The payment freeze on student loans will also be extended through Dec. 31. Borrowers with Pell Grants will receive $20,000 of forgiveness. Borrowers with undergraduate loans under an income-repayment plan will be able to cap repayment at 5% of their monthly income.

President Joe Biden’s decision on student loans has meant a lot of extra stress and anxiety for Sophie Conners.

Conners, a 26-year-old public relations manager based in Dallas, Texas, says she’s been putting a huge portion of her income toward paying down $42,000 in student loan debt since graduating college five years ago. Her balance is down to $8,000, and she has enough savings to pay the rest of her loans off. But she’s halted her plan because of potential student loan forgiveness.

Sophie Conners and her partner George Engroff both graduated from college with student loan debt almost five years ago. Conners is almost done paying off her $42,000 student loan balance, which has “felt like a second mortgage,” but is waiting to see if the president will forgive the rest of it.

“It was a huge goal of mine to be relieved of these loans finally, and now the decision is almost making it worse because I don’t even feel comfortable paying them off now that I can,” she says. “I’ve felt anxious and discouraged.”

Biden promised during the 2020 presidential campaign that he would forgive at least $10,000 of student debt per borrower — a promise that remains unfulfilled nearly two years after his election. Meanwhile, the pause on federal student loan payments has been extended six times since early 2020, many of which were last-minute extensions.

The uncertainty with regard to potential loan forgiveness and an additional repayment freeze extension has left millions of student loan borrowers, like Conners, in limbo — with many delaying important decisions that could affect their financial futures. Conners is just one of many experiencing a deep sense of frustration and anxiety.

We surveyed 104 people who have student loans to better understand their perspectives. More than half told us they feel stressed and anxious about their student loan debt right now, and one in three don’t feel prepared to restart payments at the end of August.

“This is unfortunately a time of anxiety for many people with federal student loans,” says Chris Ebeling, head of student lending at Citizens. “When or if payment resumes, it will be difficult for many borrowers who have likely redirected income to other obligations, such as housing, utilities, car payments, and credit card bills.”

Student Loan Anxiety and Uncertainty

The spread of COVID-19 forced the world to grind to a halt in early 2020, with stay-at-home orders and state of emergency declarations leaving millions of workers out of jobs and without the ability to pay bills or achieve financial goals. It also gave student loan borrowers a two-in-a-half-year hiatus on repaying their loans.

The student loan payment freeze is set to expire in less than two weeks as rising prices weigh on borrowers, the majority of whom haven’t seen pay increases at work to offset inflation, according to a CNBC and Momentive workforce survey. Nearly half of respondents in the NextAdvisor survey haven’t been paying their student loans since the moratorium began. Many say they’ve been taking advantage of the interest-free period to instead focus on other aspects of their finances, such as paying down credit card debt or building an emergency fund.

More than half of respondents in the NextAdvisor survey said they feel stressed and anxious about their student loan debt right now.

For Kayla Hutchinson, the prospect of paying her student loans, no matter how much the monthly repayment would be, is anxiety-inducing. She says if the student loan payment pause ends this month, she won’t have enough money to cover her loans and make ends meet every month.

“Of the $100,000 I have [in student loan debt], $70,000 is in private loans, which already takes almost $1,000 from me each month,” she says. “If student loans must be paid again, financially I just can’t.”

It seems likely that the president will extend the payment pause beyond Aug. 31, given that loan servicers have not been told to prepare for the restart of payments and mid-term elections are in a few weeks. The Wall Street Journal reported Wednesday that Biden could make an announcement on student loans this week. But experts say waiting so long to announce another extension, or the cancellation of student loan debt, puts unnecessary financial stress on borrowers.

Conners says she’s felt anxious and discouraged about the lack of communication from the Biden administration on student loan forgiveness. The remaining $8,000 balance she has left in federal student loans is a burden hanging over her, and she’s unsure of what to do next.

“I’m in this weird position now where I have enough savings to pay my loans off and I really want to because I want that burden off my shoulders. I want to open a 401(k). I want to get started on all these things I’m waiting to do,” she says. “But I’m really afraid that if I pay it off, the administration will announce that they’re going to relieve $10,000 of debt for everybody and I’ll essentially lose $8,000, which is a significant amount of money.”

The average student loan balance is a little over $37,000, and one in three borrowers could see all their federal student direct loans wiped away if Biden cleared $10,000 in student loans, according to a Student Loan Hero study. There could be a ceiling for broad forgiveness so that only borrowers who made less than $125,000 or $150,000 last year would qualify, according to multiple reports.

What’s Next for Student Loan Borrowers?

The NextAdvisor survey found that more than half of all borrowers agree there should be mass student loan forgiveness and another extension of the student loan payment pause. While signs are pointing to another extension, it’s still unclear which policies, if any, Biden will implement.

“My fear is that he won’t address forgiveness at all, and that would be the worst-case scenario because it just leaves us wondering what we should do to make our own best financial decisions,” Conners says. “If we know some sort of timeline or where their heads are at, I think it would really help everyone.”

Until there’s a decision on the loan pause or forgiveness, experts recommend borrowers use this time to get prepared and set themselves up for success with a plan to restart payment. Make sure your contact information is updated with your loan servicer, review your loans, and set up autopay. Higher education expert Mark Kantrowitz says borrowers should assume that their monthly loan payment will be the same as it was before the COVID-19 pandemic and put money aside in a high-yield savings account, just in case repayment restarts at the end of August.

“They can use this money to ease their way into repayment when it does happen, or use it to build or bulk up their emergency fund,” he says.

He also recommends delaying any decisions about refinancing until after the election or the president’s announcement, whichever comes first. If borrowers are struggling financially, Robert Farrington, founder of The College Investor, says they should contact the loan servicer now to review options, such as deferments, forbearances, and income-driven repayment that can provide financial relief when the payment pause ends.

“Borrowers need to remember that payments will restart at some point, so they need to begin planning for that,” Farrington says. “I also encourage borrowers to get organized.”