Study: Effects of the Student Loan Freeze


Federal student loan payments have automatically been paused and interest has not accrued since late March of 2020. Our survey found that this freeze has kept an average of $417/month in the pockets of the student loan borrowers surveyed. 

So the real question: what are borrowers doing with the extra money?

Key Findings:

  • $417/month. The average amount of freed up cash each month for student loan borrowers.
  • 33 years old. The average age of borrowers is not limited to millennials and Gen Z, with some parents paying loans for children and others that are on long repayment schedules. 
  • $64,825. The average debt balance remaining for respondents. 
  • 7 years. Average years since respondents graduated (or attended) college or grad school.
  • $0. Median required current student loan monthly payment.
  • 15%. The percentage of respondents who are paying more toward their student loans during the interest freeze than they were before it started.
  • 73%. Number of respondents that feel an urgency to pay off their student loan debt.
  • Savings, Other Debt, and Continued Payments. The three most common uses of the extra money by respondents. 
  • The Public Service Loan Forgiveness program was mentioned frequently. Part of the student loan relief includes the paused months counting toward the 10 years of qualifying payments for borrowers in public service and many were extremely thankful for this piece of the relief. Learn more about PSLF during the pandemic here.

We surveyed 596 student loan borrowers about how the freeze has impacted their financial state. Our goal is simply to tell their stories rather than making any sort of value judgment. Their comments are quoted throughout as anonymous, as we did not collect names in the survey.

Here’s what else we learned:

Where’s the Money Going? Savings and Debt Payments

Nearly 35% of borrowers surveyed are choosing to save the money that would have otherwise been going to loan payments. 

35% of respondents are saving the money that would be going to student loan payments.

“With so much uncertainty right now, I’d rather hold the money in case of an unexpected change in financial circumstances.”

33% of student loan borrowers were using the money to pay off other debt.

“It has allowed me to completely pay off my credit card debt and private student loan debt! Everything was always tied up in paying off debt, now I feel like I can breathe.”

29% of respondents are still making regular payments to lower the balance of their debt while the interest-free window is open. 

“The 0% interest has really had the biggest financial impact for me. I’ve paid off so much more of my principal over the last year. I finally feel like I’m paying down my loan and moving on with my life.”

Wondering what the best route to take is while your student loans are paused? Here’s a guide for deciding. 

85% Have Said the Freeze Has Allowed Them to Get Ahead Financially

With an extra tailwind from student loan debt savings (combined with stimulus money and other savings), most respondents said they felt they had gotten ahead in one form or another financially during the pandemic. 

85% of respondents have gotten ahead or gotten somewhat ahead financially during the freeze.

“The freeze, stimulus, and the pandemic (no eating out or travel expenses) allowed us to pay off $16,000 in credit card debt, increase principal payments towards our mortgage, and start an emergency fund.”

Financial Wins Were Numerous

Survey respondents had financial success stories from the last year, including other loans that were paid off, building an emergency fund, and being able to finally face their financial reality.

  • “I actually paid off my car because of the student loan freeze. 🎉🎉”
  • “I feel incredibly grateful for this student loan reprieve. It has enabled us to get a solid emergency fund in place and to be able to put money towards other debt.”
  • “I was actually in default, the freeze helped me find my loans and enter loan rehabilitation.”
  • “The freeze initially allowed me to pay off my car and motivated me to pay the entire loan off ASAP so I wouldn’t have to pay anymore interest. As of this week I paid off my last loan. 🙌🏻”
  • “I paid off $20k of credit card debt in 2020—that wouldn’t have been possible without the student loan freeze.”
  • “The current freeze sparked me to get my finances under control and really face how much student loan debt I have. It has helped me so much more than just freeing up cash, but by motivating me to do what’s best for my future during the freeze.”

Student Loan Payments are Now Going to House Down Payments

The housing market was surprisingly hot in 2020, and with the largest generation in the U.S. entering their 30s, 2021 is poised to see an increased demand from first-time home buyers

Our survey showed a common theme of respondents using the extra savings for a down payment on their first home.

“Almost our entire house down payment (which we close on Wednesday) is from money saved from the student loan freeze.” 

“The freeze, along with some other factors, has allowed me to save up to buy a house…YNAB has been fantastic in accomplishing this.”

“If it weren’t for the student loan freeze, we would have been saving to buy a house for at least another year or two. This freeze has allowed my family and me to accelerate our original home buying goal.”

Many Borrowers Have Complicated Emotions Around Their Debt

Student loan debt is a multifaceted issue and not without controversy or strong opinions. Here’s what some of our respondents had to say about their debt. 

  • “It feels like my loans will never be paid off.”
  • “I pretend that my student loans don’t exist—that’s the only way that I don’t freak out about it. I don’t know if I’ll ever pay them off but I won’t let it steal my life from me.”
  • “I feel guilty about loan forgiveness. I took on the debt, is it right for the government to pay for it?”
  • “Given the opportunity to re-do my past, I would have chosen a much less expensive graduate school.”
  • “I just wish more people knew that many of us have paid our loans and then some in interest.”
  • “In ten years I’ve only paid 17% of the original loans off. It’s like I’m running on a treadmill.”
  • “I think student loans in the US are an absolute scam. I feel like I could write a novel about my hatred of the whole institution. I think the freeze and reevaluation of the system has been a wonderful silver lining to the pandemic.”
  • “I would do almost anything for some student loan relief. They are a stone around my neck that I’ve been paying more than 10 years and I am in more debt now than when I started.”

70% Said Student Loans Have Held Them Back from a Life Event

While changing jobs, moving, buying a house, and having a baby have traditionally been viewed as markers of adulthood for some, the majority of respondents have said their student loan debt has been a wet blanket holding them back from these moments.

Nearly 50% of respondents say student loan debt has held them back from buying a house.

“I do not plan to buy a house or have a baby until my loans are paid off.”

Student Borrowers Are Looking for Deeper Change

The student loan issue has been described by some as a crisis, and those who have been digging out from the debt have a few thoughts on the matter. In taking a look at what student borrowers would change about the way current student loans are set up, many respondents focused around the interest rates (which currently sit at 5.8% for the average borrower—currently higher rates than a car loan, mortgage, or appliance financing).  

“Instead of loan forgiveness, the middle ground should be a significant decrease in interest rates. My average rate is 7%.”

“The most important part of the student loan freeze for us has been the 0% interest on federal loans. This has allowed us to pay way more toward the principal of the loans.”

“Forgiving interest/capitalized interest should be in the discussion. That would save me over 25k. I’m fine paying back what I borrowed, but the interest on interest is highway robbery.”

What’s Next

With another round of stimulus payments cushioning the financial health of Americans, these student loan borrowers should see even more momentum in their financial progress. It’s anyone’s guess what will happen next in terms of debt relief, but what we do know is that our respondents were taking control of their financial future right now and already seeing progress.

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Survey data came from 595 student loan borrowers who use You Need a Budget. Data was collected between February 8, 2021 and March 6, 20201. See the survey results here.