For many, a lifeline; for others, a godsend
The automatic payment pause was intended to provide relief to cash-strapped borrowers. Survey results show that the pause helped borrowers redefine their financial priorities in very different ways.
A third of Americans with their own federal student loan debt (33%) say they use money that would normally go toward their loan repayments to pay for necessities like utilities, rent and food while on their loans are in automatic abstention.
But 29% of federal borrowers say they use potential loan money to pay off/reduce debt – 16% pay off/reduce credit card debt; 13% are repaying/reducing another type of debt and 8% are repaying/reducing private student loans, according to the survey.
Some federal borrowers use potential loan money to bloat their savings: Nearly one in five (19%) say they put potential loan money in an emergency savings account and 13% say he is investing the money for retirement. .
Additionally, about 1 in 5 (19%) federal borrowers surveyed say they continue to repay their federal loan as usual.
Some private borrowers are refinancing
Private borrowers were not eligible for automatic forbearance and generally have fewer relief options. Of those with student loan debt (including federal and private student loans), about 1 in 10 have chosen to refinance their private loans (11%) since the start of the pandemic, the survey found. Refinancing involves combining all of their private loans into a new private loan with its own interest rate.