Just over half of student loan borrowers consider themselves financially insecure, while about three-quarters said they had experienced an adverse financial event, like skipping a bill, in the past year, according to a survey from the Pew Charitable Trusts exploring the attitudes of student loan borrowers after federal student loan repayments restarted in October 2023 following a three-year pause. The survey was conducted in the summer of 2024.
Existing financial challenges are closely associated with struggles to repay student loans, the survey found. About 23 percent of respondents indicated they had missed some or all of their student loan payments since October 2023, but that number was higher among those who are financially insecure (34 percent) and those who had experienced a negative financial event (30 percent).
But paying off student loans isn’t just challenging for those facing other financial difficulties. Among all borrowers, 57 percent said they found it difficult to afford their loans, including 41 percent of those who said they do not consider themselves financially insecure. Over a third of borrowers also said they found repaying their student loans more stressful than paying their other bills.
The Education Department estimates that nearly 25 percent of borrowers have either defaulted on their loans or will default in the next several months. In May, the agency restarted collections on unpaid loans.
After a five-year pause, the Trump administration is bringing back financial penalties for the many millions of borrowers who are too far behind on their student loan payments. It’s led to confusion and financial uncertainty.
At least 5 million people are in default, meaning they have failed to make payments on their loans for at least nine months — and millions more are projected to join them in the coming months.
The Hechinger Report spoke to student loan experts about what to expect and how to prepare, as well as about a separate effort in Congress to adjust how student loans work.
The Biden administration restarted loan repayments in October 2023. That came without any consequences, however, for about a year. But interest, which had also been frozen since the start of the pandemic, has been piling up for some borrowers since the fall of 2023.
All told, about 43 million federal student loan borrowers owe a total of $1.6 trillion in debt. Starting May 5, those in default face having tax refunds withheld and wages garnished if they don’t start making regular payments.
A college degree can be a path to long-term financial security, but the process of repaying loans can lead to financial hardship for many borrowers. About half of all students with a bachelor’s degree graduate with debt, which averages more than $29,000. And although average debt tends to be lower for graduates of public universities (about $20,000), close to half of people who attend those schools still leave with debt.
Related: Interested in more news about colleges and universities? Subscribe to our free biweekly higher education newsletter.
The student loan landscape is likely to change in some way over in the coming months: The Trump administration is expected to push the limits on aggressive collection practices, while Republicans in Congress are determined to adjust repayment options. Here’s what we know about what the Trump administration’s actions mean for student borrowers.
Once you’ve failed to make a loan payment in 270 days, you will probably enter into default. That means, as of May 5, the government can take your federal tax refund and apply it to your debt. Starting in June, the government can also withhold up to 15 percent of any money you receive from Social Security, including disability payments. And later this summer, officials said, they will start the process of taking a cut ofyour paycheck, although borrowers have the right to appeal. Going into default can also harm your credit score, which can make it harder to rent an apartment or borrow money for other reasons, like buying a car.
Can I go back to school to avoid repaying my loans?
Some influencers on social media have recommended enrolling in school as a way to delay making payments. It’s true that most loans are deferred while you’re in school, meaning you wouldn’t have to pay while you’re taking classes, but you may also add to what you already owe if you spend more time in college. Unless you’re confident a new certificate or degree will boost your income, delaying repayment and increasing what you owe could make paying off your loans even more difficult.
I can’t afford to repay my loan. What should I do?
There are other options. One type links your monthly payments to what you earn. These income-based repayment plans can shrink your monthly loan bill. There is also a graduated repayment plan that can lower your payments initially, after which they increase every two years. A third option is an extended repayment plan, which lowers your monthly payments but adds months or years to the time it will take to pay off your loans. The government’s Loan Simulator is one way to find options available to you.
Where can I go if I need help?
The Education Department’s Default Resolution Group can help provide advice for borrowers who are already in default. The Federal Student Aid call center is set up to answer questions. Borrowers can also reach out to their loan servicers for guidance.
What’s the difference between loan deferment, loan forbearance and default?
Loan deferment: The Education Department may grant a loan deferment for several reasons, including when a borrower is experiencing an extreme economic hardship or is unemployed. That means the borrower can temporarily stop paying off the loan without any financial penalties; in the case of subsidized undergraduate loans, interest doesn’t keep accruing during that time.
Forbearance: A loan forbearance also allows a borrower to stop payments, or make smaller ones, without any penalties. However, interest usually keeps building on all loans during that time.
Default: If a borrower is in default, it means they have failed to make payments for at least 270 days without permission. That’s when the government can begin to garnish tax refunds, Social Security benefits and wages, and a borrower’s credit score will drop.
I’ve heard income-driven repayment plans are in trouble. Is that true?
There are several types of income-driven repayment plans, which are meant to keep payments affordable. The Biden administration’s Saving for a Valuable Education (SAVE) plan is on hold because of legal challenges from Republican-led states. That plan previously offered eligible borrowers a repayment plan with lower monthly payments and a quicker path to loan forgiveness than other previously available options. But borrowers can still enroll in the Pay As You Earn (PAYE) plan and other income-based repayment options, in which payments are capped at 10 percent of a borrower’s income, or the Income-Contingent Repayment Plan, which requires payments of up to 20 percent of income and allows full repayment more quickly. Congressional Republicans hope to eliminate several of these plans in favor of just one income-based repayment plan, but it’s unclear if that bill will pass the Senate.
What’s happening with the court cases challenging the SAVE program?
Courts have effectively paused the SAVE plan. The 8 million borrowers who are enrolled don’t have to make payments, and interest will not be added while the court decides the case. With those payments paused, borrowers in this group who are intending to seek loan forgiveness for working in public service are also not making progress toward that goal. If Congress eliminates the SAVE program or the courts officially kill it, those borrowers would need to enroll in a different repayment plan.
Does Public Service Loan Forgiveness (PSLF) still exist?
Yes, the Public Service Loan Forgiveness program is still available. Borrowers should still be eligible if they are in an income-driven repayment plan and make regular payments for 10 years. They must work for the federal, state or local government — teachers and firefighters are eligible, for example — or for qualifying nonprofit organizations, such as some health care clinics or foster care agencies. The goal of PSLF is to encourage graduates to pursue careers that may pay less than jobs with private companies but which benefit their communities or the country as a whole.
The Trump administration issued an executive order in March aimed at limiting which organizations’ jobs could qualify for PSLF — for instance, a nonprofit could be excluded if the government decides it is “supporting terrorism,” engaging in civil disobedience or aiding undocumented immigrants in violation of federal law. So far, it’s unclear what the effect will be.
What other changes might be in store for student loans?
As part of the federal budget process, congressional Republicans have proposed a slew of changes to student loans that some policymakers worry will make borrowing more expensive for students — especially those in graduate programs.
The proposals include changes to:
Subsidized loans: Congressional Republicans want to get rid of subsidized loans for undergraduates, which would mean interest would accrue while a student was in college. They also want to cap total undergraduate borrowing at $50,000.
Grad Plus: They also want to end the Grad Plus program, which allows students to borrow money to cover the cost of graduate school. Student advocates worry that this would push more students into the private student loan market, which has fewer protections for borrowers.
Income-driven repayment: One proposal would simplify income-driven repayment into one option and prevent interest from causing student debt to balloon for students in income-driven repayment plans.
The proposed changes are included in the federal budget bill and may undergo many revisions as Congress figures out its spending priorities for the year.
This story about student loan repayment was produced by The Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education. Sign up for the Hechinger newsletter.
The Hechinger Report provides in-depth, fact-based, unbiased reporting on education that is free to all readers. But that doesn’t mean it’s free to produce. Our work keeps educators and the public informed about pressing issues at schools and on campuses throughout the country. We tell the whole story, even when the details are inconvenient. Help us keep doing that.
Yesterday, President Trump signed an executive order ordering the shutdown of the U.S. Department of Education (ED). The order claims to ensure the “uninterrupted delivery of services, programs, and benefits on which Americans rely,” yet Trump and Secretary Linda McMahon have gutted the arms of ED that make those functions possible. Read our statement on yesterday’s executive order here.Last week, Trump announced a 50 percent reduction in the workforce at the Department. Now he plans to move student loans to the Small Business Administration?!?!
The Trump Administration is intentionally breaking the student loan system and attacking borrowers and working families with student debt. But we’ve been fighting back.
On Tuesday night, the 1.8 million-member AFTsued ED for denying borrowers’ access to affordable loan payments and blocking progress towards Public Service Loan Forgiveness (PSLF)—in violation of federal law.
Three weeks ago, federal education officials eliminated access to Income-Driven Repayment (IDR) plans by removing the application from ED’s website and secretly ordering student loan servicers to halt processing all applications. These IDR plans provide millions of borrowers the right to tie their monthly payment to their income and family size, giving them the option to make loan payments they can afford.
IDR plans are also the only way for public service workers to benefit from PSLF—a critical lifeline for teachers, nurses, first responders, and millions of other public service workers across the country.
Attacks at the federal level on working families make state and local work like this all the more necessary. States can and must step up to create more protections for borrowers!
Since the 1980s, massification, policy shifts, and changing ideas about who benefits from higher education have led to the expansion of national student loan schemes globally. For instance, student loans were introduced in England in 1990 and generalized in 1998. Australia introduced income-contingent student loans in the late 1980s. While federal student loans were introduced in the US in 1958, their number and the amount of individual student loan debt ramped up in the 1990s.
A lot of academic research has analysed this trend, evaluating the effect of student loans on access, retention, success, the student experience, and even graduate outcomes. Yet, this research is based on the choices and experiences of first-generation student borrowers and might not apply to current and future students.
First-generation borrowers enter higher education with parents who have either not been to higher education, or who have a tertiary degree that pre-dates the expansion of student loans. The parents of first-generation borrowers therefore did not take up loans to pay for their higher education and had no associated repayment burden in adulthood. Any cost associated with these parents’ studies will likely have been shouldered by their families or through grants.
Second-generation borrowers are the offspring of first-generation borrowers. Their parents took out student loans to pay for their own higher education. The choices made by second-generation borrowers when it comes to higher education and its funding could significantly differ from first-generation borrowers, because they are impacted by their parents’ own experience with student loans.
Parents and parental experience indeed play an important role in children’s higher education choices and financial decisions. On the one hand, parents can provide financial or in-kind support for higher education. This is most evident in the design of student funding policies which often integrate parental income and financial contributions. In many countries, eligibility for financial aid is means-tested and based on family income (Williams & Usher, 2022). Examples include the US where an Expected Family Contribution is calculated upon assessment of financial need, or Germany where the financial aid system is based on a legal obligation for parents to contribute to their children’s study costs. Indeed, evidence shows that parents do contribute to students’ income. In Europe, family contributions make up nearly half of students’ income (Hauschildt et al, 2018). But the role of parents also extends to decisions about student loans: parents tend to try and shield their children from student debt, helping them financially when possible or encouraging cost-saving behaviour (West et al, 2015).
On the other hand, parents transmit financial values to their children, which might play a role in their higher education decisions. Family financial socialization theory states that children learn their financial attitudes and behaviour from their parents, through direct teaching and via family interactions and relationships (Gudmunson & Danes, 2011). Studies indeed show the intergenerational transmission of social norms and economic preferences (Maccoby, 1992), including attitudes towards general debt (Almenberg et al, 2021). Continuity of financial values over generations has been observed in the specific case of higher education. Parents who received parental financial support for their own studies are more likely to contribute toward their children’s studies (Steelman & Powell, 1991). For some students, negative parental experiences with general debt can lead to extreme student debt aversion (Zerquera et al,2016).
As countries globally rely increasingly on student loans to fund higher education, many more students will become second-generation borrowers. Because their parents had to repay their own student debt, the family’s financial assets may be depleted, potentially leading to reduced levels of parental financial support for higher education. This is likely to be even worse for students whose parents are still repaying their loans. In addition, parental experiences of student debt could influence the advice they give their children with regard to higher education financial decisions. As a result, this new generation of student borrowers will face challenges that their predecessors did not, fuelled by the transmitted experience of student loans from their parents (Figure 1).
Figure 1 – Parental influence on second-generation borrowers
As the share of second-generation borrowers in the student body increases, the need to understand the decision-making process of these students when it comes to (financial) higher education choices is essential. Although the challenges faced by borrowers will emerge at different times and with varying intensity across countries — depending in part on loan repayment formats — we have an opportunity now to be ahead of the curve. By researching this new generation of student borrowers and their parents, we can better assess their financial dilemmas and the support they need, providing further evidence to design future-proof equitable student funding policies.
Ariane de Gayardon is Assistant Professor of Higher Education at the Center for Higher Education Policy Studies (CHEPS) based at the University of Twente in the Netherlands.
