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What Might Happen When Student Loan Forbearance Ends?

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Abstract

Federal student loan relief was recently extended through August 31, 2022, marking the sixth extension during the pandemic. Such debt relief includes the suspension of student loan payments, a waiver of interest, and the stopping of collections activity on defaulted loans. The suspension of student loan payments was expected to help 41 million borrowers save an estimated $5 billion per month. This post is the first in a two-part series exploring the implications and distributional consequences of policies that aim to address the student debt burden. Here, we focus on the uneven consequences of student debt relief and its withdrawal. With the end-date of the student loan relief drawing near, a key question is whether and how the discontinuation of student debt relief might affect households. Moreover, will these effects vary by demographics?

Suggested Citation

  • Rajashri Chakrabarti & Jessica Lu & Wilbert Van der Klaauw, 2022. "What Might Happen When Student Loan Forbearance Ends?," Liberty Street Economics 20220421a, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:94082
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    File URL: https://libertystreeteconomics.newyorkfed.org/2022/04/what-might-happen-when-student-loan-forbearance-ends/
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    More about this item

    Keywords

    student loans; forbearance; CARES; delinquency; default; relief; debt;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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