Student Loan Borrowers Are Cutting Expenses to Afford Their Monthly Payments

Borrowers are making lifestyle changes in order to afford their payments again now that the federal student loan pause has ended.

Among Americans with student loan debt, 80% say they have reduced their spending due to their debt, according to poll results released Tuesday by MassMutual. Just over half of the surveyed borrowers say they have cut back on eating out to make their student loan payments. They've also come up with money for their student loan bills by reducing their spending on luxuries (a tactic used by 44% of respondents), limiting everyday spending (39%) and curbing essential purchases (37%).

In addition to payments being suspended, interest did not accrue on federal student loans from March 2020 to September 2023. The first bills after the pause finished were due in October, which means many borrowers have now paid their federal student loans twice since the policy expired.

As borrowers try to fit the payments into their budgets for the first time in over three years, the MassMutual survey shows many are taking a hit financially. About three-quarters of Americans with student loans say the payment restart has had a “negative impact on their day-to-day financial health.”

What (really) happens if you miss student loan payments?

The number of borrowers who haven't made the newly required loan payments is unknown, but a letter sent to the Education Department from four Democratic senators earlier this week is seeking that information. Authored by Sen. Elizabeth Warren, D-Mass., the letter raises concern that borrowers will suffer harm to their credit scores if they miss payments.

The Biden administration created a one-year on-ramp for the restart of federal student loan payments during which there are credit protections for borrowers who don’t pay their loans. While missed payments on a student loan are usually reported to the credit bureaus after 90 days, the on-ramp gives people a 12-month reprieve from being declared delinquent.

But here's the thing: Even if delinquencies aren't reported, the Warren letter notes, credit-scoring companies may still be able to see that a borrower missed payments — and potentially ding them for it. The senators are worried borrowers are being misled to think the on-ramp means they can skip payments without their credit scores being impacted.

In reality, they say, there's no guarantee.

Bottom line

If you're a borrower with student loans trying to figure out how to afford your payments again, you're not alone. Fortunately, experts say, there are tried-and-true strategies for finding and freeing up money in a budget.

"Challenging times require more thoughtful financial planning," Paul LaPiana, a certified financial planner and head of MassMutual brand, product and affiliated distribution, said in a news release. "Prioritizing savings, reducing debt and diversifying investments can help people safeguard their financial well-being."

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