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Portrait of Jennifer Cardenas, Lewis Eggleston and Max Richter with a Car, Washing Machine and Money in the background
Money; Getty Images; Courtesy of Jennifer Cardenas, Lewis Eggleston and Max Richter.

A new washing machine, a car, brand-name pants for work. In a world without student loan payments, millions of borrowers have gotten a taste over the past 20 months at what they could afford if they weren't, well, borrowers.

That world without student loans has been a temporary one, of course. At the end of January, the pandemic-era reprieve that paused federal student loan payments will come to an end. For many of the country’s more than 40 million borrowers, the looming deadline means they’ll soon have to change spending habits they’ve grown comfortable with over a nearly two-year period.

Four in 10 Americans with student loan debt aren’t ready for that, saying in a recent survey from financial services company D.A. Davidson & Co. that they wanted the government to extend the pause past January 2022. That may be, in part, because people are relying on that money for other things: In another survey from Pew Charitable Trusts, 59% of borrowers who had not been making voluntary payments during the pause said they were instead using that money for “needed expenses,” including rent, food or utilities.

The absence of monthly payments, for some people, was a necessary buffer from financial strain. For others, the extra money went toward future goals they’d been neglecting while paying down their debt. Either way, Kevin Mahoney, a financial advisor in Washington, D.C. and founder of Illumint, says the break from payments and interest has been a breath of fresh air for borrowers.

For once, borrowers could spend on what really mattered to them, without worrying about loans.

“This time can provide so much insight on what people would do in the absence of having to devote such a large percentage of resources to debt,” Mahoney says.

From saving for retirement to paying off credit card debt, here are six stories of borrowers and how they used the money they’d otherwise spend on student loans.

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Paying down expensive credit card debt

Jennifer Cardenas, a first-generation Latina college grad, finished up her anthropology degree from Columbia University in 2021 with just over $67,000 in student loan debt. Luckily, she graduated into the period of paused student loan payments, because 34-year-old Cardenas says she’d have struggled to come up with money for the $800 payments, after she lost her college tutoring job. She ended up racking up about $7,000 credit card debt during college on the essentials she needed to live.

She used the money she would have otherwise spent on student loan payments to pay down her credit cards and boost her savings. She also bought a washing machine for her parents, who she’s been staying with since graduation. Cardenas is grateful for the ability to pay her bills without stress — she didn’t have to worry as much about unexpected expenses since the payment pause gave her a little wiggle room in her budget.

By the time her loan payments start in 2022, she hopes to have her credit cards totally paid off and some money saved. But she doesn’t anticipate transitioning to pay down her debt quickly. In fact, she plans to take out student loans to attend law school.

“The playing field is so uneven for people of color, who don’t have the same access to education as other people,” she says. “Having a law degree, even if it adds more debt, will create more socioeconomic mobility for me.”

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Having freedom to save and donate to causes he’s passionate about

Lewis Eggleston, a 35-year-old American expat in Germany, graduated college in 2008, during the Great Recession. In such a lackluster job market, he chose to serve two terms in Americorps, before returning to school. He borrowed $70,000 to attend seminary. Now 35, he knows that debt enabled him to get a job he loves as a queer minister at a nonprofit organization. But Eggleston says the stress of owing that much money also constantly lurks.

“Millennials listened to their elders when they said education was essential to get ahead, and now I’m in stressful crushing debt with an interest rate I can only describe as sinful,” he says.

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Even though he’s made payments for years before the payment pause, his debt has actually grown to $79,000. (He’s been in an income-based repayment plan, in which his monthly payments are based on his salary, not how much he owes.)

He’s used the months off to boost his savings so he can afford to pay his loans again when the time comes. He’s also increased his giving to other nonprofit organizations. With payments resuming, he likes to dream of a time when he can truly focus on living out his calling as a minister rather than the ongoing stress of making student loan payments.

“Even if President Biden wiped out $50,000 of my loans, I would still have loans left from the years of income-based repayment,” he says. “But I could finally be able to get ahead and be a bolder, fiercer minister without the burden of student loans over my head.”

Courtesy of Shannon Beranek

Saving for retirement, guilt-free shopping and more

Before the pandemic, Shannon Beranek was paying about $540 a month toward debt from her three degrees in civil engineering. Hoping to pay off her debt ASAP, she continued to make her normal monthly payments through November 2020, when she got her accrued interest down to zero and had only principal left.

“That’s when I decided to stop paying and start saving it,” says Beranek, who lives in Champaign, Illinois.

The 42-year-old invested $6,000 in her Roth IRA in both 2020 and 2021, and she set some more money aside in a savings account, which she plans to use for a future down payment on a house or put toward future student loan payments. But Beranek also made some day-to-day changes to her spending habits.

“If I needed some new pants for work, I didn’t stop and go, ‘Should I buy these brand-name pants or should I go to Kohl’s and find cheap ones?” she says.

She still owes just over $53,000. She’s got her auto-debit ready to go when payments resume in February, and even though she’s bolstered her savings, she’s still nervous about having that much debt.

“I didn’t grow up well off, which really instilled in me a fear of not having enough, and that continues when I have the looming student loan payments,” she says. “Even this past year when I didn’t have to pay, I had a hard time breaking my internal dark thoughts of not having money.”

Courtesy of Lisa Ansell

Investing in her family’s future

Lisa Ansell, a 42-year-old college professor and acting president of the California chapter of the student loan reform advocacy group Student Loan Justice, owes about $55,000 from her graduate degree in international relations. With her extra $465 a month, she decided to invest in her family’s future.

While her kids will have free tuition at the University of Southern California, where she works, Ansell used some of her extra money to set up college funds to cover their books and room and board. Along with prepaying for a life insurance policy, she decided to invest in a long-term care insurance policy after losing two immediate family members during the pandemic. Her stepfather had been diagnosed with stage four cancer, but because he had long-term care insurance, her mother could afford his expensive medical care.

“Without long-term care insurance, a disease or disability can wipe out a family’s savings,” she says. “Even though I’m a bit on the younger side, I still wanted to have that protection.”

When her student loan payments return, Ansell says she knows she’ll have to make sacrifices to continue paying her insurance premiums.

“It will mean that we will have to cut out visiting family out of state and other health and wellness outlets, such as our gym membership,” she says.

Courtesy of Sergio Mata Cisneros

Saving up for a down payment on a car

Pre-pandemic, 24-year-old Sergio Mata-Cisneros had been fronting $300 to the federal government each month for his four-year degree in political science from a private liberal arts college. When the forbearance started, he was immediately relieved. Mata-Cisneros, who lives in Washington, D.C., had been getting less hours at his part-time job, and he wasn’t sure income from his full-time job, a fellowship at a nonprofit that paid minimum wage, would be enough to pay the bills.

Fortunately, in May 2020, he found a better-paying full-time job as a policy analyst for an anti-hunger organization. Larger paychecks and lower bills allowed him to quickly save up for a down payment on a 2020 Kia Optima. He also created a budget and started aggressively paying off credit card debt from college.

“I wouldn’t have been able to do either of those things unless I knew my financial situation was stable,” he says.

Mata-Cisneros still helps out at his part-time job, but since he feels more confident in his finances, he has also cut his hours, so he has more time to explore the city and hang out with friends. He hopes to have the rest of his remaining credit card debt by January, just in time to turn his focus to his student loan debt when payments resume in February.

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Building up an emergency savings fund

Max Richter, who graduated with a degree in business administration and aviation studies, paid for his undergrad education with $95,000 in federal loans, a combination of his own and PLUS loans from his parents. When the pandemic hit, he was paying $800 a month toward the debt.

“I started to panic, because I knew some sort of job furlough was on the horizon, and I barely had enough money saved for one month,” Richter says. Every dollar he would have spent on loans went into a high-yield savings account, which he’d use in case he lost his job in the airline industry.

Seven months after the pandemic hit, when he found out he’d been furloughed, the 24-year-old had another full-time job lined up — but if he needed it, he also had enough savings to get him through two months of bills in the expensive Washington, D.C. area where he lives. Richter says he’s lucky to have studied what he likes, and he doesn’t regret investing in his education. But he knows he’s got a long road ahead.

“This pause has made me realize that there’s still a lot of money in my future I’m going to keep sending out,” he says.

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