New Survey Finds Financial Constraints Are Driving Missed Student Loan Payments

Editor’s note: This article was updated Oct. 1, 2024, to clarify that about one-third (32%) of borrowers with less than $25,000 in household income are not current on their student loan payments—not that they are current on those payments.

Among borrowers who owe payments on their federal student loans, 13% were not making any payments during the “on-ramp period”: a year-long period of temporary flexibility to help transition borrowers back into repayment after a more than three-year pause on payments and interest accumulation that began during the COVID-19 pandemic.

That’s according to a summer 2024 survey of 1,533 current borrowers conducted for The Pew Charitable Trusts, which also found that borrowers in this group are more likely to be lower-income and less financially secure than those who reported making payments. These borrowers were also often disengaged with the repayment system, and made either partial or irregular payments even before the pandemic and payment pause.

After the COVID-triggered pause, federal student loan borrowers began or resumed making payments in October 2023, many of them for the first time. Recognizing the significant economic strain that these payments can cause both for first-time and returning borrowers, the Department of Education instituted the 12-month on-ramp period, which has prevented many of the usual consequences of nonpayment for at least 6.7 million borrowers.

But now, with the on-ramp period coming to an end, new and returning borrowers who have missed payments risk falling into delinquency and eventually defaulting, which leaves them vulnerable to a host of financial consequences. Pew research demonstrates that borrowers who don’t successfully engage in repayment by either making payments or selecting a repayment plan in the first three months are 2 1/2 times more likely to default on their loans than other borrowers, meaning that repayment patterns created in the first months for new and returning borrowers strongly influence their long-term repayment success.

The new survey, conducted by opinion and market research company SSRS, helps illuminate which borrowers appear to have struggled to make payments during the on-ramp period and may need additional support from the Department of Education and its loan servicing contractors as the on-ramp period comes to a close.

Borrowers are primarily missing payments for financial reasons

The survey data finds that the 13% of borrowers who are currently not making payments report higher feelings of financial insecurity and lower incomes than those who are making payments. Borrowers who do not feel secure about their household finances are more than three times more likely (20%) not to make payments than borrowers who feel financially secure (6%). About one-third (32%) of borrowers with less than $25,000 in household income are not current on payments on their student loans. These borrowers would probably qualify for lower payments under several income-driven repayment (IDR) plans, but 50% of those who were not making payments were not familiar with IDR plans.

A little more than three-fourths (76%) of borrowers who were not making payments cited financial concerns as the primary reason; 56% said they couldn’t afford the payments, and the remaining 20% said that other financial obligations took priority. When asked how difficult it would be to make payments if they were required to, 91% of borrowers who are not currently making payments said it would be difficult to do so. Taken together, it’s clear that financial constraints and affordability-related concerns are key determining factors for nonpayment.

Irregular payments pre-pandemic, noncompletion of degrees, and low engagement with the repayment system appear to be related to missing payments

Borrowers’ pre-pandemic repayment patterns may be linked to nonpayment during the on-ramp period. The survey measured borrowers’ current repayment status compared with their repayment status prior to the payment pause in March 2020. Almost one-half of borrowers (45%) who owed and were not making payments since the on-ramp period began were already making irregular payments or had their loans in default prior to the payment pause—indicating that the financial circumstances of many borrowers who struggled to afford payments before the pandemic have not materially improved in a way that makes affording payments easier now.

The survey also found that 21% of borrowers who had attempted but not completed a degree were not making payments at the time of the survey; this share is 2 1/2 times higher than for borrowers who completed at least an associate degree or higher (8%). The relationship between completion and repayment success is a well-documented phenomenon associated with default and various negative financial consequences.

Lack of engagement with the repayment system also stands out as a contributing factor to nonpayment. Forty-nine percent of borrowers who were not making their payments reported not knowing how to contact the Department of Education or their loan servicers with questions about their loans—which suggests that some borrowers may not be paying simply because they don’t know about options to lower their payments.

Even more borrowers are at risk of falling behind on payments

In addition to borrowers who aren’t currently making payments, a second group of borrowers remains vulnerable to falling behind on payments in the future. Although over half of borrowers (54%) who are keeping up with payments reported that they usually make full, on-time payments—and one-third (33%) reported having $0 payments on an IDR plan—another 12% reported making inconsistent or irregular payments. These borrowers—like those borrowers who are already missing payments—risk becoming delinquent on their loans soon after the end of the on-ramp and possibly defaulting on their loans as early as July 2025.

Since delinquency is typically reported after three months of nonpayment, the Department of Education has an opportunity in the next few months to conduct targeted outreach to borrowers who have demonstrated over the last year that they can’t afford payments. Some or even many of these borrowers may not know that protections preventing them from becoming delinquent are soon expiring and that they could benefit from enrolling in repayment plans that lead to successful long-term outcomes. Many would qualify for a significantly lower payment on an IDR plan, keeping their loans in good standing. They, like all borrowers, will need access to consistent, timely information on programs and benefits in a rapidly changing student loan environment. 

Lexi West is a principal associate and Richa Bhattarai is a senior associate with The Pew Charitable Trusts’ student loan initiative.