Ashley Dorn, a public school music teacher, had suspended her student debt for three years and found another use for the money she had saved during the moratorium. She used the extra money to pay off $10,000 in credit card debt, a bill she had been nagging for a decade.
“I couldn’t have done it if it weren’t for this student debt hiatus, and I’m afraid I’m going to have to start piling it all up again,” she said of the credit card debt. She can’t imagine being able to afford payments unless she finds another job, she said, in addition to her “already very time-consuming, already very stressful career.”
She earns about $50,000 a year and her husband earns about $45,000 as a government employee, but they still live paycheck to paycheck. Since graduating with a master’s degree in education from the State University of New York Empire State College in 2014, Ms. Dorn and her husband, Jonathan, who live near Albany, have been paying off their student debt of more than $160,000 a month. They stopped in March 2020, when the Trump administration, as part of a pandemic relief effort, said borrowers with federal student loans could stop making monthly payments.
The couple’s payments were nearly $900 a month, with Ms. Dorn on an income-dependent installment plan, which adjusts payments to a borrower’s salary.
With the break coming to an end at the end of August and President Biden’s Supreme Court debt cancellation proposal having been rejected, the Dorns and millions more are facing the reality of resuming those loan payments.
For many of the 43.6 million borrowers with federal student debt, the three-year break created a financial cushion that allowed them to use the money for other purposes: buying homes, paying off credit card debt, supporting family members, undergoing overdue medical procedures and booking vacations. Now they’re figuring out how to cut back to fit those payments into their budgets.
The Dorns had always assumed they would have children one day, but the burden of their student debt has made them reconsider. For now, their two dogs, Micah and Oscar, and two cats, Ellie and William, will have to suffice.
“That conversation is off the table indefinitely,” said 33-year-old Ms Dorn. In addition to monthly expenses such as their mortgage and car payments, Mr. Dorn has Crohn’s disease, which adds another layer of financial stress.
The couple said they expected their new monthly payments, which will be calculated based on their income-based payment plans, to be around $800. That may change with the Department of Education’s new IDR option, the Saving on a Valuable Education plan, or SAVE, which takes income and family size into account.
Before the payment break, Mrs. Dorn relied on her credit card to cover expenses such as an unexpected emergency room visit, vet bills, health care co-payments, and new car tires. She used credit to replace their water heater, pay for some car insurance, and install a new transmission in her husband’s car. In the past six months, she has paid off her credit and closed the card using a debt resolution program.
For Shantel Anderson, 27, the break was a lifeline that allowed her to support her mother and help her avoid deportation. The two struggled as Mrs. Anderson grew up in Philadelphia, bouncing from apartment to apartment until they were evicted; they ended up in a homeless shelter for a week, just before she started college. Her mother had lost her job earlier that year, and Mrs. Anderson, then 18, had put off her first fall semester of college because she couldn’t afford to go. Ms. Anderson had lost most of her belongings during the eviction and relied on donations from people in her life, including her school counselor, for dorm room supplies.
Ms. Anderson secured financial aid and student loans to study political science at Eastern University while maintaining a work-study job and other employment, but still graduated in 2018 with $43,000 in debt. The moratorium, which freed up $455 a month, allowed her to pay her mother’s phone bill and some car repairs. Mrs. Anderson also helped her mother with groceries, medicine, gas, and cat food. With these expenses, her mother was able to spend all of her income on paying rent and utilities.
Ms. Anderson’s first full-time job outside of school, at a veterinary hospital, paid $32,000 a year, and the hospital provided housing at the time. When the pandemic recession hit, her hours were reduced. She paid one last student loan in full in March 2020, then a few more monthly payments of $50. But when she found out she was going to lose her home, she stopped paying the debt to pay rent and other bills.
The hiatus allowed her to move into a three-bedroom high-rise apartment with a pool and gym — amenities she thought she could never afford — and paid $500 for her share of the monthly rent with three roommates. She bought a car, which made grocery shopping easier, and she was able to afford about $400 in co-payments for unexpected health problems and medical procedures.
Some borrowers were shocked last August when Mr Biden’s debt relief plan was announced.
“That day was crazy for me,” Ms. Anderson said. She believed the plan would have halved her federal student debt. Her relief soon gave way to skepticism after Republican lawmakers filed a series of lawsuits to block the plan.
When payments resume, Ms. Anderson expects her monthly bill to remain around $455, adding to her monthly car and credit card payments of $250. She’s increased her income to more than $60,000 a year by working as a data manager at a nonprofit organization, and she signed up for Public Service Loan Forgiveness (PSLF) last October, but she’s already started cutting back on certain expenses.
She stopped going to therapy to save on co-payments and talked to her mother that she couldn’t help her very well. In an emergency, Ms. Anderson said, she would sell her car.
She still helps with some of her mother’s expenses: the phone bill, gas money for commuting to her part-time job at a nursing home, and occasional errands. But her mother is already behind on rent and her landlord has filed the eviction papers.
“She had a lawsuit,” Mrs. Anderson said. Her landlord didn’t show up, so the judge dismissed her case. I was like, thank goodness, we have more time.
Lifestyle gains
For others, the break helped redirect money to things like home renovations and vacations. Elizabeth Burton and her husband, Kyle, have private and federal student debt of approximately $175,000. The moratorium saved the couple, who live in Manchester, NH, about $650 a month. Her schedule as a sonographer allowed her to stay home during the day, saving them an additional $1,200 in childcare costs during the pandemic, allowing their 8-year-old and 5-year-old to stay home.
While Ms. Burton, 39, and her husband, 38, a sales representative, still had to pay $500 a month in private loans, the extra money allowed them to put a second bathroom in their home, pay off credit card debt, and take an eight-day family vacation to Disney World.
Now that Ms. Burton and her husband have better paying jobs, they think a means-tested installment plan would lead to a higher bill than before.
“There is no money for my children to study,” said Mrs. Burton. “I’m still going to pay off my loans. But you know, my son is 8. I have 10 years left in my federal loans. There is no money for him. He will either have to take out loans, he will have to live at home, he will have to get a scholarship – I have nothing left for him.”
The Dorns used part of their saved student debt to book a vacation as well – for July 2025. They plan to celebrate their anniversary in Jamaica, hoping to soak up the tropical atmosphere and explore the sea creatures. The couple has a payment plan for the trip, which offers the option of spreading small payments over three years. It’s their dream vacation, said Mrs. Dorn. But now that the payment break is ending, they are considering giving that up too.
