Betting on Loan Forgiveness Cost Some Borrowers 43% More Debt, New Research Finds
Borrowers who paused payments expecting Biden loan forgiveness now carry balances up to 43% higher than those who kept paying — NBER research quantifies the real cost of betting on relief that never arrived.
The Real Cost of Waiting on Forgiveness That Never Came
New research from the National Bureau of Economic Research puts hard numbers on what many borrowers are now learning the painful way: betting on student loan forgiveness as a financial strategy was a losing bet. Borrowers who pulled back on payments during the pandemic pause — banking on Biden-era relief programs or continued extensions to wipe out their balances — are now significantly more likely to be delinquent than peers who kept making payments. The gap in outcomes isn't small. Some borrowers are carrying balances up to 43% higher than they would have had they continued paying down their debt. That number represents years of compounding interest that kept accruing while repayment was paused and forgiveness remained perpetually "coming soon."
“"Borrowers who banked on relief paid less toward their loans, spent more freely, and are now significantly more likely to be delinquent — with some facing balances up to 43% higher than borrowers who kept paying." *— National Bureau of Economic Research, via The College Investor*”
Why the Math Worked Against You
Interest doesn't care about political timelines. During the federal payment pause, unsubsidized federal loans and graduate PLUS loans continued to accrue interest even though no payments were required. Borrowers who chose to spend that money elsewhere — a reasonable-seeming choice when the White House was promising broad forgiveness — watched their principal quietly balloon in the background. When the Supreme Court struck down Biden's flagship $10,000–$20,000 forgiveness plan in June 2023, and when subsequent SAVE plan legal challenges froze income-driven forgiveness pathways, those borrowers were left holding significantly larger balances with no relief mechanism in sight. The lesson isn't that borrowers made irrational decisions — the lesson is that unlegislated policy promises are not a sound basis for a debt repayment strategy.
What Thi
This issue draws on reporting and data from The College Investor.