Moratorium Will Save Borrowers Average of $7,431

While the coronavirus pandemic has posed financial challenges for many, student loan borrowers have enjoyed some relief. Starting in March 2020, the government paused payments and interest on eligible federal student loans.

Since then, the student loan moratorium has been extended four times, most recently until Jan. 31, 2022. This long-term, zero-interest forbearance is resulting in major savings for borrowers — $154 billion in total, according to Student Loan Hero researchers.

Analysts estimate the typical borrower in active repayment will have kept $7,431 that would have otherwise gone to their student loans. However, borrowers shouldn’t count on another extension.

Key findings

  • Eligible borrowers in active repayment across the U.S. will have kept $154 billion in their pockets by the time the student loan moratorium expires in January 2022. The average student loan borrower in repayment will save $7,431 during the 22-month student loan forbearance period.
  • Student loan borrowers in the District of Columbia, Alaska and Washington are estimated to have saved more than residents of any other state. However, when adding up the total savings by state, the amounts are greatest in California, Texas and New York.
  • The amount of money that student loan borrowers are expected to save represents 0.08% of both the national gross domestic product (GDP) and total personal income.
  • The most recent moratorium extension from Sept. 30, 2021, to Jan. 31, 2022, will save borrowers $28 billion, with an average per-borrower savings of $1,351.

Student loan borrowers will have kept $154 billion in their pockets

Americans owe more than $1.71 trillion in student loans. Although not every borrower was in active repayment when the student loan moratorium began, the group that was will reap major savings — $7 billion a month, for a total of $154 billion over 22 months, according to Student Loan Hero researchers.

In total, analysts estimate the typical student loan borrower in active repayment will have kept an extra $7,431 after the 22-month moratorium. While between 300,000 and 500,000 borrowers chose to keep making payments on their student loans during this time to cut down on their principal, others may have used that money for emergency expenses, living costs or their own savings.

However borrowers chose to use this money, it was likely a welcome relief during the coronavirus pandemic.

How much Americans are saving during the student loan moratorium
Estimated borrowers in active repayment each month (millions) 20.8
Estimated monthly amount saved (billions) $7.0
Estimated amount saved over 22-month moratorium (billions) $154.3
Estimated average amount saved per borrower in repayment over 22-month moratorium $7,431

Borrowers in D.C., Alaska and Washington are saving at least $7,400

While the average student loan borrower in active repayment is saving $7,431 during the moratorium, that number is higher or lower by state depending on what borrowers’ pre-moratorium payments looked like.

According to Student Loan Hero findings, borrowers in the District Columbia will have saved the most when the moratorium is complete, with an average savings per borrower of $8,536. Borrowers in Alaska and Washington also will have reaped relatively high savings at $7,625 and $7,400, respectively. Before the pandemic, borrowers in D.C. paid an average of $388 a month in student loans, while borrowers in Alaska and Washington state paid $347 and $336, respectively.

On the flip side, borrowers in North Dakota, Mississippi and Arkansas saved $4,655, $4,954 and $4,993, respectively. Residents of these states had average monthly payments of $227 or lower.

California, Texas and New York top list of states that saved most

Along with estimating the amount of money saved per borrower, Student Loan Hero took a look at how the student loan moratorium has impacted states as a whole.

According to the analysis, California has been infused with more than half a billion a month — $581 million, to be exact — that would have otherwise been earmarked for student loan payments. Texas and New York follow at $472 million and $364 million, respectively, in total student loan money saved each month.

For the most part, analysts found that states with bigger populations had greater savings, since they likely had a larger number of student loan borrowers. In fact, the five most populous states comprise 36% of the total savings per month.

Meanwhile, Wyoming, North Dakota and Vermont saw significantly lower monthly savings. Borrowers in these states saved a monthly total of $7 million, $9 million and $11 million, respectively.

Having highest total savings doesn’t mean moratorium has had greatest impact on that state’s economy

According to the Student Loan Hero analysis, the amount of money withheld from student loan payments represented 0.08% of both the GDP and total personal incomes of the U.S. as a whole.

Between April 2020 and March 2021 — the latest available data — the savings from the student loan moratorium totaled nearly $70 billion. By the time the moratorium ends in 2022, those total savings are expected to reach $154 billion.

Moratorium savings as a percentage of GDP, total personal income
Student loan moratorium savings from April 2020 through March 2021* (billions) $68.9
U.S. gross domestic product from April 2020 through March 2021* (billions) $84,246.6
Total personal income in the U.S. from April 2020 through March 2021* (billions) $82,005.3
Moratorium savings as a percentage of GDP 0.082%
Moratorium savings as a percentage of total personal income 0.084%
*Latest available data at the time of publication

Despite having the largest cash infusion, California’s savings only represent 0.06% of their state GDP, the third-lowest among the states. Mississippi’s economy enjoyed the biggest benefit from the moratorium, as its estimated infusion of $590 million represented the equivalent of 0.13% of their GDP and 0.11% of total personal earnings within the state.

Of course, these numbers will differ by borrower, and the interplay between state size, average monthly payment and each state’s economy is complex. While the pause in student loan payments might have represented a drop in the bucket for some, it may have been a serious financial lifeline for others during this difficult time.

REPORTERS: Looking for state-specific data on the moratorium savings as a percentage of GDP or total personal income? Contact [email protected].

Most recent extension will save borrowers nearly $28 billion

Since the student loan moratorium began in March 2020, it was extended four times, twice by the Trump administration and then twice by the Biden administration. Most recently, it was set to expire at the end of September 2021 when the current administration extended it again until Jan. 31, 2022.

This added four-month extension was significant for borrowers, representing a savings of $28 billion in student loan payments overall and $1,351 per borrower. However, borrowers shouldn’t count on another extension, as officials indicated that payments would resume after January 2022.

If you owe federal student loans, make sure to sign in to your accounts and review your information, including your:

  • Balance
  • Interest rate
  • Monthly payment

If your payments are burdensome, you might consider applying for an alternative repayment plan, such as income-driven repayment or extended repayment.

Federal Student Aid also offers forbearance and deferment options on a case-by-case basis. Speak with your loan servicer about your options, but remember that interest will accrue on most loan types during normal forbearance periods.

Refinancing your student loans might be another avenue worth pursuing, particularly if you have strong credit and a stable income. Interest will resume on federal student loans when the moratorium ends, so it might make sense to refinance your loans for better rates.

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