Many Borrowers Refusing to Pay Back Their Student Loan Debt as They Wait for Debt Cancellation

By: Georgia | Published: Jan 30, 2024

The end of the pandemic pause on student loan payments in October revealed a striking trend: approximately 40% of borrowers with bills due didn’t make their payments.

This figure might not capture the entire scenario, as it likely excludes those affected by servicer errors. The pause, initially a relief measure, has highlighted ongoing financial challenges for many borrowers.

Financial Hardship at the Core of Non-Payment

The Federal Reserve Bank of Philadelphia sheds light on why borrowers are struggling.

An open laptop rests on a red shag carpet. In the foreground, multiple credit cards and receipts are scattered across the carpet

Source: Dylan Gillis/Unsplash

They revealed that more than half of borrowers who didn’t make a payment in October, including some who were on plans allowing them to make payments as a percentage of their income, said it was because they couldn’t afford it.

A Mix of Service Errors and Intentional Non-Payment

MarketWatch reports that a substantial number of borrowers, about a quarter, missed their October payment due to servicing errors.

A student is captured from the waist up, holding a stack of textbooks in one hand. They are wearing a white shirt under a light blue denim jacket adorned with orange patches, a grey backpack over one shoulder, and earphones

Source: Element5 Digital/Unsplash

Furthermore, 21% chose not to make a payment even though they could afford to do so, per data from The Federal Reserve Bank of Philadelphia

Richelle Brooks' Strategic Approach to Loan Payments

Richelle Brooks, a 36-year-old from Los Angeles, is part of a growing number of people who have decided not to pay their student loans.

A hand holding up a protest sign with the message 'CANCEL STUDENT DEBT' in bold, pink letters against a white background. The sign is in sharp focus against the blurred backdrop of the Supreme Court building

Source: Getty Images

She told MarketWatch, “It became, okay, if I stay in school, I can pay my bills and I don’t have to worry about paying my student loans back.” 

The Debt Collective's Influence

The Debt Collective, an activist group, has made significant strides in advocating for systemic change.

A group of protesters, some wearing masks, are holding signs and a large banner advocating for the cancellation of student debt in front of a government building. The banner reads '$10K?!? NO WAY' and 'DON'T GO SMALL CANCEL IT ALL! JOIN THE DEBT COLLECTIVE' in bold, colorful letters

Source: Getty Images

Their actions, such as the 2015 debt strike, have led to policy reforms and helped shape the national conversation around student debt, MarketWatch reports.

Navigating the Post-Pause Environment

In the current climate, borrowers like Richelle Brooks are utilizing a 12-month grace period after the resumption of student loan payments. This period provides temporary relief from severe consequences.

Overhead view of attendees seated in a lecture hall with rows of tan chairs, some with wooden desks. Individuals appear engaged, with some taking notes, using laptops, or holding papers

Source: Mikael Kristenson/Unsplash

Brooks, who faces about $260,000 in student debt, told  MarketWatch, “I’m figuring out a way to not pay these student loans. Now I’m going to politicize that. I’m going to talk about it.”


Challenges with Repayment Plans

MarketWatch reports on the story of Michelle Rose, a resident of Toledo, Ohio, who faced challenges in enrolling in the new SAVE repayment program for her student loans. 

Three men in business attire stand behind a podium bearing the seal of the United States Senate. To the left, a poster board titled 'LOWERING EDUCATION COSTS AND DEBT ACT' with the subtitle 'ADDRESSING ROOT CAUSES OF STUDENT DEBT' is displayed on an easel

Source: Getty Images

Despite being eligible, she encountered rejections and delays, highlighting the inefficiencies and complexities in the loan servicing system.


Debt Influencing Life Decisions

Rose’s experience with student loan debt has significantly influenced her life decisions. 

A person with long hair is seen from behind, working on a laptop placed on a wooden table. An external hard drive is connected to the laptop, and there is a cup of coffee beside it

Source: Andrew Neel/Unsplash

She returned to school at 31 and later found a job in IT, but the looming debt affected major life choices, including living arrangements and family planning, per information from MarketWatch.


The Complex Path to Debt Relief

Elli England and Michael Baugh, based in Anaheim, California, are navigating a complex system for student loan relief. 

A classroom full of students sitting at desks facing the front, where a male teacher in a plaid shirt stands near a whiteboard. The students appear attentive, and the classroom is decorated with educational materials

Source: Kenny Eliason/Unsplash

England shared with MarketWatch, “Obviously we got a reprieve during the pandemic and so didn’t really think about it. At that time we were dealing with my husband’s health,” she said. “We assumed that he’s not able to work — we can get it forgiven. Didn’t work. He’s worked in special education for many years —we can get it forgiven as has been promised many times. Didn’t work.”


Bureaucratic Barriers in Loan Forgiveness

England and Baugh’s struggle to obtain loan forgiveness highlights systemic challenges. Despite meeting criteria for the Public Service Loan Forgiveness program and disability discharge, their path has been difficult.

President Joe Biden is speaking at a podium with microphones, holding a pen in his hand, with an attentive expression on his face. A man in a suit and glasses is standing in the background, slightly out of focus

Source: Getty Images

England said to MarketWatch, “The whole process has been so frustrating, made worse by the fact that you cannot get a straight answer out of everybody.”


Boycotting Payments to Spur Policy Change

Some borrowers are skipping payments to pressure the administration for more loan forgiveness. This tactic is a response to dissatisfaction with current debt relief measures.

A diverse group of demonstrators is gathered, holding signs with messages urging for the cancellation of student debt. A prominent pink sign in the foreground reads 'President Biden: Cancel Student Debt - ALL OF IT! NO MEANS TESTING!'

Source: Getty Images

However, Jake Hill, founder and CEO of DebtHammer, told The Washington Times, “Although the frustration behind the student loan boycott is understandable, it’s unlikely to lead to positive change. Instead, it will destroy credit scores of those who choose to participate.”


The Continuing Debate Over Student Loan Forgiveness

The student loan crisis remains a hot topic, with over 43 million borrowers owing $1.63 trillion. Efforts towards debt cancellation have been made, but the struggle continues. 

In a black and white photo, individuals are holding up signs that read 'CANCEL STUDENT DEBT' with the NAACP logo at the bottom

Source: Getty Images

Elaine Parker, president of the conservative advocacy group Job Creators Network Foundation and critic of the boycott said to The Washington Times, “Rather than demanding that taxpayers forgive their loans, students should protest their colleges for saddling them with these debts in the first place.”