What Happens When Student Loan Payments Resume?
With an increased monthly debt burden, borrowers could cut discretionary spending, causing economic turmoil. On the bright side, alternative ways to pay for college are being considered.


As October draws closer, millions of Americans are preparing for a stark reality they haven’t faced in over three years: the restart of federal student loan payments.
The pandemic-induced payment pause that began in March 2020 was a critical relief during a time of widespread economic instability. However, its cessation could have significant implications for borrowers and the economy.
A looming problem
During the hiatus, many consumers used the break from student loans to help them manage other debts. Borrowers reduced their credit card balances by an average of $611 during the pause, according to a report by TrueAccord, though it also found an alarming surge in credit card reliance, with 87.5 million new cards issued in 2022 alone. Rising interest rates could make unpaid credit card balances more expensive post-resumption.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Another unexpected consequence highlighted by the report’s data analysis is the growth of auto loan debt among those who deferred student loans. These borrowers saw an increase of $264 in their auto loan balance in 2020 and a further increase of $428 in 2021. By 2022, student loan holders had an average of $811 more in auto loan debt than non-student loan holders, a sobering revelation.
Experts have expressed concern regarding this trend, warning that the resumption of student loan payments will usher in a monthly debt burden that borrowers will likely struggle to manage. This could lead to a significant increase in delinquencies across credit types, which would invariably impact consumer financial health on a large scale.
In addition to the burgeoning debt, the restart of loan payments is anticipated to impact consumer behavior, leading to a reduction in consumption, especially of discretionary goods and services. This scenario could prove disastrous, particularly when businesses are grappling with an inflation rate that peaked at 9.1% in June 2022 (it was 3.2% this past July). This disruption could push the economy into a recession.
An opportunity to change behavior
However, amid these concerns, the payment pause has had the beneficial side effect of increasing awareness about long-term options for financing higher education.
Embarking on the journey of higher education is an exciting and transformative experience for parents and prospective students alike. However, it also presents a significant financial challenge that requires careful planning and consideration.
Here are some options:
Tuition payment plans. Many colleges and universities offer tuition payment plans that allow families to spread the cost of tuition and fees over several months instead of making a single lump-sum payment. These plans typically divide the total cost into equal monthly installments, often without charging interest.
It is essential to contact the college’s financial aid or bursar’s office to learn about available payment plan options and enrollment deadlines.
Federal Work-Study (FWS). This need-based program provides part-time employment opportunities for eligible students. These programs allow students to earn money to help cover educational expenses.
Work-study positions are often available on campus and can be related to the student’s field of study or provide valuable work experience, helping the student to develop crucial job skills and build a professional network.
Alternative financing options. In recent years, new and innovative financing options have emerged, offering alternative ways to pay for college. One key example: The Biden administration recently announced it has finalized its newest income-driven repayment plan, called Saving on a Valuable Education (SAVE).
This plan, like other income share agreements provided by private companies, offers affordability and flexibility since payments are always proportionate to the borrower’s income, reducing the financial burden during periods of low or no earnings.
As we brace for the return of student loan payments, it is evident that this issue is not simply about repayment. It’s about how we can transform this challenge into an opportunity to explore and promote more sustainable solutions for managing student debt.
related content
- A Little-Known Tax-Free Way To Help Pay Your Student Loan
- How to Prepare to Start Paying Student Loans Again
- States With the Highest, Lowest Student Loan Debt Burdens
- Student Loan Borrowers See Struggle As Payment Pause Ends
- How to Align Strategies for Student Loans and Retirement
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Dan Rubin is the founder and CEO of YELO Funding, a socially driven education fintech company on a mission to improve access to education by offering income-contingent financing to U.S. college students of all backgrounds. Mr. Rubin has 27 years of principal investing, investment banking, restructuring and operational experience, including roles as co-founding partner of YAD Capital, a private credit investment firm, private equity real estate investor at Halpern Real Estate Ventures and JEN Partners, investment banker at Lehman Brothers and turnaround consultant at Deloitte.
-
I'm a Financial Planner: Here's How to Invest Like the Wealthy, Even if You Don't Have Millions
Private market investments, once exclusive to the ultra-wealthy and institutions, have become more accessible to individual investors, thanks to regulatory changes and new investment structures.
-
Four Ways a Massive Emergency Fund Can Hurt You More Than It Helps
Saving too much could mean you're missing opportunities to put your money to work. Redirect some of that money toward paying off debt, building retirement funds, fulfilling a dream or investing in higher-growth options.
-
I'm a Financial Planner: How to Dodge a Retirement Danger You May Not Have Heard About
Timing is everything, and sequence of returns risk can mean the difference between a retirement nest egg that's overflowing … or empty.
-
Caring for Aging Parents: An Expert Guide to Easing the Financial and Emotional Strain
Early conversations, financial planning and understanding the progression of care needs can help to mitigate stress and protect family relationships.
-
I'm a Financial Adviser: The OBBB Is a Reminder for Older People to Have a Long-Term Plan
The new tax bill presents a good opportunity for retirees to revisit tax plans, look into doing some Roth conversions and consider plans for long-term care.
-
I'm an Insurance Expert: This Is Exactly Why Your Insurance Rates Are Soaring (and What You Can Do)
A dramatic rise in the frequency and cost of severe weather and wildfires means you need to prepare, prepare, prepare — no matter where you live — for higher premiums.
-
Q3 2025 Post-Mortem From an Investment Adviser: Markets Continue to Climb, Gold Shines
The third quarter saw market gains driven by Fed rate cuts and strong earnings, despite high valuations and concerns about speculative trading and job growth. Gold and international stocks could be potential hedges.
-
Moving Abroad? You Might Need a Cross-Border Financial Adviser
If you want to live in another country long term, you could benefit from an expert's guidance. Here's how to find a good qualified adviser to help with residency requirements, documentation, financial laws and tax impacts.