The student-loan-payment pause saved 37 million borrowers $195 billion, the Fed says. But Biden is on track to end that relief on May 1.

• The student-loan-payment pause saved 37 million borrowers $195 billion, the New York Fed found.
• The Fed said if payments resumed on May 1, many borrowers would become delinquent.

The student-loan-payment pause accomplished what it set out to do during the pandemic: put money back into Americans' pockets.

But that could all change in just over a month.

The New York Federal Reserve released a report on Tuesday that highlighted just how influential the pause on student-loan payments has been for federal borrowers over the past two years. It estimated that the payment freeze, with waived interest, would save 37 million borrowers with direct loans $195 billion through April.

But 10 million borrowers with private loans, or privately held Federal Family Education Loans, did not reap the same benefits and continued making payments during the pandemic, and their experiences are a harbinger of what federal borrowers could face when the payment freeze ends in May.

Given that borrowers with privately held loans were not covered by the Education Department's automatic forbearance, the Fed said the "difficulties faced by these borrowers in managing their student loans and other debt" suggested the borrowers who had not been voluntarily making payments during the pause were likely to fall behind.

"Although borrowers will likely face a healthier economy going forward, Direct loan holders have higher debt balances, lower credit scores, and were making less progress on repayment than FFEL borrowers prior to the pandemic," the report added. "As such, we believe that Direct borrowers are likely to experience a meaningful rise in delinquencies, both for student loans and for other debt, once forbearance ends."

Student-loan payments have been paused since 2020, initially by then-President Donald Trump, to give federal borrowers a reprieve amid the pandemic. President Joe Biden has since extended that relief three times, and payments are set to resume on May 1 unless further relief is implemented.

The report from the Fed, along with other analyses, have used data to raise a warning for if borrowers are put back into repayment: Sticking millions of borrowers with another monthly bill in May will cause more harm than good.

Student-loan borrowers may have saved money, but they still worry about affording debt payments

Over the past year, Insider has spoken with over a dozen borrowers who have benefited from the pause on student-loan payments. Some borrowers were able to pay off other forms of debt, like big medical bills, while others could build up savings, but they all expressed concerns with resuming payments on their student debt.

Gwen Carney, a 61-year-old with $75,000 in student debt, told Insider last year she's not sure she could afford an additional monthly bill.

"Restarting payments makes me very anxious because I somehow have to find that extra $200," Carney said. "I just don't have it."

She's not alone. A recent report from the Student Debt Crisis Center found 92% of fully employed borrowers were concerned about restarting payments amid rising inflation. That followed a November report that found 89% of fully employed borrowers expressed the same concerns. That's because a big chunk of their income would have to be repurposed — 27% of those respondents reported at least one-third of their income would be redirected toward student-debt payments, money needed elsewhere.

And on the administrative side, the Education Department has acknowledged challenges with restarting payments. It told the Government Accountability Office earlier this year it would be "a challenge to motivate" borrowers after a two-year-plus pause, citing difficulties with communication efforts.

Despite lawmaker pressure, Biden is silent on broad student-loan relief

The White House chief of staff, Ron Klain, suggested a few weeks ago that borrowers would get some form of student-debt relief before the expected May 1 payment-resumption date. But there is still no word on what that relief will look like or when it will be implemented, which has lawmakers and advocates ramping up pressure on the administration to provide clarity to borrowers.

Many Democratic lawmakers have been calling for an extension of the pause on student-loan payments. Sen. Patty Murray, the chair of the Senate education committee, recently called for the president to extend the pause on payments through 2023 until the loan system was "permanently" fixed, referring to broken loan-forgiveness and -repayment programs.

"This is not too much to ask — so until we fix our student-loan system, the student-loan payment pause must continue to provide borrowers much-needed relief," she said.

And 43 Democratic lawmakers, led by Rep. Conor Lamb, urged Biden to extend the payment pause "at least until the end of this year," adding that both borrowers and the Education Department "are unprepared to resume payments in May."

Biden's administration has yet to respond to those requests, along with the issue of broad student-loan forgiveness. While the president has canceled about $16 billion in student debt for targeted groups of borrowers, like those defrauded by for-profit schools, his campaign pledge to give borrowers $10,000 in relief remains unfulfilled. Advocates say now is the time to make good on that promise.

"The president during the campaign talked about his commitment to canceling debt," John King, President Barack Obama's education secretary, previously told Insider. "And so this is now the moment to follow through on that promise from the campaign."

Do you have a story to share about student debt? Reach out to Ayelet Sheffey at asheffey@insider.com.