Borrowers who believed the student loan payment pause would keep getting extended were 7.5 percentage points more likely to be 90 days past due by May 2025, according to a new National Bureau of Economic Research working paper that offers the clearest picture yet of how policy uncertainty reshaped repayment behavior, and why so many accounts are now landing in collections.
The study, from researchers at the University of Chicago, Purdue University, and the University of Cambridge, linked a multi-year survey of borrower expectations to credit bureau records, employment data, and consumer spending data. It tracked how beliefs about forgiveness evolved from the 2020 election through the 2022 Biden administration announcement, the court injunctions that followed, and the Supreme Court decision that ultimately killed broad-based cancellation in June 2023.
The behavioral effects were significant. Borrowers who were optimistic about forgiveness reduced their student loan payments by roughly $40 per month and increased spending on nondurable goods by about $100 per month. Borrowers in the top two quartiles of forgiveness expectations were 30 percentage points less likely to make any payment at all during the pause. Randomized experiments embedded in the survey, which showed participants optimistic or pessimistic news articles, confirmed the relationship was causal: shifting beliefs directly changed payment behavior.
The delinquency findings should resonate with anyone managing student loan portfolios. Optimism about another pause extension, not optimism about forgiveness itself, was the belief that predicted borrowers falling 90 days behind once the on-ramp period ended and servicers resumed reporting to credit bureaus in late 2024.
The welfare stakes were substantial. The researchers calculate that borrowers who made repayment decisions based on incorrect beliefs suffered losses of up to 44% of their initial loan balance, with pessimists who rushed to pay down balances that might have been forgiven faring worst in scenarios where forgiveness occurred.
The paper lands as a caution for policymakers, and a partial explanation for the delinquency surge the industry has been navigating since early 2025. Beliefs moved sharply with every announcement. The August 2022 forgiveness announcement alone raised expectations by 22 percentage points, and each reversal left a cohort of borrowers whose financial decisions were anchored to a policy that never arrived. The authors argue that ambiguous government signals carry real costs, a lesson the credit and collection industry has been living with one past-due account at a time.
