Why some student-loan borrowers aren't worried about missing payments over the next year

• Federal student-loan payments started to become due again in October.
• But some borrowers are choosing not to make those payments right now.
• They're banking on the 12-month "on-ramp" period during which interest still grows.

Student-loan payments have resumed — and some borrowers are choosing not to make them.

In September, the over-three-year pause on federal payments ended and interest began accruing again on borrowers' balances. This month, bills started becoming due. According to Treasury data, many borrowers took advantage of the month before their bills were due to pay off some of their debt — the daily Treasury statement reported an over $1 billion cash deposit on September 1, up from $66 million just one year prior.

However, other borrowers did not try to get ahead of their debt, and they're not planning to do so anytime soon. To ease the transition back into repayment, President Joe Biden's Education Department announced a 12-month "on-ramp" period during which it would not report any missed payments to credit agencies.

That has some activists and borrowers urging others with student loan debt to make use of the on-ramp over the next year, even though interest is still accruing during that time. For example, the Debt Collective — a debtors union pushing for the abolition of all forms of debt — wrote on X, formerly Twitter, last month that "if you miss the October student debt payment, and the November payment and the December payment, and every month until September 2024, your interest will accrue but you won't face other big financial harms: no default, no delinquency, no ding on your credit, no wage garnishment."

Other borrowers have taken to social media platforms like TikTok to tout the on-ramp. A TikTok creator posted a video in August with nearly 50,000 likes with the caption: "The 'real' date you need to make payments is September 2024, NOT this year!!!!"

"Maybe you need a year to breathe, like most young people who are struggling financially," he said. "Congratulations, you have more money than you thought you used to and now you don't have to pay the government for a full year."

Additionally, an August survey from Intelligent, a higher-education-research platform, found that out of 1,000 federal borrowers, 62% of them said they were likely to boycott payments. Half of the sampled borrowers believed a boycott could lead to total loan forgiveness. 

The Education Department is currently in the process of crafting its new student-debt relief plan after the Supreme Court struck Biden's first plan down. It's possible it could take until 2025 to be implemented, but some borrowers might choose against making payments in the hopes they will get relief before paying off another monthly bill.

Targeted student-loan forgiveness could also be driving some borrowers to push off their monthly payments. The Education Department is in the process of implementing one-time account adjustments for borrowers who have made the required payments on income-driven repayment plans and Public Service Loan Forgiveness, most recently $8 billion in relief for 104,000 borrowers in both of those programs.

Consequences of missing a student-loan payment

For now, the only guaranteed consequence of missing a student-loan payment is interest accrual. Interest grows on federal borrowers' balances every day, so if borrowers choose not to pay off their debt until the on-ramp ends, they will find that their balance is bigger than when repayment restarted.

However, while the Education Department said it will not actively report missed payments, it did release guidance stating it does not have control over how credit scoring companies factor in missed payments. So borrowers might not be fully protected from hits to their credit scores during this time.

Once the on-ramp ends, normal debt collection actions will resume — if a borrower is delinquent for more than 90 days, their servicer will report them to a national credit bureau, where it can enter default.

Still, there are other reasons — aside from choosing not to pay debt — why a borrower might not make a payment right now. For example, since payments resumed many borrowers have reported issues with their account, from missing paperwork, to inaccurate billing statements, to severe processing delays.

Xiong Chang, a borrower who paid off his remaining balance in June, previously told Insider his servicer has still not processed the payment, and now his account is marked as past-due for a balance he no longer owes.

"I'm starting to be worried because I was told this would be taken care of, but it still hasn't been dissolved and I want to know what's going on," he said.