Americans with student debt are bracing to start making payments again after more than two years.

During a forbearance period that started early in the pandemic, those with a piece of the $1.7 trillion student debt burden could set aside at least one of their financial worries, allowing them to reach major life milestones, boost their financial health and splurge on vacations.

Now, they’re preparing for the grace period to end Aug. 31. While President Joe Biden could once again extend the deadline, or even announce a forgiveness plan, the date to start paying again is creeping closer with no clear sense that there will be action from the White House.

Without loans hanging over their heads, some Americans have dramatically improved their credit scores, paid down other debt and taken vacations. Others bought houses, expanded their families or boosted savings.

Jennifer Nagle, a 38-year-old in Michigan who works in IT, was able to go on vacation for the first time since 2012. She graduated from college with more than $60,000 in student loans, two-thirds of it federal, and was paying about $600 a month before the pandemic.

This summer, she spent time at an Airbnb on a lake in rural southwest Michigan for a friend's 40th birthday — the kind of trip she had felt "cheated out of" due to her debt.

"It's hard to save up money to go on vacation," she said. "This felt like I could put down a heavy burden and just be."

Financial Lifeline
One study by the California Policy Lab and Student Loan Law Initiative found that 44% of borrowers reduced their use of credit cards or other revolving credit during the forbearance period. Meanwhile, credit scores increased by an average of 30 points.

The Federal Reserve’s Survey of Household Economics and Decisionmaking also showed that 73% of people with education debt felt they were “doing at least okay financially,” up from 66% in 2020 and 64% in 2019.

For Jennifer Le, a 30-year-old architectural designer in Washington, the pause was a welcome break from financial stress.

She left graduate school with $90,600 in debt in early 2020. This year, she put some of the money she would’ve spent on her student loans to help fund her wedding in front of 65 people.

“This loan freeze gave us all time to just breathe and catch up a little and maybe pursue some of these personal or financial goals we have,” she said. “Maybe if we were lucky, we could splurge a little on little luxuries.”

Heather Diehl of Virginia said the freeze made preparing for her first child easier, from buying a SUV that would better fit a car seat to saving for daycare.

“I wish our society didn’t force 18-year-olds into loads of debt just to be able to get a job,” said Diehl, who works in human resources and graduated with $90,000 in debt. “I hope the system isn’t as broken in 18 years when my son has to figure out what he wants to do.”

Imminent Restart
Critics of the forbearance extensions or cancellation plans argue that it would be unfair to people who already paid off their debt or that it could contribute to inflation. Concerns about the optics around forgiveness have complicated decisions from Biden, who’s looking to boost ratings ahead of midterm elections.

Anthony Portesy is dreading the return of the loan payments. The 35-year-old lawyer in Long Island, New York, was paying more than $700 a month toward his six-figure loan balance from law school before the pandemic.

He's since funneled that money into paying off his credit card debt, maxing out his Roth IRA and, most recently, buying his girlfriend an engagement ring and a romantic getaway. He’s planning to propose in San Francisco exactly three years after they met.

Still, his loans are constantly hanging over him.

"I’m worried that my future will be back to constantly budgeting to have the extras our parent’s generation had, like buying a house, family vacations and raising a family,” he said.

This article was provided by Bloomberg News.