Why Student Loan Pauses Hurt Your Financial Future

Have you ever felt like your student loans are a heavy backpack you can’t seem to shrug off? You’re not alone. With over 40 million Americans juggling federal student loan debt, many are hitting the pause button on repayments through options like forbearance and deferment. But here’s the kicker: these pauses, while offering temporary relief, might be setting you up for a financial stumble down the road. Let’s dive into why more borrowers are halting payments, what it means for their wallets, and how you can navigate this tricky terrain without derailing your financial future.

The Growing Trend of Student Loan Pauses

It’s no secret that managing student loan payments can feel like juggling flaming torches while riding a unicycle. Recent data paints a stark picture: in just one year, from 2024 to 2025, the number of borrowers opting for forbearance skyrocketed from 2.9 million to a whopping 10.3 million. That’s a jaw-dropping leap, and it’s not just a random spike. Another 3.4 million borrowers chose deferment in the same period, up slightly from 3.2 million the year before. Together, these figures mean over a quarter of federal student loan holders have pressed pause on their repayment journey.

Why the surge? For many, it’s a matter of survival. Rising costs for housing, childcare, and everyday essentials are squeezing budgets tighter than ever. I’ve seen friends and colleagues wrestle with these choices, torn between paying rent or keeping up with loan bills. It’s a tough spot, and pausing payments can feel like a lifeline. But as we’ll explore, this lifeline comes with strings attached.

What Are Forbearance and Deferment, Anyway?

If you’re new to the student loan game, terms like forbearance and deferment might sound like jargon from a finance textbook. Let’s break it down. Both are ways to temporarily halt your student loan payments, but they’re not identical twins.

• Forbearance: This lets you pause payments for a set period, often due to financial hardship or other challenges. The catch? Interest keeps piling up, adding to your debt like snow on a winter roof.
• Deferment: Similar to forbearance, but typically tied to specific situations like unemployment, economic hardship, or even a serious medical condition. In some cases, interest might not accrue on certain loans, but that’s not guaranteed.

Think of these options as a financial snooze button. They give you breathing room, but the alarm will go off eventually—and it might be louder than you expect. For example, someone with an average loan balance of $39,000 and a 6.7% interest rate could see their debt grow by about $219 a month during a pause. That’s not pocket change.

Pausing payments can feel like a relief, but the interest that accrues is like a silent debt monster growing in the background.

– Certified financial planner

Why Are So Many Borrowers Pausing Payments?

The numbers don’t lie—something’s pushing borrowers to hit pause in droves. One major culprit? The fallout from a now-defunct repayment plan that promised lower monthly payments but faced legal challenges and was ultimately scrapped. This plan, designed to make payments more affordable, had millions enrolled before it was replaced with less forgiving options. Now, many borrowers are stuck in a forbearance limbo, with some facing interest charges even during their payment pause.

Then there’s the broader economic picture. Costs for basics like rent, groceries, and childcare have climbed faster than wages for many. For instance, the number of borrowers citing economic hardship for deferments doubled from 50,000 to 100,000 in a year. Unemployment deferments also rose, jumping from 140,000 to 180,000. These stats tell a story of people stretched thin, trying to keep their heads above water.

I can’t help but think of a friend who recently lost her job and opted for a deferment. She told me it felt like a weight lifted—until she realized the interest was still creeping up. It’s a stark reminder that these pauses, while helpful, aren’t a free pass.

The Hidden Costs of Hitting Pause

Let’s get real for a second. Pausing your student loan payments might feel like a win when your bank account is screaming for mercy, but it’s a short-term fix with long-term consequences. The biggest issue? Interest accrual. When you’re not paying, interest keeps building, turning your loan into a financial snowball rolling downhill.

Consider this: if you owe $39,000 at a 6.7% interest rate, a year in forbearance could tack on over $2,600 to your balance. That’s money you’ll have to pay back later, potentially delaying big life goals like buying a home or saving for retirement. It’s like borrowing from your future self—and your future self might not be thrilled about it.

The table above shows how costly a pause can be. And it’s not just about the dollars. Time spent in forbearance or deferment often doesn’t count toward loan forgiveness programs, meaning you’re not making progress toward wiping out your debt. For many, it’s a cycle that feels impossible to escape.

The Fallout of a Lost Repayment Plan

One of the biggest drivers of the forbearance boom was the end of a popular repayment plan that offered lower monthly payments. Before it was repealed, this plan helped millions afford their loans by tying payments to income. For example, someone earning $75,000 a year paid about $166 a month under this plan, compared to $429 under the next best option. That’s a huge gap, especially for folks already stretched thin.

When the plan was scrapped, borrowers were left scrambling. Many ended up in forbearance, but getting out isn’t always easy. Recent reports show a backlog of over 1.3 million applications for alternative income-driven repayment plans, leaving borrowers in limbo. It’s a bureaucratic mess, and it’s no wonder so many are feeling stuck.

The loss of affordable repayment options has left borrowers with impossible choices—pay more than they can afford or watch their debt grow.

– Consumer advocate

How Pauses Impact Your Financial Milestones

Student loans don’t just affect your bank account—they shape your life’s trajectory. Pausing payments might help you get through a rough patch, but it can also delay major milestones. Want to buy a house? Save for a wedding? Start a family? The growing balance from interest accrual can make those dreams feel further out of reach.

I’ve always believed that financial freedom is about more than just numbers—it’s about the life you want to live. When your loan balance balloons, it’s not just debt; it’s stress, missed opportunities, and tough choices. A financial planner I spoke with put it perfectly: these pauses can trap you in a cycle where you’re always playing catch-up.

1. Homeownership: Extra debt from interest makes it harder to save for a down payment or qualify for a mortgage.
2. Retirement Savings: Money spent on interest could have been invested, growing over time.
3. Family Planning: Higher debt loads can delay starting a family or other personal goals.

What Can You Do Instead?

So, what’s the alternative to hitting pause? It’s not always easy, but there are strategies to manage your student loans without letting interest take over. Here are some steps to consider:

• Explore Income-Driven Repayment Plans: These plans adjust your payments based on your income, making them more manageable. They’re not perfect, but they’re better than letting interest pile up.
• Make Small Payments: Even paying a little toward interest during a pause can keep your balance from growing out of control.
• Budget Ruthlessly: Cut non-essential spending to free up cash for loan payments. It’s tough, but it pays off.
• Seek Employer Benefits: Some companies offer student loan repayment assistance as a perk. Check with your HR department.

Another idea? Look into loan forgiveness programs if you qualify, like those for public service workers. These won’t solve everything, but they can chip away at your debt. The key is to stay proactive—don’t let the system dictate your financial future.

A Path Forward

Navigating student loans feels like walking a tightrope sometimes, doesn’t it? The rise in forbearance and deferment shows just how many people are struggling to balance debt with life’s demands. But here’s the good news: you have options. By understanding the true cost of pausing payments and exploring alternatives, you can take control of your financial story.

Perhaps the most interesting aspect is how these choices ripple through your life. Every dollar you save on interest is a dollar you can put toward your dreams—whether that’s a new home, a secure retirement, or just the peace of mind that comes with being debt-free. So, what’s your next step? Will you hit pause or keep pushing forward?

Your financial future isn’t just about paying bills—it’s about building the life you want.

– Financial wellness coach

The road to financial freedom isn’t always smooth, but it’s worth the journey. Take a moment to assess your situation, explore your options, and make a plan. Your future self will thank you.