Biden’s flip-flopping on student loan promises made borrowers increase discretionary spending, and were 7.5% more likely to default as a result

When President Joe Biden announced in August 2022 the federal student loan payment pause would be extended one “final” time, millions of borrowers took him at his word. Then he extended it again. And again. By the time payments actually resumed in October 2023, some borrowers had gone years without making a single payment, convinced forgiveness was imminent—while others took him at his word and paid aggressively, thinking it was indeed the “final” time. That flip-flopping forced American federal student loan holders to go through a rollercoaster of emotions at the time, and now, researchers have put a real financial cost to it too. Borrowers who believed Biden’s repeated promises of relief were 7.5 percentage points more likely to be 90 days past due on their loans by May 2025, according to new research from the National Bureau of Economic Research. The finding, drawn from a study linking survey data on borrower beliefs to credit bureau records, puts a precise number on the financial damage inflicted by years of government policy whiplash on student debt. “There are very real costs for consumers of politicians flip-flopping,” said Constantine Yannelis, an economist at the University of Cambridge and one of the paper’s co-authors. “If consumers take actions based on beliefs that are not actually true because of mistaken policy promises, they may engage in financial planning that actually turns out not to be in their best interest.” The paper, co-authored with Dmitri Koustas and Michael Weber, tracked borrowers’ beliefs about forgiveness from 2022 through mid-2025, linking survey responses to credit bureau records and consumption data. What it found was a direct pipeline from political promise to financial harm: Borrowers who expected forgiveness stopped making payments, increased spending, and were wholly unprepared when the bill finally came due. “A lot of people who thought they would get forgi