New research from the New York Fed estimates that student loan borrowers benefitting from the interest-free pause are expecting pain whenever the pause ends.

"Our analysis suggests that the scheduled discontinuation of student debt forbearance on August 31 will likely increase financial hardship and delinquency rates," the authors at the New York Fed stated in a new blog post.

The payment pause on federal student loans was recently extended through August 31, 2022. The pause was set to expire after May 1 after being enacted by former President Donald Trump amid the coronavirus pandemic in March 2020 and extended multiple times by President Biden.

Totally ending payment pause will cause a 16% risk of delinquency

Using data from the May 2021 Survey of Consumer Expectations, the researchers at the New York Fed highlighted how many student loan borrowers were unprepared to restart payments in multiple ways.

If student loan forbearance were discontinued, borrowers surveyed reported an average probability of 16.1% risk of delinquency on their student debt. Those debtors without an income-driven repayment (IDR) plan expect even more adverse outcomes, "with an almost 50% higher expected delinquency rate," the researchers noted.

The pre-pandemic student loan delinquency rate was 15.6% of borrowers.

Borrowers on IDR said they were less likely to be delinquent on their loans in the next three months. IDR plans allow student loan borrowers to drop their monthly payments to as low as $0 if their income dips below a certain threshold. If they complete 10, 20, or 25 years of payments, depending on their plan, they qualify to have the rest of their debt written off by the federal government.

The IDR program has its own problems, as detailed in a recent Government Accountability Office report.

Nevertheless, being on IDR reduces borrowers' anxiety over missing payments as it restricts payments to a manageable share of their income.

"The payment pause has been a significant federal investment throughout the pandemic, providing essential relief to millions of families during the economic and public health crisis and saving them an average of $393 per month," a recent letter from prominent Democrats stated.

Debtors holding student loans say they're more likely to miss payments

The NY Fed researchers also found that Americans holding student debt said that there was a higher chance of them missing a debt payment as compared to those without any student debt.

Those with student loans expected a 13.5% chance of missing a minimum debt payment, as compared to 8.7% who did not have any student loans.