> Student loan payments are set to resume in late August after a three-year pause. Millions of people could fall behind on their debt.
So that is going to immediately hit the economy with some major headwinds.
This will be a headwind yes, but not a "major" one, in an economy that remains strong while inflation remains higher than desired.
I don't think macroeconomics is a good reason to do this, but to the extent it's worth considering, I think it's a positive in the current macroeconomic environment.
From Reuters:
> "We've seen evidence that middle to lower income consumers are cutting back on discretionary spending," said Mike Graziano, consumer products senior analyst at RSM US in New York.
> "Given the student loan relief plan was aimed at this customer cohort, any additional fixed monthly costs will result in additional financial pressure."
> Separately, 26.6 million Americans with federal student loans will start making interest payments in October when a more than three-year moratorium ends. Morgan Stanley estimates that the hit to households' disposable income could lower inflation-adjusted consumer spending by about 10 basis points this year and slice 7 basis points off GDP growth.
10 points here or there isn't much, but if they start to add up, that's how you wind up in a recession.
The political claim is that the loan relief plan was aimed at "middle to lower income consumers". The reality is that its benefits would have been mostly concentrated in middle to upper income households. Student debt isn't actually a big problem at the low end of the income scale. It's mostly an upper middle class problem.
As usual, none of this is evenly distributed. I would say this is yet another setback for expensive cities like San Francisco and New York in the post-pandemic period, as there are lots of highly-educated people in those cities who will have to figure out how to pay for both their student loans and their rent, and lots of them will have to decide the answer is to move somewhere cheaper. But this is still a pretty small cohort, relative to the entire population of the country.
Yeah here's the breakdown, this is the mean amount of debt held per household by income percentile, with 25-40 years old broken out as an age category:
Income Percentile (%) All Households -Age 25-40 Households
0-9.9 $3,633.61 $9,656.34
10-19.9 $3,285.49 $8,245.48
20-29.9 $6,035.88 $11,804.46
30-39.9 $7,401.99 $12,059.02
40-49.9 $9,796.45 $20,744.43
50-59.9 $9,814.08 $16,905.26
60-69.9 $11,750.67 $28,708.72
70-79.9 $13,999.30 $27,615.90
80-89.9 $13,887.24 $27,382.43
90-94.9 $9,727.94 $18,273.48
95-98.9 $4,655.90 $11,178.10
99-100 $3,156.78 $62,532.52
Income Percentile (%) Percentage with Student Loans Percentage of 25-40 with Student Loans
0-9.9 14.0% 26.6%
10-19.9 13.7% 30.6%
20-29.9 17.4% 36.3%
30-39.9 19.8% 32.2%
40-49.9 24.8% 49.1%
50-59.9 25.7% 45.2%
60-69.9 24.0% 49.2%
70-79.9 29.9% 47.3%
80-89.9 27.0% 44.9%
90-94.9 24.5% 34.2%
95-98.9 10.7% 18.1%
99-100 8.2% 45.0%
I'd say those distributions show a pretty broadly "middle-class" millennial issue, with a lot of overlap.
Your numbers are exactly what I'm talking about. That distribution is middle to upper middle class skewed.
I might have been more supportive of it with a lower income cap. But I still think improving the income based repayment program - which I just read is one of Biden's new proposals! - is a much better way to do this without it being regressive.
Also 75th percentile income is only $88k which is certainly not upper middle class wages these days, and that is right around where the distribution of money/household gets a bit fatter. "Middle class" isn't really 50th percentile any more these days.
> "Middle class" isn't really 50th percentile any more these days.
I don't get it, why not? It does seem to be true that everyone from like the 25th to the 95th percentile thinks they are "middle class". But I don't buy it.
Although 95th percentilers do all like to claim they have middle class values and were all self-made millionaires. Doesn't change the fact that the middle class is getting hollowed out.
I think the obvious thing to do is to define it by income percentiles, but you don't seem happy with that (or maybe you just disagree on what the floor and ceiling of the percentiles should be?), and I'm open to the idea that something else matters more.
Sorry, but that was totally your own mistake. Maybe an understandable one, but not something that requires collective action to solve.
Fixing your own mistakes often isn't easy and convenient. So you've got two months to figure out how to work your debt payments into your budget.
If my boss says "You can work from home today", and I let my wife borrow the car, then the CEO says "You actually have to come into the office today or you're fired", who made a mistake? Maybe I could have, potentially maybe, known that my boss could be overruled, but it's hardly my fault. My boss has more culpability, because as someone who's job it is to relay information to me and make appropriate decisions based on their directives, they have an obligation to not fuck me over. But mostly it's the CEO's fault for being a dick.
How does that matter to the question if it was a mistake?
It's still a mistake to trust the wrong people, even if you didn't know better at the time. This seems like a good time to learn the lesson "don't count your chickens before they've hatched (even if someone tells you to)."
> ...how much blame to place on the administration versus the regressives in the court, but dismissing out of hand the human suffering caused by the reversal by going "they should have known better" is patently evil.
"Regressives"? "Human suffering"? "Patently evil"? That's, frankly, a completely immature and utterly ridiculous position to take on this. If someone robbed a bank and gifted you money from the robbery, would you call the cops "evil" for taking the money back, because of all the "suffering" it would cause you?
I get it, you really wanted student loans to be forgiven, but that doesn't make the people who oppose what you want "evil" or even bad.
This has been known to be going to the Supreme Court since around January, I think, so people should have had about 8 months to prepare to start paying back their loans, and not just the two months since this judgement was passed.
Personally, while I did hold off on making payments for about eight months at the start of Covid, I resumed making payments during the pandemic and actually managed to pay off my student loans completely back in November of last year (although I was getting pretty close to paying them off anyway).
Other people could have started making small payments during this team, taken advantage of the zero interest to start making a larger dent in their payments, and increased slightly how much they were paying each month to ease the transition to full payments again when this kicks off again.
I'm aware that's easier said than done, though. My wife has student loans she hasn't made full payments on this entire time (I think she's been making half payments), so we're going to have a slightly rough transition also, but at least we no longer have the $400/month payments I was making on mine before the pandemic.