{"id":42676,"date":"2023-07-31T14:34:25","date_gmt":"2023-07-31T18:34:25","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/a-100-billion-drag-on-u-s-consumer-spending-is-coming-heres-whats-behind-it\/"},"modified":"2023-07-31T14:34:27","modified_gmt":"2023-07-31T18:34:27","slug":"a-100-billion-drag-on-u-s-consumer-spending-is-coming-heres-whats-behind-it","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=42676","title":{"rendered":"A \u2018$100 billion drag\u2019 on U.S. consumer spending is coming. Here\u2019s what\u2019s behind it."},"content":{"rendered":"
\n

Prepare for some major headwinds.\u00a0<\/p>\n

There are a total of 45 million people in the U.S. with student-loan debt, which currently totals $1.7 trillion \u2014 and the average monthly repayment is approximately $200, according to data from Experian
\n EXPGY,
\n -0.10%<\/bg-quote>.<\/span>
\n That will create a multi-billion-dollar spending squeeze for borrowers, particularly younger Americans, experts warn.<\/p>\n

\n

\u201cSo resuming student loan payments in October will subtract roughly $9 billion from consumer spending every month, or roughly $100 billion a year,\u201d Torsten Sl\u00f8k, chief economist and partner at Apollo Global Management, said in a research note Monday.<\/p>\n

This, he added, \u201cwill mainly have an impact on younger households.\u201d Roughly 6% of federal student-loan debt is shouldered by adults under the age of 25; adults aged 25 to 34 hold 30%, while nearly 39% belongs to those aged 35 to 49, according to the Education Data Initiative, an online resource for students, teachers, policy makers, and others.\u00a0<\/p>\n

Student-loan payments will resume this fall after they were paused for more than two years due to the COVID-19 pandemic. In June, however, the Supreme Court knocked down President Biden\u2019s debt-forgiveness plan.<\/p>\n

Biden\u2019s plan aimed to cancel up to $10,000 in federal loan debt for borrowers earning less than $125,000 a year, and up to $20,000 for borrowers who met that criteria and also used a Pell grant in college. Democratic lawmakers argued that forgiveness would help the most vulnerable borrowers, while many Republicans said forgiveness would merely leave the taxpayer to pick up the bill. Economists have also weighed in on the wisdom and effectiveness of Biden\u2019s plan.<\/p>\n

Interest on federal student loans will start accumulating on Sept. 1, and the first payment after the moratorium is lifted will come due in October. <\/p>\n

Expect increased delinquencies <\/h2>\n

Economists and analysts have expressed concern about the potential impact of the resumption of student-loan payments on the economy, especially on consumer spending and household finances.\u00a0<\/p>\n

Case in point: The return to student-loan payments could increase delinquencies on other household debt. During the payment pause, many people said they were able to pay off credit-card debt, among other personal loans, and were also able to save.<\/p>\n

While consumers have been paying their debt back and delinquencies are \u201csubdued for now,\u201d they\u2019re still rising, Bank of America
\n BAC,
\n -0.20%<\/bg-quote>
\n economists wrote in a note last month.<\/p>\n

A rising number of people have been more than 30 days late on their auto loans and credit-card debt, BofA noted, and the share of people who are seriously delinquent on loans, or more than 90 days late on their debt, has risen above pre-pandemic levels.\u00a0<\/p>\n

If student-loan payments resume in full, \u201cwe estimate that serious delinquencies could rise by about 67% over time,\u201d BofA stated, \u201cwith risks of knock-on effects to other forms of household debt as well.\u201d<\/p>\n

The Consumer Financial Protection Bureau estimated that more than 1 in 13 student-loan debtors are currently behind on their other payment obligations.\u00a0<\/p>\n

But the Biden administration has said it has not given up on student-loan forgiveness. After June\u2019s ruling on loan forgiveness by the Supreme Court, the Department of Education filed notice saying it would embark on a regulatory process that would seek an alternative pathway to student-debt relief.\u00a0<\/p>\n

Using that process, known as \u201cnegotiated rulemaking,\u201d the department said it will take comments from the general public on questions relating to debt forgiveness, and gather a group of stakeholders to discuss a proposed rule related to the waiver and compromise authority under the Higher Education Authority.\u00a0<\/p>\n

Quentin Fottrell contributed.<\/p>\n

Also see:\u00a0<\/strong><\/p>\n

Inside the room where Biden administration officials and college leaders game planned college admissions after affirmative action<\/strong><\/p>\n

Biden administration to cancel $130 million in student debt for borrowers who say they were scammed by their school<\/strong><\/p>\n

If you\u2019re part of the 1%, you\u2019re twice as likely to attend an elite college, new research finds<\/strong><\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Prepare for some major headwinds.\u00a0 There are a total of 45 million people in the U.S. with student-loan debt, which currently totals $1.7 trillion \u2014 and the average monthly repayment is approximately $200, according to data from Experian EXPGY, -0.10%. That will create a multi-billion-dollar spending squeeze for borrowers, particularly younger Americans, experts warn. \u201cSo […]<\/p>\n","protected":false},"author":1,"featured_media":42677,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-42676","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nA \u2018$100 billion drag\u2019 on U.S. consumer spending is coming. 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