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From the Bloomberg article on the same topic: > Student loan payments are set to resume in late August after a three-year pause. Millions of people could fall

From the Bloomberg article on the same topic: > 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.

zeroonetwothree 3y ago
I think it's non-obvious how this would affect the overall economy. Say you spend $1,000 on loan repayment. That means you spend $1,000 less on other goods. BUT the government now gets $1,000 more income. They need to tax $1,000 less and thus someone else spends $1,000 more on other goods. Thus the net effect is neutral. Of course this is a simple analysis but it shows that it's not straightforward to know what the effects are.
- frumper 3y ago
  Except the government spending isn’t really connected to taxation. The government spends what it spends and collects taxes for what it levy’s taxes for. It borrows any shortfalls without much afterthought. For any working age adults alive, it’s been very rare we’ve not run a federal deficit.
willmeyers 3y ago
This is huge issue. Many people (like myself) left college during covid and haven't budgeted at all for the monthly payments after entering the workforce. There's going to thousands of deferments. It honestly feels like a debt trap of sorts.
- tivert 3y ago
  > This is huge issue. Many people (like myself) left college during covid and haven't budgeted at all for the monthly payments after entering the workforce. There's going to thousands of deferments. It honestly feels like a debt trap of sorts. 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.
  - OkayPhysicist 3y ago
    Is it really a mistake to take your government at their word? When an authority figure lies, far more culpability lies on the authority figure than the subordinate. In this case, it wasn't even a lie, it was active obstruction by politically-motivated wall-people of the Supreme Court. 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.
    - blockwriter 3y ago
      Is it really a mistake to take your government at their word? Probably, yes. In this case, the actors likely knew they did not have the authority to unilaterally pursue this policy in a durable manner. It was misleading from the get.
      - OkayPhysicist 3y ago
        But did the average person who was told their debt was going to be forgiven know that? I'm okay with arguing about the details of 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.
        tivert 3y ago
        > But did the average person who was told their debt was going to be forgiven know that? 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.
- symlinkk 3y ago
  You didn’t budget for it at all? Just 100% confident that you’d never have to pay it?
- lamontcg 3y ago
  It is going to hit like a tax hike on the middle class. And this comes on the heels of corporations scooping up all the gains made during the pandemic via raising prices and inflation (also acting like a regressive tax). That should all spill over into consumption.
- robomartin 3y ago
  You knew you owed money and have payments. Why didn’t you?
- sanderjd 3y ago
  I don't want to play the blame game, but you have to budget for making debt payments on a car, same thing here. I do get that the unpredictability sucks, and that's why I didn't like it when Biden did this in the first place (note: as a pretty big Biden supporter for other reasons), and a the rest of the blame is at the feet of the pandemic itself, which made tons of stuff unpredictable for everyone. I'm sympathetic to the budgeting surprise, but it's also the kind of thing that happens in life, and especially in these last few weird years.
- tekla 3y ago
  How the hell do you not budget for your monthly debt payments?
sanderjd 3y ago
People massively overestimate the number of people with student debt and the size of that debt relative to the economy as a whole. 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.
- lamontcg 3y ago
  In the current economic climate the consumer is under a lot of stress because the effect of inflation has been to increase corporate profits, so they're already feeling a "tax" from inflation. Borrowing is up in lower income households, even though rates are higher. This isn't going to help that situation any. 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.
  - sanderjd 3y ago
    > "Given the student loan relief plan was aimed at this customer cohort, any additional fixed monthly costs will result in additional financial pressure." 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.

zeroonetwothree 3y ago

I think it's non-obvious how this would affect the overall economy. Say you spend $1,000 on loan repayment. That means you spend $1,000 less on other goods. BUT the government now gets $1,000 more income. They need to tax $1,000 less and thus someone else spends $1,000 more on other goods. Thus the net effect is neutral. Of course this is a simple analysis but it shows that it's not straightforward to know what the effects are.

frumper 3y ago
Except the government spending isn’t really connected to taxation. The government spends what it spends and collects taxes for what it levy’s taxes for. It borrows any shortfalls without much afterthought. For any working age adults alive, it’s been very rare we’ve not run a federal deficit.

willmeyers 3y ago

This is huge issue. Many people (like myself) left college during covid and haven't budgeted at all for the monthly payments after entering the workforce. There's going to thousands of deferments. It honestly feels like a debt trap of sorts.

tivert 3y ago
> This is huge issue. Many people (like myself) left college during covid and haven't budgeted at all for the monthly payments after entering the workforce. There's going to thousands of deferments. It honestly feels like a debt trap of sorts. 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.
- OkayPhysicist 3y ago
  Is it really a mistake to take your government at their word? When an authority figure lies, far more culpability lies on the authority figure than the subordinate. In this case, it wasn't even a lie, it was active obstruction by politically-motivated wall-people of the Supreme Court. 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.
  - blockwriter 3y ago
    Is it really a mistake to take your government at their word? Probably, yes. In this case, the actors likely knew they did not have the authority to unilaterally pursue this policy in a durable manner. It was misleading from the get.
    - OkayPhysicist 3y ago
      But did the average person who was told their debt was going to be forgiven know that? I'm okay with arguing about the details of 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.
      - tivert 3y ago
        > But did the average person who was told their debt was going to be forgiven know that? 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.
symlinkk 3y ago
You didn’t budget for it at all? Just 100% confident that you’d never have to pay it?
lamontcg 3y ago
It is going to hit like a tax hike on the middle class. And this comes on the heels of corporations scooping up all the gains made during the pandemic via raising prices and inflation (also acting like a regressive tax). That should all spill over into consumption.
robomartin 3y ago
You knew you owed money and have payments. Why didn’t you?
sanderjd 3y ago
I don't want to play the blame game, but you have to budget for making debt payments on a car, same thing here. I do get that the unpredictability sucks, and that's why I didn't like it when Biden did this in the first place (note: as a pretty big Biden supporter for other reasons), and a the rest of the blame is at the feet of the pandemic itself, which made tons of stuff unpredictable for everyone. I'm sympathetic to the budgeting surprise, but it's also the kind of thing that happens in life, and especially in these last few weird years.
tekla 3y ago
How the hell do you not budget for your monthly debt payments?

sanderjd 3y ago

People massively overestimate the number of people with student debt and the size of that debt relative to the economy as a whole. 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.

lamontcg 3y ago
In the current economic climate the consumer is under a lot of stress because the effect of inflation has been to increase corporate profits, so they're already feeling a "tax" from inflation. Borrowing is up in lower income households, even though rates are higher. This isn't going to help that situation any. 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.
- sanderjd 3y ago
  > "Given the student loan relief plan was aimed at this customer cohort, any additional fixed monthly costs will result in additional financial pressure." 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.