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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

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.
- lamontcg 3y ago
  The people who struggle to pay back student loans aren't the upper middle class borrowers, and there's plenty of middle class and even lower class students (trying to do that whole american dream thing) who are saddled with debt. 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 Here's the breakdown of the percentage of households that have student loans: 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% https://dqydj.com/average-student-loan-debt-united-states/ https://dqydj.com/average-student-loan-debt-united-states/ I'd say those distributions show a pretty broadly "middle-class" millennial issue, with a lot of overlap.
  - sanderjd 3y ago
    The forgiveness was not targeted at people who struggle to pay back their loans. It was a blanket forgiveness with a very high income ceiling. I would have qualified for it and I qualify for essentially no other kind of government subsidy. But it kind of had to be a high ceiling to have the desired political impact, because it targets people who attended college, which is a demographic that skews affluent. 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.
    - lamontcg 3y ago
      Blanket forgiveness has a much higher likelihood of being accepted. Means testing is a great way to kill programs. 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.
      - sanderjd 3y ago
        I agree, but that political calculus doesn't impact my personal assessment of whether I think it's a good policy. > "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.
        lamontcg 3y ago
        Because of the Gini index and rising wealth and income inequality. 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.

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.

lamontcg 3y ago
The people who struggle to pay back student loans aren't the upper middle class borrowers, and there's plenty of middle class and even lower class students (trying to do that whole american dream thing) who are saddled with debt. 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 Here's the breakdown of the percentage of households that have student loans: 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% https://dqydj.com/average-student-loan-debt-united-states/ https://dqydj.com/average-student-loan-debt-united-states/ I'd say those distributions show a pretty broadly "middle-class" millennial issue, with a lot of overlap.
- sanderjd 3y ago
  The forgiveness was not targeted at people who struggle to pay back their loans. It was a blanket forgiveness with a very high income ceiling. I would have qualified for it and I qualify for essentially no other kind of government subsidy. But it kind of had to be a high ceiling to have the desired political impact, because it targets people who attended college, which is a demographic that skews affluent. 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.
  - lamontcg 3y ago
    Blanket forgiveness has a much higher likelihood of being accepted. Means testing is a great way to kill programs. 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.
    - sanderjd 3y ago
      I agree, but that political calculus doesn't impact my personal assessment of whether I think it's a good policy. > "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.
      - lamontcg 3y ago
        Because of the Gini index and rising wealth and income inequality. 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.