>I’d assume this starting will reduce inflation by pulling money out of consumer spending.
You're assuming people are spending money they would otherwise use to pay these loans.
In fact, many of the people who owe on student loans can't pay them, or can only pay barely enough to keep them from growing.
So what will happen is a lot of defaults or (for those who pay) a lot of people who can't save enough money for a down payment on a home or can't afford to have kids, or other problems caused by living hand to mouth.
On the second graph titled "average amount owed per month based on 10yr at 5.8%" - does anyone understand if there's a fundamental reason why the "balance owed per person" is strictly increasing? Or is it happenstance? The fact that I can't see a fundamental reason for this suggests I'm missing something.
Separate note - I keep hearing that the USA has a big problem with student debt. However on the third groph they plot the ratio of monthly payments divided by monthly gross pay, and it varies between 5% and 12%. I don't know how to do the after tax calculation, but say it goes up to 20%. Why is this such a big problem to the point that the president is wiping out debt? These people should be able to pay it back.
I am continually astonished at the lack of monetary discipline in the USA. For your average american, saving is a substantial amount of effort. Investing, diversifying, etc is 5D chess.
It's easy to forget that a lot of us exist in a highly educated, highly compensated, 99th percentile of the population, and most people struggle to pay off their minimum credit card payment each month. Not to say that tech workers and HN denizens are better than other people -- in general, we're lacking a lot of skills and most of us would starve within days if we had to exist in any time period of human existence before 2000. But there is a VERY wide spectrum of financial competency out there, and folks commenting on this forum are likely very near the top of that ranking.
Well yes of course, but the key point is that these people don't _want_ to pay it back. It's easy to come up with a million reasons why your voluntary choice to borrow a bunch of money is not your own fault.
Student loans in the US have "special" terms that are unusual. For example, unpaid interest past a certain amount is capitalized, so the principal of the loan can increase if the borrower doesn't make large enough monthly payments to cover the interest. In addition, the borrower wishing to make the principal actually decrease over time needs to make a payment on the principal over and above the interest payment.
How much each borrower pays per month depends on the payment plan selected and how much is owed, but the terms of the loan ensure that any mismanagement by e.g. a first time borrower will result in growth of the principal. Very many people who took out loans to go to college as an 18 year old student have been mismanaged in the subsequent years and ballooned by an insane amount.
To give you an idea of what can happen, on my own loan I have paid (since I left college) an amount roughly equal to three times the actual debt (original principal) I had when I left school.. I have ADHD and other issues that kept me from getting secure and well paying employment for about a decade after school. During that time, the principal grew to a total that is slightly more than 3x the original debt, which I still owe.
If I were making monthly payments right now, I'd be paying about 12% of my monthly income each month to simply prevent the principal from growing.
I'm one of the lucky well-paid ones, many people who graduated with a four year degree are paid half what I make or less money, because their degree isn't able to be used for one reason or another - not enough jobs in their field, or they're in a field that pays very poorly (like e.g. primary/secondary teaching), where they literally don't make enough money to live.
Many young people at present in the US have student loan debt that they have not been able to make headway on for years. During the part of their lives they might normally marry, buy a house, or start a family, they have no money to do so, because they're required to make payment on their student loans. Entire generations are unable to build lives for themselves because of generational theft of wealth.
I suggest reading up on the various things that make these loans different from most others, including the fact that Federal student loans can not be discharged in bankruptcy, unlike almost every other kind of debt.
I can't see the graphs myself because of a paywall, but I suspect the graphs don't tell the whole story.
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[ 2.0 ms ] story [ 32.3 ms ] threadI can’t imagine this not having some additional economic impact.
Post Covid there was a significant rise in inflation ( ppp loans / money supply / student loan debt)
I’d assume this starting will reduce inflation by pulling money out of consumer spending.
I don’t believe student loan debt is the cause of inflation, and the ppp forgiveness is likely a larger forgiveness than student load debt.
You're assuming people are spending money they would otherwise use to pay these loans.
In fact, many of the people who owe on student loans can't pay them, or can only pay barely enough to keep them from growing.
So what will happen is a lot of defaults or (for those who pay) a lot of people who can't save enough money for a down payment on a home or can't afford to have kids, or other problems caused by living hand to mouth.
Separate note - I keep hearing that the USA has a big problem with student debt. However on the third groph they plot the ratio of monthly payments divided by monthly gross pay, and it varies between 5% and 12%. I don't know how to do the after tax calculation, but say it goes up to 20%. Why is this such a big problem to the point that the president is wiping out debt? These people should be able to pay it back.
It's easy to forget that a lot of us exist in a highly educated, highly compensated, 99th percentile of the population, and most people struggle to pay off their minimum credit card payment each month. Not to say that tech workers and HN denizens are better than other people -- in general, we're lacking a lot of skills and most of us would starve within days if we had to exist in any time period of human existence before 2000. But there is a VERY wide spectrum of financial competency out there, and folks commenting on this forum are likely very near the top of that ranking.
How much each borrower pays per month depends on the payment plan selected and how much is owed, but the terms of the loan ensure that any mismanagement by e.g. a first time borrower will result in growth of the principal. Very many people who took out loans to go to college as an 18 year old student have been mismanaged in the subsequent years and ballooned by an insane amount.
To give you an idea of what can happen, on my own loan I have paid (since I left college) an amount roughly equal to three times the actual debt (original principal) I had when I left school.. I have ADHD and other issues that kept me from getting secure and well paying employment for about a decade after school. During that time, the principal grew to a total that is slightly more than 3x the original debt, which I still owe.
If I were making monthly payments right now, I'd be paying about 12% of my monthly income each month to simply prevent the principal from growing.
I'm one of the lucky well-paid ones, many people who graduated with a four year degree are paid half what I make or less money, because their degree isn't able to be used for one reason or another - not enough jobs in their field, or they're in a field that pays very poorly (like e.g. primary/secondary teaching), where they literally don't make enough money to live.
Many young people at present in the US have student loan debt that they have not been able to make headway on for years. During the part of their lives they might normally marry, buy a house, or start a family, they have no money to do so, because they're required to make payment on their student loans. Entire generations are unable to build lives for themselves because of generational theft of wealth.
I suggest reading up on the various things that make these loans different from most others, including the fact that Federal student loans can not be discharged in bankruptcy, unlike almost every other kind of debt.
I can't see the graphs myself because of a paywall, but I suspect the graphs don't tell the whole story.