Many METARs got our education when the cost of education was relatively low. Some of us had scholarships and others worked their way through college. Some of us were fortunate enough to have our tuition paid by our employers. If we had student debt it was relatively low.
In recent years, the cost of higher education has increased faster than the inflation rate. Many borrowed large amounts for education that a significant percentage didn’t complete. Many didn’t get jobs that paid enough to retire their debt. The increase in student debt is stunning. It’s now over $1.5 Trillion. Student debt cannot be discharged in bankruptcy.
https://www.nytimes.com/2025/04/29/business/student-loans-collections.html
Student Debt Collections Restart on May 5. Here’s What to Know.
More than five million borrowers are in default, and millions of others are projected to be on the precipice.
By Tara Siegel Bernard, The New York Times, April 29, 2025
After a five-year reprieve, the Trump administration will restart forced collections on federal student loans in default, which could include garnishing a portion of borrowers’ paychecks.
With collections in place, the last piece of the student loan machinery has been turned back on, officially ending pandemic-era relief, which began when President Trump paused federal student loan payments in March 2020…
Now that late-payment penalties have begun to appear, borrowers who fell behind are beginning to see their credit scores plunge, including more than five million borrowers in default and many millions more projected to be on the precipice.
At the same time, the Biden-era repayment program known as SAVE — which ties a borrower’s loan payments to income and household size — has been frozen since August, with its eight million enrollees’ payments on hold. That plan is stuck in legal limbo, an evolving situation that threatens to upend the income-driven repayment plans that came before it…
There are serious consequences if the loans remain in default, which means the balance becomes immediately due. The government can grab your entire tax refund (as long as it doesn’t exceed your debt amount) and up to 15 percent of monthly Social Security retirement and disability benefits and your paycheck. …[end quote]
The article has lots of details and advice for people in this situation. There will be lots of wailing and gnashing of teeth by people who have been living their lives but suddenly have a huge burden.
As an investor I’m interested in the Macroeconomic impact of millions of young (and many not-so-young) consumers suddenly saddled with debts and poor credit scores that “slipped their minds” over the past 5 years.
The loss of consumer spending will add to recessionary pressures.
Wendy
