Last week we highlighted the next economic shock; a student loan default wave that could cause a $63 billion hit to GDP.
And here it comes. During Wednesday’s Cabinet meeting, Education Secretary Linda McMahon said “We’re going to start getting it back,” adding “For those people who have borrowed money and have not been paying — that’s just not to be punitive, there are many ways that they can go online to understand how they can get back into the right payment structure. Because when they’re in default, they can’t buy a house, they can’t buy a car, their credit scores go down.” h/t Jennifer Jacobs
As we reported last week (full note available to premium subscribers), student-loan delinquencies began climbing after the pandemic-era forbearance on repayment ended in September 2023. The Biden administration allowed a year for payments to fully ramp back up, which temporarily suppressed delinquency rates. Now, though, missed payments are crossing the 90-day threshold and showing up on borrowers’ credit report