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The main result of the Student Loan Program Pause is that borrowers used the pause to take on more debt.
In 2020 payments on student loans were paused, initially for 3 months but then extended via executive action until June 30, 2023. This was a big program, at the time there were approximately 45 million student loan borrowers, with an outstanding balance of over $1.7 trillion. The main results of the program were that borrowers used the pause to take on more debt. From a new paper by Dinerstein, Yannelis and Chen:
Quote:
We evaluate the effects of the 2020 student debt moratorium that paused payments for student loan borrowers. Using administrative credit panel data, we show that the payment pause led to a sharp drop in student loan payments and delinquencies for borrowers subject to the debt moratorium, as well as an increase in credit scores. We find a large stimulus effect, as borrowers substitute increased private debt for paused public debt. Comparing borrowers whose loans were frozen with borrowers whose loans were not frozen due to differences in whether the government owned the loans, we show that borrowers used the new liquidity to increase borrowing on credit cards, mortgages, and auto loans rather than avoid delinquencies. The effects are concentrated among borrowers without prior delinquencies, who saw no change in credit scores, and we see little effects following student loan forgiveness announcements. The results highlight an important complementarity between liquidity and credit, as liquidity increases the demand for credit even as the supply of credit is fixed.
I don't doubt it it all. Those people likely felt very flush not having to make that monthly outlay.
I personally only know one person affected by the pause, and to their credit they paid off their car note and socked away about $30k in savings and are ready to resume paying on their student loans as soon as they start back up. They also went back to school and finished their degree last year (paying cash for the new tuition), so there are some good Millennials out there.
The main result of the Student Loan Program Pause is that borrowers used the pause to take on more debt.
In 2020 payments on student loans were paused, initially for 3 months but then extended via executive action until June 30, 2023. This was a big program, at the time there were approximately 45 million student loan borrowers, with an outstanding balance of over $1.7 trillion. The main results of the program were that borrowers used the pause to take on more debt. From a new paper by Dinerstein, Yannelis and Chen:
I've been saying they bought houses and other things because I read a few articles early on where they said they took on a mortgage. They all were counting on the student loan debt to be wiped clean at some point. They were saying they don't know how they'll survive if they have to continue to repay the student loan debt because they allocated that loan payment to something else instead of trying to put money away.
It does not surprise me they took on other debt too with their credit scores increasing.
I'm glad I'm not them, nor are my kids. My son's was paid off 10 years ago, a few years after he attended. His college was about $20k per year. I'm thankful he quit after three quarters. He found a career where they trained him.
The main result of the Student Loan Program Pause is that borrowers used the pause to take on more debt.
Most excellent.
Government: We're here to help.
Not.
I think I mentioned in a post about a year or so ago how the Millennials all ran out and bought houses during STUPID-19 so they don't have to live in mommy's basement.
I don't see the Court issuing a ruling until later, probably August or September, because it's going to be quite controversial whatever they rule.
Because the Court always weights public policy considerations, whenever they do issue their decision, the deferment will be extended for at least 90 days, maybe even 6, and possibly up to one 1 year, so they'll have some time to get their act together.
I think I mentioned in a post about a year or so ago how the Millennials all ran out and bought houses during STUPID-19 so they don't have to live in mommy's basement.
I don't see the Court issuing a ruling until later, probably August or September, because it's going to be quite controversial whatever they rule.
Because the Court always weights public policy considerations, whenever they do issue their decision, the deferment will be extended for at least 90 days, maybe even 6, and possibly up to one 1 year, so they'll have some time to get their act together.
I imagine we'll be seeing a lot of bankruptcies.
As I have said in another thread- the game of extend and pretend can only continue for so long.
This is true. I paid minimal amount back and used the rest to further my education.
Then, I took on a bunch of credit card debt.
I am one of the dumb millennials.
If you increased your educational attainment that will increase your salary then okay. Just pay off your credit card. Go to confession and all is well.
I paid off both cars, all my credit cards, a personal loan to paint my house, and refinanced my house.
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