No Result
View All Result
SUBMIT YOUR ARTICLES
  • Login
Tuesday, October 28, 2025
TheAdviserMagazine.com
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal
No Result
View All Result
TheAdviserMagazine.com
No Result
View All Result
Home Market Research Economy

The low-end consumer is about to feel the pinch as Trump restarts student loan collections

by TheAdviserMagazine
6 months ago
in Economy
Reading Time: 3 mins read
A A
The low-end consumer is about to feel the pinch as Trump restarts student loan collections
Share on FacebookShare on TwitterShare on LInkedIn


Andersen Ross Photography Inc | Digitalvision | Getty Images

Wall Street is warning that the U.S. Department of Education’s crack down on student loan repayments may take billions of dollars out of consumers’ pockets and hit low income Americans particularly hard.

The department has restarted collections on defaulted student loans under President Donald Trump this month. For first time in around five years, borrowers who haven’t kept up with their bills could see their wages taken or face other punishments.

Using a range of interest rates and lengths of repayment plans, JPMorgan estimated that disposable personal income could be collectively cut by between $3.1 billion and $8.5 billion every month due to collections, according to Murat Tasci, senior U.S. economist at the bank and a Cleveland Federal Reserve alum.

If that all surfaced in one quarter, collections on defaulted and seriously delinquent loans alone would slash between 0.7% and 1.8% from disposable personal income year-over-year, he said.

This policy change may strain consumers who are already stressed out by Trump’s tariff plan and high prices from years of runaway inflation. These factors can help explain why closely followed consumer sentiment data compiled by the University of Michigan has been hitting some of its lowest levels in its seven-decade history in the past two months.

“You have a number of these pressure points rising,” said Jeffrey Roach, chief economist at LPL Financial. “Perhaps in aggregate, it’s enough to quash some of these spending numbers.”

Bank of America said this push to collect could particularly weigh on groups that are on more precarious financial footing. “We believe resumption of student loan payments will have knock-on effects on broader consumer finances, most especially for the subprime consumer segment,” Bank of America analyst Mihir Bhatia wrote to clients.

Economic impact

Student loans account for just 9% of all outstanding consumer debt, according to Bank of America. But when excluding mortgages, that share shoots up to 30%.

Total outstanding student loan debt sat at $1.6 trillion at the end of March, an increase of half a trillion dollars in the last decade.

The New York Fed estimates that nearly one of every four borrowers required to make payments are currently behind. When the federal government began reporting loans as delinquent in the first quarter of this year, the share of debt holders in this boat jumped up to 8% from around 0.5% in the prior three-month period.

To be sure, delinquency is not the same thing as default. Delinquency refers to any loan with a past-due payment, while defaulting is more specific and tied to not making a delayed payment with a period of time set by the provider. The latter is considered more serious and carries consequences such as wage garnishment. If seriously delinquent borrowers also defaulted, JPMorgan projected that almost 25% of all student loans would be in the latter category.

JPMorgan’s Tasci pointed out that not all borrowers have wages or Social Security earnings to take, which can mitigate the firm’s total estimates. Some borrowers may resume payments with collections beginning, though Tasci noted that would likely also eat into discretionary spending.

Trump’s promise to reduce taxes on overtime and tips, if successful, could also help erase some effects of wage garnishment on poorer Americans.

Still, the expected hit to discretionary income is worrisome as Wall Street wonders if the economy can skirt a recession. Much hope has been placed on the ability of consumers to keep spending even if higher tariffs push product prices higher or if the labor market weakens.

LPL’s Roach sees this as less of an issue. He said the postpandemic economy has largely been propped up by high-income earners, who have done the bulk of the spending. This means the tide-change for student loan holders may not hurt the macroeconomic picture too much, he said.

“It’s hard to say if there’s a consensus view on this yet,” Roach said. “But I would say the student loan story is not as important as perhaps some of the other stories, just because those who hold student loans are not necessarily the drivers of the overall economy.”

Don’t miss these insights from CNBC PRO



Source link

Tags: CollectionsconsumerFeelloanlowendPinchrestartsStudentTrump
ShareTweetShare
Previous Post

What Is a Credit Card Hold, and When Should You Expect One?

Next Post

2 Undervalued China Stocks Worth Buying as Trade Tensions Cool

Related Posts

edit post
Why Republics Will Collapse | Armstrong Economics

Why Republics Will Collapse | Armstrong Economics

by TheAdviserMagazine
October 28, 2025
0

QUESTION: Mr. Armstrong, you have said many times that we are in a phase in which this time it will...

edit post
Private sector created nearly 15,000 jobs a week over the past month, preliminary ADP data shows

Private sector created nearly 15,000 jobs a week over the past month, preliminary ADP data shows

by TheAdviserMagazine
October 28, 2025
0

Private sector employers added an average 14,250 jobs per week over the past four weeks, according to new preliminary data...

edit post
Adam Smith Would Not Approve: The Evidence

Adam Smith Would Not Approve: The Evidence

by TheAdviserMagazine
October 28, 2025
0

Shortly after the “Liberation Day” tariffs were announced back in April, Janet Bufton wrote an excellent post about whether or...

edit post
The World Confronts the Genocide Washington Is Trying to Bury

The World Confronts the Genocide Washington Is Trying to Bury

by TheAdviserMagazine
October 28, 2025
0

Conor here: We’re offered daily reminders that the US-Israel has no intention of abandoning its genocide in Gaza. While the...

edit post
Mamdani To Reform NYC – Wall Street Moves To Miami

Mamdani To Reform NYC – Wall Street Moves To Miami

by TheAdviserMagazine
October 27, 2025
0

  Andrew Cuomo’s campaign just posted — and quickly deleted — this AI-generated ad depicting “criminals for Zohran Mamdani.” It...

edit post
Follow the Money and Power in the Trump 2.0 Political Maze

Follow the Money and Power in the Trump 2.0 Political Maze

by TheAdviserMagazine
October 27, 2025
0

Follow the money has been a rule of thumb for understanding American politics since the Watergate scandals of the 1970s,...

Next Post
edit post
2 Undervalued China Stocks Worth Buying as Trade Tensions Cool

2 Undervalued China Stocks Worth Buying as Trade Tensions Cool

edit post
Webull Pay Taps Coinbase Infrastructure for Crypto Rewards and Staking Services

Webull Pay Taps Coinbase Infrastructure for Crypto Rewards and Staking Services

  • Trending
  • Comments
  • Latest
edit post
77-year-old popular furniture retailer closes store locations

77-year-old popular furniture retailer closes store locations

October 18, 2025
edit post
Pennsylvania House of Representatives Rejects Update to Child Custody Laws

Pennsylvania House of Representatives Rejects Update to Child Custody Laws

October 7, 2025
edit post
What to Do When a Loved One Dies in North Carolina

What to Do When a Loved One Dies in North Carolina

October 8, 2025
edit post
Another Violent Outburst – Democrats Inciting Civil Unrest

Another Violent Outburst – Democrats Inciting Civil Unrest

October 24, 2025
edit post
Probate vs. Non-Probate Assets: What’s the Difference?

Probate vs. Non-Probate Assets: What’s the Difference?

October 17, 2025
edit post
California Attorney Pleads Guilty For Role In 2M Ponzi Scheme

California Attorney Pleads Guilty For Role In $912M Ponzi Scheme

October 15, 2025
edit post
Saudi power chair: Tariffs weaken the global energy transition and hurt humanity

Saudi power chair: Tariffs weaken the global energy transition and hurt humanity

0
edit post
Ray Dalio says a risky AI market bubble is forming, but may not pop until the Fed tightens

Ray Dalio says a risky AI market bubble is forming, but may not pop until the Fed tightens

0
edit post
Wizz Air uncompromising on demands for Israel hub

Wizz Air uncompromising on demands for Israel hub

0
edit post
Estate Planning Myths That Can Haunt Families

Estate Planning Myths That Can Haunt Families

0
edit post
Dollar mixed as investors eye central bank decisions, trade talks

Dollar mixed as investors eye central bank decisions, trade talks

0
edit post
Unlocking Stock Market Success: Why You Should Embrace the Skew

Unlocking Stock Market Success: Why You Should Embrace the Skew

0
edit post
Saudi power chair: Tariffs weaken the global energy transition and hurt humanity

Saudi power chair: Tariffs weaken the global energy transition and hurt humanity

October 28, 2025
edit post
Ray Dalio says a risky AI market bubble is forming, but may not pop until the Fed tightens

Ray Dalio says a risky AI market bubble is forming, but may not pop until the Fed tightens

October 28, 2025
edit post
Wizz Air uncompromising on demands for Israel hub

Wizz Air uncompromising on demands for Israel hub

October 28, 2025
edit post
Dogecoin Price Hasn’t Begun Its 3rd Wave Yet, ATH Above alt=

Dogecoin Price Hasn’t Begun Its 3rd Wave Yet, ATH Above $0.8 Still In The Cards

October 28, 2025
edit post
Trump says he is prepared to send ‘more than the National Guard’ into US cities

Trump says he is prepared to send ‘more than the National Guard’ into US cities

October 28, 2025
edit post
183 Million Credentials Stolen, Including Millions of Gmail Logins. Google Says Reports Are ‘Greatly Exaggerated.’ Are Your Details Safe?

183 Million Credentials Stolen, Including Millions of Gmail Logins. Google Says Reports Are ‘Greatly Exaggerated.’ Are Your Details Safe?

October 28, 2025
The Adviser Magazine

The first and only national digital and print magazine that connects individuals, families, and businesses to Fee-Only financial advisers, accountants, attorneys and college guidance counselors.

CATEGORIES

  • 401k Plans
  • Business
  • College
  • Cryptocurrency
  • Economy
  • Estate Plans
  • Financial Planning
  • Investing
  • IRS & Taxes
  • Legal
  • Market Analysis
  • Markets
  • Medicare
  • Money
  • Personal Finance
  • Social Security
  • Startups
  • Stock Market
  • Trading

LATEST UPDATES

  • Saudi power chair: Tariffs weaken the global energy transition and hurt humanity
  • Ray Dalio says a risky AI market bubble is forming, but may not pop until the Fed tightens
  • Wizz Air uncompromising on demands for Israel hub
  • Our Great Privacy Policy
  • Terms of Use, Legal Notices & Disclosures
  • Contact us
  • About Us

© Copyright 2024 All Rights Reserved
See articles for original source and related links to external sites.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In
No Result
View All Result
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal

© Copyright 2024 All Rights Reserved
See articles for original source and related links to external sites.