They’re Baaack… and Can Kill Your Credit Score

 

They’re Baaack… and Can Kill Your Credit Score

Gen Z vs Student Loan Repayments

Gen Z seem to be the new sacrificial lambs in Trump’s America. Even as many voted for Trump, the supporter of the new man-up machismo vs woke rising female power, they are facing absurdly higher housing costs, as those most junior in recent hires, they are the most likely to lose their jobs in the impending recession (a certainty for many of those in federal jobs), the cost of living is skyrocketing, interest rates are soaring and they are the most powerless adult generation in the nation. State legislatures and Congress have very few elected Gen Z representatives. And now, as icing on a poisonous cake, those student loans that were in a temporary freeze… are now officially unfrozen. If Republicans are to implement their massive tax cuts for the super-rich, anything that raises the deficit that can be cut is toast. Like unpaid student loans.

Student debt was not a significant number 50 years ago, but as the above NY times chart reflects, tuition increased over the years at triple the inflation rate, just as government cuts to scholarships fell. With higher interest rates, the aggregation of student debt quadrupled in the last 25 years. There is more student debt now than the totality of US credit card debt. Today, with the demise of the federal Department of Education, the rising resentment of “educated elites” by the MAGA masses and the direct assault by the Trump administration against prestigious research universities and their governmental funding, the writing was on the wall for all that accrued and hanging student debt. The new mandate, effectively pay or die, began on May 5th.

Writing for The Morning, NY Times News feed, May 5th, Stacy Cowley writes: “For five years, more than 40 million Americans have not faced dire consequences if they failed to pay back their federal student loan debt. That ends [May 5th]… As the coronavirus pandemic convulsed the economy, President Trump and Congress brought relief: They allowed borrowers to take a break from their payments. The government also froze the interest, meaning borrowers’ balances did not grow. People saved hundreds or even thousands of dollars per month.

“The measure was popular at the time. It let people improve their credit scores, pay down other debts and build savings. So officials extended the reprieve nine times — across the rest of Trump’s first term and most of former President Biden’s… But the government made those loans, and letting them go unpaid added to the deficit. Some economists also warned about sending the wrong message — that it was fine not to repay your debt. Eventually, the payment freeze ended, but policymakers said they wouldn’t penalize borrowers for late payments yet.

“Now even that break is gone, and late payments are showing up in credit reports for millions of people. Today, the government restarts collections on defaulted loans — first by docking tax refunds, then by garnishing paychecks and Social Security benefits.” The Biden administration tried unsuccessfully to reduce/forgive a lot of that student debt but was stopped in federal court. “To prevent borrowers from facing bills larger than what they can pay, the government can tie your monthly payment to your income. Biden’s new program to do that, called SAVE, cut some borrowers’ bills in half and allowed millions of low-wage workers to pay nothing at all.

“But several Republican-led states said in legal challenges that he couldn’t do that, and federal courts froze the plan. (Loan forgiveness has been especially unpopular on the right. College graduates are more likely to be Democrats, although many people with student debt started degrees and never finished.) Some eight million people who enrolled in the plan are now in limbo.

“The Trump administration intends to end the plan if courts don’t. For now, borrowers on SAVE can simply stay on pause — they won’t be considered delinquent — but that extension is nearly certain to end sometime this year. No one knows exactly when, which stresses borrowers out.

“Another point of confusion is Trump’s ambition to close the Education Department — the agency that owns and manages federal student debt — and move the loans to another agency… Moving all those records, including contracts with the companies that collect payments, would be complicated, and it can’t happen without Congress. Lawmakers and federal officials tell me there’s no plan for this.” Cowley.

This repayment program will put pressures on Gen Z, well above the impending recession, since whatever their discretionary budgets may have been is reduced dramatically. Home ownership is now all but abandoned, consumer purchases will drop, marriages delayed and giving birth as Herr Trump seems to demand is just an unaffordable luxury. The notion of serious government-supported childcare has been reduced to a bad joke. It’s back to Ramen for lunch and dinner for way too many. 

I’m Peter Dekom, and this nation appears to enjoy eating their children’s future to appease the rich… with absolutely no shame at all.