This will be the last student-loan-free summer
in outstanding debts, according to the Federal Reserve. That means for the last three years, most people were taking the $200 to $300 they would normally spend on paying off their student-loan debts and, instead, paid for the rest of their lives. All this money had to go somewhere.
is going to see a big decrease —thousands of dollars — in their discretionary budgets, just as borrowing new money has become more expensive than at any point since 2008. In a way, this is exactly what the Federal Reserve has been trying to do as it fights inflation — kill the demand that’s been baked into the economy for the last three years. When Fed chair Jerome Powell has held press conferences during the last few years, he’s rarely, if ever, had to answer questions about the impact of student debt on the economy. Butin 2018, telling Congress that “as student loans continue to grow and become larger and larger, then it absolutely could hold back growth.
There’s an optimistic scenario in which kick-started student-loan bills help create a domino effect of virtuous scenarios: lower inflation, lower interest rates, more affordable stuff, everybody’s happy. In reality, it won’t be that simple. Still, the resumption of student loan payments is probably not going to be so bad. Ever since April 2020 — when the payments were first suspended — the purchasing power of the dollar has fallen by more than 18 percent.
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