45% of student loan borrowers expect to go delinquent
—a comprehensive breakdown of the deleveraging heading for the US economy as the loan piper comes a-knockin'
College has long been considered the “next step” for American teenagers.
Far from its heyday as higher education reserved for those with forethought career paths, now, everybody goes to college regardless of career ambition. It has morphed into an extension of high school thanks to guaranteeing student loans to aimless, meandering high schoolers who don’t need them—far from the higher education reserved for doctors, lawyers, engineers, and other select jobs that require specialized schooling that it used to be.
This paradigm shift in the American university system has created rampant capital misallocation, not across businesses, but across American citizens.
Debtors have increasingly diminished in quality as the college dream proliferates across the USA to those who never intended to attend had it not been pushed on them. Their collective ability to pay back lenders has diminished too—the main evidence we have for our claim in today’s post. Now that March 2020’s post-COVID emergency student loan forbearance is ending in 2 days, a multi-trillion-dollar deleveraging is heading for the US economy.
While it may not kick off the next credit event, the real economic fallout will be the 180° heel-turn in consumer spending, and the subsequent collapse in economic growth that will result.
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Federal student loan interest will start accruing again in three days, while principal and interest payments will begin on October 1st.
There is $1.569 trillion in federal student loan debt as of Q2, representing 92.6% of all student loan debt in the US: