Calvin Wang| September 26, 2024
Embedded Files
September 30, 2024. What does this date mean to you? Maybe it’s just another Monday. About a year ago, the federal student loan pause started. After the Biden administration’s promise to millions of Americans to forgive 430 billion in student loan debt was struck down by the Supreme Court, the Department of Education introduced a cushion for borrowers starting repayment. An year long policy where borrowers missing repayment weren’t considered delinquent and the missing payments weren’t reported.
The broken promise of the Biden Administration likely screwed over many Americans that were depending on student loan forgiveness. How many people do you think budgeted what they would have put toward the debt and put it into other life necessities? How many people do you think really started repayments? Missing repayments wouldn’t have an immediate effect, like a drop in credit score. Without that immediate negative impact, some people will continue to miss repayments since they don’t consider the long term effects. This coming September 30th is the end of the 12 month cushion. Soon, we’ll be able to see how many people actually started repayments and we’ll get an even better view of how the American economy is doing.
The likelihood of a healthy amount of people starting repayments, based on what I’ve read, is low. The delinquency rate on credit card loans has been steadily rising quarter after quarter.
This is a warning sign for the overall health of the US economy. As of Q2 2024, the rate is 3.25%. Delinquency rates haven’t been that high since 2011. People are struggling to meet payments while also cutting back on spending. Companies are struggling to keep their customers buying, with BOFA stating that consumers have been cutting back on spending on things from hard goods to software. Interestingly, US credit the overall health of the US economy. card debt declined from May to June this year.
This is a warning sign for the overall health of the US economy. As of Q2 2024, the rate is 3.25%. Delinquency rates haven’t been that high since 2011. People are struggling to meet payments while also cutting back on spending. Companies are struggling to keep their customers buying, with BOFA stating that consumers have been cutting back on spending on things from hard goods to software. Interestingly, US credit card debt declined from May to June this year.
There’s multiple factors at play here. First, credit card interest rates have been increasing steadily since 2022. Higher rates make it harder to make repayments, which can lead to the American buyer becoming more conscious about how much they put on their credit card. There’s also the constant talk about inflation. Consumers simply aren’t buying as much as they used to because the prices are getting too high. There’s been talk about recession.
The recent federal rate cuts signal that the Fed’s are aiming for a soft landing, something that hasn’t been successful since 1994. The 50 bp-cut over the 25 bp-cut signals a desire to correct a great deal. It shows that the Fed is prioritizing recession control rather than inflation control. Government workers don't aspire to spark panic among people. Claimng that we are headed towards a recession would result in an even greater mess in the US economy.
It’s also not definite where we are right now. Things can always change in an instant.
In my personal opinion, I think the trends look bad. I don’t believe that our Fed will be able to pull off a soft-landing this time. Our unemployment rate is rising. People are struggling to find good jobs, they’re struggling to pay off loans, they’re cutting back spending. I don’t agree with the people saying that what Americans are feeling right now is a “vibe-cession”. Yes, the market seems like it’s been reaching record highs every other day. Yes, multiple reports state that the economy is booming. But people are still struggling. September 30th, for me, will confirm or deny whether the recession is in the near future. We’ll see soon.
Page updated
Google Sites
Report abuse