The Student Loan Pause Has Made Borrowers Worse Off
From the linked working paper’s abstract:
We find a large stimulus effect, as borrowers substitute increased private debt for paused public debt. Comparing borrowers whose loans were frozen with borrowers whose loans were not frozen due to differences in whether the government owned the loans, we show that borrowers used the new liquidity to increase borrowing on credit cards, mortgages, and auto loans rather than avoid delinquencies. The effects are concentrated among borrowers without prior delinquencies, who saw no change in credit scores, and we see little effects following student loan forgiveness announcements.
This means there is a huge swath of people out there who, when the student loans were paused, did not plan for their resumption, borrowed more–and are likely going to have to declare bankruptcy when student loan payments resume.
This implies in October we will see a massive uptick in bankruptcies.
And the corresponding political anger from a group of people who were promised “breads and circuses” and who did not use the pause as an opportunity to take control of their personal finances.
Remember: the Tea Party movement started during the Obama Administration as a protest, in part, by those upset the government was potentially awarding delinquint mortgage holders and thus creating a massive moral hazard.