this post was submitted on 11 May 2025
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96
Why student loan debt collections could be more painful than anticipated (www.axios.com)
submitted 1 week ago by gedaliyah@lemmy.world to c/news@lemmy.world
13 comments fedilink hide all child comments
 

The clock started ticking on a financial time bomb this week for student loan borrowers — those in default will now be referred to debt collections.

Because of the messy state of the student loan world, the economic fallout could be far more widespread than anticipated, hitting some who typically would be able to pay back loans. It also comes amid recession fears, worries over higher inflation, and a slowdown in hiring.

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[–] Joeffect@lemmy.world 34 points 1 week ago* (last edited 1 week ago) (1 children)

It's my understanding that after the housing crisis... Investors moved whatever they were doing in the housing market to the more stable student loans market and did the same thing there...

So basically this shit is going to come crashing down so hard... It will probably be worse than the housing market crash

People who were struggling before... Were able to compensate for the struggles they were facing when they stopped payment for student loans ... Those same people are still struggling thanks to the great economy we were able to build back up...

So now they are in a worse spot and also have to figure out where to get money that has not been a factor in their bills for a long time...

[–] agamemnonymous@sh.itjust.works 12 points 1 week ago (2 children)

Yup, SLABS. They're a massive part of the derivative market, especially since student loans aren't discharged through bankruptcy.

[–] N0body@lemmy.dbzer0.com 7 points 1 week ago (1 children)

The derivatives market is leaning heavily on paused student loans when 2/3 of Americans are using layaway plans to buy groceries? And inflation is about to skyrocket again because of the tariff chaos?

Does the derivatives market deliberately choose bad long-term investments and plan on crashing? That would explain a lot.

[–] Bakkoda@sh.itjust.works 2 points 1 week ago

It does if you bank on it failing.

[–] partial_accumen@lemmy.world 3 points 1 week ago

Yup, SLABS.

"Student loan asset-backed securities (SLABS)" I had to look that up.

Just for clarity of the thread, apparently SLABS contain private student loans. Many of the other conversations here are referring to Federal student loans. So these conversations don't apply to each other. However, a single person can have loans of both types.

[–] LifeInMultipleChoice@lemmy.world 16 points 1 week ago* (last edited 1 week ago) (1 children)

When the government doesn't know what's going we have no way of even knowing what our payments are supposed to be. What percentage of expenses will it possibly change to... Apparently they don't know.

[–] gedaliyah@lemmy.world 9 points 1 week ago (1 children)

My federal loan servicer has confirmed that repayment requirements will begin in August at the previous lower rate. That's as much as I can personally confirm.

For sure there's still a lot of uncertainty and who knows what will change between now and then, or in the future.

[–] LifeInMultipleChoice@lemmy.world 9 points 1 week ago (1 children)

Wish we could just sue for undo stress and force them to drop all repayments do to their complete lack of certainty. Whether or not people can afford to eat depends on their flip flopping changes. If they are going to send thing to collections and garnish wages they need to have full drawn out timelines on when such will happen. We can't invest money into ensuring ongoing success in our own lives without knowing the stability of what our payments are required to be.

One can dream.

[–] gedaliyah@lemmy.world 3 points 1 week ago

That I can get behind!

[–] atzanteol@sh.itjust.works 14 points 1 week ago (2 children)

Remember when liberals were whining about how Democrats weren't listening to them on student loans and then wouldn't vote for Harris?

[–] gedaliyah@lemmy.world 10 points 1 week ago

Not sure what you mean.

The Democrats did work on student loans. Biden forgave millions of loans and the Republican Congress overturned it in the Conservative courts. So he capped repayment for most borrowers (I've verified with my own loan that the lower rates are still active), and placed almost all loans in forbearance. It was the closest thing to forgiveness that was legally achievable.

Then leftists decided he was too old to be re-elected. Harris promised to continue the fight, as well as advance other progressive causes like criminal justice reform, federal decriminalization of marijuana, etc. We all know what happened there.

Let's not rewrite history here.

[–] dgriffith@aussie.zone 8 points 1 week ago* (last edited 1 week ago) (1 children)

I was reliably informed at the start of the year that the US was just days away from the best jobs, the biglyest paychecks, and a golden age.

Was I misled‽

[–] SinningStromgald@lemmy.world 3 points 1 week ago

No, just none of that is for you. All of that is for those already rich and/or in seats of power.