US student loan policy change unlikely to affect spending
The return of student loan payments is unlikely to significantly impact overall spending but may raise delinquencies and affect credit scores.
The end of student debt forbearance, and the resumption of collection efforts on delinquent loans, will have a minimal impact on overall consumer spending.
We estimate that for most borrowers, student loan payments make up 2%-3% of their overall expenditures, but it varies significantly across the income distribution. In 2024, many borrowers who paused payments during the pandemic resumed them without a pullback in other spending.
Delinquencies will rise most among older borrowers struggling to make payments for some time, and Southeastern states will experience a disproportionate increase.
Borrowers receiving a new delinquency will see a drop in their credit score. This may signal a reversal of the positive credit score trend seen during the pandemic, which would lead to reduced credit limits and higher interest rates for new loans.
