More than 9 million US borrowers miss student loan payments as delinquencies rise.
For the last 12 months, the government enforced a safety net called the on-ramp which stopped student loan servicers from reporting missed payments to credit bureaus. It effectively blinded the system to the fact that millions of people were not paying their debts. The sudden spike in the numbers isn't because a massive wave of people stopped paying yesterday, it is because the credit bureaus are finally processing a year long backlog of shadow delinquencies all at once. We are seeing the official data catch up to reality, revealing that millions of Americans have been technically in default for months but the system was just forbidden from acknowledging it until now.This exposes a widespread gamble that didn't pay off. A huge number of these borrowers likely stopped paying strategically, either betting that the government would eventually forgive the loans or simply choosing to spend their money elsewhere because there was no penalty for skipping the student loan bill. That period of consequence free non payment is over. The economic fallout from this is going to be painful. As these missed payments finally hit credit reports, millions of people are watching their credit scores crash, which immediately freezes them out of the market for mortgages and car loans. You can't qualify for a home loan when your credit report shows serious delinquency so this pulls a massive layer of demand out of the housing market. Even worse, as these borrowers are forced to scramble and start paying again to fix their credit, they have to pull cash away from restaurants, travel, and retail. It sucks spending power out of the fun parts of the economy and redirects it into paying off old interest, acting as a brake on growth just when the economy needs consumers to keep spending.Source: StockMarket.News
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