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Speaker 1: It was one week ago to the Supreme Court throughout

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Speaker 1: President Biden's plan to cut student loan debt for more

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Speaker 1: than forty million Americans. Now those people are facing the

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Speaker 1: prospect of higher monthly payments when they resume paying off

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Speaker 1: that debt in October. That comes after a three year

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Speaker 1: pause on payments due to the pandemic. It's not just

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Speaker 1: former students who could feel the pain. The broader economy

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Speaker 1: could take a hit as well. Student loans account for

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Speaker 1: nearly ten percent of all outstanding consumer credit, and the

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Speaker 1: prospect of payments resuming could also curb consumer spending. Here

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Speaker 1: with more is Denise Pellegrini in a Bloomberg Radio special report.

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Speaker 2: It's hard for me to wrap my head around repayment

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Speaker 2: becoming a thing, just because it's been pushed off so

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Speaker 2: many times up until this point.

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Speaker 3: Megan is twenty five. She's been working at charter schools

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Speaker 3: in Boston and elsewhere after graduating from a top private

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Speaker 3: liberal arts college in Connecticut, and she says she's in

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Speaker 3: shock that she'll have to start repaying all of the

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Speaker 3: tens of thousands of dollars.

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Speaker 2: I can see myself my lifestyle changing a lot, unfortunately.

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Speaker 3: And Megan is one of millions of students, former students,

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Speaker 3: and others reeling after the Supreme Court. Throughout the Biden

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Speaker 3: Administration's plan to forgive between ten and twenty thousand dollars

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Speaker 3: of student debt for many.

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Speaker 4: For the typical student loan borrower, they're going to start

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Speaker 4: paying about three four dollars a month.

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Speaker 3: Mark Sandy, chief economist at Moody's Analytics, says the one

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Speaker 3: two punch of not having some of the debt forgiven

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Speaker 3: and having to resume the monthly payments as soon as

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Speaker 3: October is going to be painful for.

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Speaker 4: Many student loan borrowers, younger borrowers, lower income borrowers.

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Speaker 3: That's tough tough for borrowers like twenty seven year old Marcus,

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Speaker 3: a middle school history teacher and first generation college grad

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Speaker 3: in the Philadelphia metro who owes about fifty thousand dollars

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Speaker 3: in student loans and says all of this has him

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Speaker 3: feeling aasis.

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Speaker 5: I'm feeling pretty. I'm not going to lie does things.

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Speaker 5: It does hurt. The fact is, you know we're not

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Speaker 5: going to be given this assistance.

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Speaker 3: Marcus is already cutting and spending to get ready for

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Speaker 3: the hundreds of dollars a month he now expects to

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Speaker 3: start paying back.

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Speaker 5: I'm cutting coffee every day, like I'm basically building as

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Speaker 5: the end of the week luxury or gift. It's like,

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Speaker 5: you know, if I want to snack this or that,

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Speaker 5: I'm like I need this, I needed that, And also

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Speaker 5: just like limiting how many times I go out socially

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Speaker 5: as well.

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Speaker 3: And economist Sandy says, on top of cuts in discretionary

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Speaker 3: spending like the ones Marcus is talking about, borrowers are

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Speaker 3: going to start cutting back on basic necessities, especially in

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Speaker 3: the face of the higher cost of living that people

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Speaker 3: are already struggling with.

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Speaker 4: People have to juggle, meaning you know, they'll be paying

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Speaker 4: late on this and then paying that and then so

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Speaker 4: it's going to be very uncomfortable for a lot of

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Speaker 4: these folks that have been able to not pay on

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Speaker 4: their student lunk the past several years.

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Speaker 3: And Sandy also says ones payment requirements ramp up, and

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Speaker 3: if borrowers do make their payments, this will take fifty

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Speaker 3: to sixty billion dollars a year out of spending.

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Speaker 4: Probably about a quarter point zero point three percent. There's

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Speaker 4: points of GDP.

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Speaker 3: Some other economists are even more worried than Zandy, including

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Speaker 3: Thomas Simon's US economist at.

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Speaker 6: Jeffries almost like a tax increase.

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Speaker 3: And Simons calls this impact very significant.

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Speaker 6: Four hundred dollars times forty five million people is almost

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Speaker 6: eighteen billion dollars a month in the aggregate, and that

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Speaker 6: is roughly a little bit less than one percent of

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Speaker 6: nominal monthly personal income.

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Speaker 3: Megan says she is planning on cutting back on buying

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Speaker 3: locally sourced food from upscale retailers, and also cutting back

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Speaker 3: on travel and on other big ticket items key to

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Speaker 3: the US economy as well.

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Speaker 2: My car is so old, so I just think, like

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Speaker 2: when it dies, it dies, and I won't.

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Speaker 5: Buy a car.

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Speaker 2: I won't have to worry about gas or anything.

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Speaker 3: And Simons says the cutbacks like the ones Megan is

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Speaker 3: talking about, come at a bad time for the US economy,

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Speaker 3: as people start to run out of savings they've been

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Speaker 3: using to keep up consumer spending.

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Speaker 6: I think that, you know, we're pretty close to the

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Speaker 6: end of how much longer that can continue without more

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Speaker 6: sort of rebudgeting going on and people shifting or spending

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Speaker 6: works essential. And as that happens, you know, there are

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Speaker 6: knock on effects that eventually lead to higher unemployment and

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Speaker 6: unfortunately intercession as well.

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Speaker 3: Some borrowers have already shifted their spending two essentials and

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Speaker 3: are still struggling even without making payments, including Mariah, a

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Speaker 3: twenty nine year old in the Phoenix metro with an

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Speaker 3: undergraduate degree as an athletic trainer, who says as a

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Speaker 3: first generation college student, she thought her degree was the

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Speaker 3: end of her problems, but it turned out to be

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Speaker 3: just the beginning.

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Speaker 7: I feel like I will never break even.

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Speaker 3: Mariah says she was skipping some student loan repayments even

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Speaker 3: before the pandemic moratorium began, after salaries in her field

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Speaker 3: failed to rise as much as projected and the cost

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Speaker 3: of certifications intensified. And now after a car accident and

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Speaker 3: a layoff, she does some things she'll be able to

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Speaker 3: start making payments again anytime soon.

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Speaker 7: Hit the math and I realized for the every two

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Speaker 7: thousand dollars I put in, I get about four thousand

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Speaker 7: worth of interest.

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Speaker 3: And she describes herself as worse off than some of

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Speaker 3: her friends who didn't go to college.

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Speaker 7: I do have that didn't go to college, and I

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Speaker 7: honestly I thought the joke was on them and it's

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Speaker 7: like the joke's on me.

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Speaker 3: One thing that could help is the pay and the

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Speaker 3: Biden administration is now offering a plan that would let

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Speaker 3: borrowers ease back into student loan payments over time. Zandy says,

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Speaker 3: reality we'll sink in for those who owe.

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Speaker 6: It's not a gift.

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Speaker 4: It wasn't a gift in the first place. It was alone.

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Speaker 4: I think students know that to understand that.

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Speaker 3: And Sandy says borrowers who didn't get their degrees may

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Speaker 3: struggle the most. And of course for the borrowers who

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Speaker 3: did keep making payments during the pandemic, they were able

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Speaker 3: to pay down principle, and that's a good thing for

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Speaker 3: their own balance sheets and for the economy, but especially

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Speaker 3: for those who have not paid down their debt. Simon

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Speaker 3: says that now you see it, now you don't shock

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Speaker 3: of not getting flat out. Loan forgiveness is going to

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Speaker 3: have an extra impact on spending plans.

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Speaker 6: Certainly, consumer and psychology is going to play into it

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Speaker 6: a lot, and.

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Speaker 3: He says this will make millennial borrowers more cautious about

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Speaker 3: spending long term on things like buying a home.

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Speaker 6: Do you think of this as like coming into the

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Speaker 6: recession and then leading out to it in maybe like

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Speaker 6: two or three years. That's where we'll start to see

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Speaker 6: these psychological impacts I think really play out.

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Speaker 3: As for the students we spoke to, Megan will be

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Speaker 3: in graduate school this fall and avoid payments in the

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Speaker 3: short term. Mariah is helping to boost her income to cope,

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Speaker 3: but even so she's not sure she can make the payments.

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Speaker 3: And Marcus plans to use every bonus he gets to

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Speaker 3: pay down principle, meaning he says he expects to have

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Speaker 3: to delay making big purchases like buying a home for years.

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Speaker 5: It puts a big wrench in the plans that I had.

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Speaker 3: A wrench in the plans. Marcus had a possible wrench

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Speaker 3: in plans millions of others had for their money. And

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Speaker 3: as the Federal Reserve eyes more possible interest rate hikes,

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Speaker 3: a potential wrench in plans for those hoping for a

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Speaker 3: soft landing for the US economy. Denise Pellegrini, Bloomberg Radio