Extra Expense Threatens To Crimp Spending
Summary:
The impending restart of student loan payments on October 1, impacting 43 million borrowers with $1.6 trillion in outstanding debt, raises concerns about its effect on consumer spending, a key economic driver. While the Department of Education’s income-driven SAVE plan offers relief for many borrowers, the Federal Reserve’s interest rate hikes and falling median household incomes are already straining consumers. Rising delinquency rates on credit card and auto debt further compound the challenge. Although shifting budgets toward student loan payments may cause a modest drop in personal consumption expenditures, consumer spending remains pivotal for the economy’s stability. Additionally, the housing market faces ongoing difficulties, marked by high mortgage rates and low inventory, as the National Association of Home Builders Housing Market Index declines for the second consecutive month.
CoStar Economy is produced weekly by Christine Cooper, managing director and chief U.S. economist, and Rafael De Anda, associate director of CoStar Market Analytics in Los Angeles.