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- An economist argues that home-owning millennials are an overlooked group in the conversation about student loans.
- Some Millennials moved to the suburbs during the pandemic to take advantage of low mortgage rates.
- These higher-income borrowers will not be able to benefit from financial relief when it comes to repaying their loans.
A group of borrowers will face a unique set of challenges as student loan debt repayments resume on Sunday, a former Fed economist told the Wall Street Journal.
“It will hurt a cohort that we don’t talk about much. “It’s the millennials who left town when the pandemic hit,” Danielle DiMartino Booth, a former researcher at the Dallas Fed, told the Journal’s Dion Rabouin.
Booth explained that millennials earning between $100,000 and $225,000 who chose to take advantage of record-low mortgage rates at the start of the pandemic, buying homes and settling in the suburbs, will now face additional financial strain. However, they will be the group that will not have access to student loan relief.
“They bought a house, they got a mortgage payment for the first time, they got a car payment for the first time, they google property tax because they want to know who the bad guy is,” Booth said. “Their home insurance is going up… They are the ones who surprised the country and started paying back in August because they knew rates would go up again in September. The people who can’t help paying them back will start in October.”
Booth continued: “Household bankruptcies are going to go through the roof. This will be biblical.”
Millennials and their younger Gen Z counterparts are already facing a mountain of financial stress, including inflation, healthcare costs and ever-increasing housing and car costs. Student loans become an additional financial problem for those looking to offset their housing costs.
Conversely, student loan payments will also prevent younger borrowers from affording homes in the least affordable housing market in U.S. history.