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UW-Madison. Trying to make
college more affordable

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could help the problem of
student loan defaults.

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Thousands of people across
Wisconsin are not keeping

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up with repayment of
student loans, according to

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Wisconsin Watch, more than
100,000, or 15% of

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borrowers in the state
carry loans that are in

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default, having not made a
payment in 360 days. What

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kind of a bellwether is
this for the overall

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economy, and what's the
consequence? We turn to Jay

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Michael Collins, a consumer
finance expert and

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professor at the La
Follette School of Public

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Affairs. And thanks very
much for being here.

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>> Thanks for having me.
>> So what kind of a marker

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are student loan defaults
for larger economic

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struggles?
>> I mean, it is a little

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bit of a canary in the coal
mine because if you think

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about it, many people who
have student loans also

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have credit card loans.
They might have mortgages,

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auto loans. These are the
loans that they probably

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have delayed on making
payments on. So once they

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get behind on these loans,
there could be a cascade

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where they get fall behind
on their credit card loans

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and other kinds of loans.
So it is it is something

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that's very concerning.
>> How predictable is it

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that people who hold
potentially hefty student

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loans wouldn't be able to
repay them once the Biden

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era help kind of phased out?
>> There's a lot of

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different things going on.
I mean, the Biden era help

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was also with the pandemic.
And so there was this long

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period where no payments
were required, almost three

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years. So now borrowers
have to get back in the

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habit of making payments
again. Simultaneously,

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though, we change the rules,
meaning the federal

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government changed the
rules. And so even a

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conscientious borrower is
going to have a hard time

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when the payment plans are
changing, when they're

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getting opted into plans,
if they don't take an

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action. So that's made it
really hard, I think, for

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people to try to keep up
with what the current rules

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and regulations are.
>> What's an example of how

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payments might have
ballooned when these

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favorable repayment plans
went away?

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>> I mean, one of the
examples is we had at one

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point in time, we had
probably too many different

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repayment plans that people
could opt into. But the

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sort of standard plan today
would result in borrowers

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who were in a repayment
plan before seeing their

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payments go up at least
$500 a month. So that's a

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big, big shift, especially
when they were maybe paying

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very little during the
Covid period. Other plans,

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you actually have to take
action to step up and get

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to your servicer. That
means standing in, standing

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in a virtual line for the
phone or otherwise trying

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to get reach them. And it's
been really hard. There's a

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big backlog to try to get
access to that help that

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you need.
for people who actually go

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into default on these loans?
>> The the big issue with

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student loans, unlike
almost all other forms of

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debt, is these are
unsecured loans and they

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don't go away in bankruptcy.
So you have to pay them

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back. If you don't, your
wages will be garnished.

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Even your Social Security
could be garnished as you

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get older. So there really
is no recourse but to pay

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these loans back. Most of
the new payment plans are

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actually stretching
payments now over 30 years.

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So that's quite a long time
to have that burden of

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payments that you have to
take care of.

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>> Meanwhile, consumer
spending ticked down this

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summer and job numbers were
revised down. How was the

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rate of inflation, the
higher cost of things

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dragging down the economy
amidst all of the rest of

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what.
>> We've talked? I mean,

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the surveys of consumer
sentiment that the

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University of Michigan and
other places do are all

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ticking downwards. People
seem troubled. I think, you

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know, if you look at the
inflation numbers, it's not

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terrible outside of
particularly oil. But what

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people really feel like is
that their wages aren't

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keeping up. In other words,
the the paycheck is not

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going up as much as prices
for everything else. And so

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in lots of surveys, people
think that they will

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actually their budget will
be worse off this year

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because their raises and
their income won't match

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their cost of living. And
so that's really that

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squeeze that people are
feeling and making it hard

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to keep up with everything,
including student loans.

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>> And meanwhile, you also
say that September 4th is a

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day that people will be
looking ahead to why.

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>> Right now, the
information that we have,

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the data we have is pretty
mixed. So consumer

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sentiment seems kind of
weak. You know, inflation

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numbers, like a lot of the
numbers are just kind of

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very middling. And so it's
hard to look at the numbers

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and draw any conclusions.
But the last jobs report,

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as you mentioned, was
pretty negative. And so

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this next jobs report will
really tell us if this is a

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trend, if we see another
really weak jobs report

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that suggests that places
aren't hiring, maybe places

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are even letting people go.
We worry about what this

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fall might look like in
terms of higher

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unemployment as well.
>> Speaking of that, the

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economy polls as a key
election issue, as it

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always does. What is it
like out there for the

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average voter in Wisconsin
kind of heading into the

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midterms?
>> Yeah. I mean, this

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anxiety that people feel,
this worry, that people

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feel they take it out in
lots of different ways. And

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so one of those ways is the
government isn't doing it

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for me. And so I think this
will particularly be hard

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for any incumbent,
particularly anybody who's

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associated with the current
administration, is going to

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have to sort of make an
argument that they didn't

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contribute to the problems.
It's not clear that what

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any politician can do, in
the light of the current

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economic, economic
situation, but it certainly

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is making voters very
anxious and perhaps a

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little bit rebellious in
their votes this year.

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>> And your crystal ball
would suggest that

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potentially it won't get
better before November.

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>> The numbers have shown
us, if anything, more

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negative signals than
positive signals. So maybe

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things won't be getting as
worse as the worst case

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scenario, but it looks very
unlikely it's going to get

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a lot better.
>> All right. Well, thank

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you for your insights, J.
Michael Collins. Finally

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tonight, you've probably
driven past one but may not