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We should note that PBS Wisconsin

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is a part of UW-Madison.

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Trying to make college more

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affordable could help the problem

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of student loan defaults.

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Thousands of people across Wisconsin

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are not keeping up with repayment

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of student loans.

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According to Wisconsin Watch, more

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than 100,000 or 15%

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of borrowers in the state carry

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loans that are in default,

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having not made a payment in 360

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days.

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What kind of a bellwether is this

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for the overall economy, and

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what's the consequence?

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We turn to J.

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Michael Collins, a consumer finance

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expert and professor at the

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LaFollette School of Public Affairs.

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And thanks very much for being here.

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Thanks for having me.

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So what kind of a marker are student

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loan defaults for larger economic

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struggles?

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I mean, it is a little bit of a

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canary in the coal mine, because if

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you think about it, many people who

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have student loans also have credit

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card loans, they might have

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mortgages, auto loans.

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These are the loans that they

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probably have delayed on making

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payments on. So once they get behind

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on these loans, there could be a

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cascade where they fall behind on

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their credit card loan and other

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kinds of loans.

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So it is something that's very

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concerning.

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How predictable is it that

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people who hold potentially hefty

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student loans wouldn't be able to

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repay them once the Biden era

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help kind of phased out?

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There's a lot of different things

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going on. I mean, the Biden era help

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was also with the pandemic.

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And so there was this long period

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where no payments were required

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almost three years.

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So now borrowers have to get back in

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the habit of making payments again.

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Simultaneously, though, we change

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the rules, meaning the federal

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government changed the rules.

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And so it's even a conscientious

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borrower is going to have a hard

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time when the payment plans are

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changing, when they're getting

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opting into plans, if they don't

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take an action.

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So that's made it really hard, I

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think, for people to try to keep up

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with what the current rules and

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regulations are.

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What's an example of how payments

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might have ballooned when these

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favorable repayment

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plans went away?

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I mean, one of the examples is we

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had at one point in time, we had

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probably too many different

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repayment plans that people could

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opt into, but the

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sort of standard plan today would

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result in borrowers who were in a

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repayment plan before seeing their

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payments go up at least $500 a

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month. So that's a big, big shift,

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especially when they were maybe

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paying very little during the COVID

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period.

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Other plans you actually have to

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take action to step up and

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get to your servicer.

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That means standing in a

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virtual line for the phone or

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otherwise trying to get reach of

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them. It's been really hard.

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There's a big backlog to try to get

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access to that help that you need.

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What is the consequence for people

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who actually go into default

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on these loans?

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The the big issue with student

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loans and like almost all our forms

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of debt as these are unsecured loans

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And they don't go away in bankruptcy

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So you have to pay them

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back if you don't your

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wages will be garnished even your

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Social Security could be garnered as

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you get Older so there really

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is no recourse but to pay these

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loans back Most of the new payment

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plans are actually stretching

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payments now over 30 years So

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that's quite a long time to have

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that burden of payments that you're

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going to take care of

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Meanwhile, consumer spending

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ticked down this summer and

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job numbers were revised down.

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How is the weight of inflation,

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the higher cost of things, dragging

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down the economy amidst all

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of the rest of what we've done?

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The surveys of consumer

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sentiment that the University of

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Michigan and other places do are all

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ticking downwards.

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People seem troubled.

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I think if you look at the inflation

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numbers, it's not terrible outside

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of particularly oil, but what

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people really feel like is that

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their wages aren't keeping up.

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In other words, the paycheck is not

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going up as much as prices for

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everything else. And so in lots of

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surveys, people think that they

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will. Actually, their budget will be

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worse off this year because their

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raises and their income won't match

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their cost of living.

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And so that's really that squeeze

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that people are feeling and making

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it hard to keep up with everything,

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including student loans.

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And meanwhile, you also say that

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September 4 is a day

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that people will be looking at too

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wide.

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Right now the information that we

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have, the data we have is pretty

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mixed.

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So consumer sentiment seems kind of

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weak, inflation

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numbers, like a lot of the numbers

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are just kind of very middling.

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And so it's hard to look at the

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numbers and draw any conclusions.

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But the last jobs report, as you

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mentioned, was pretty negative.

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And so this next jobs report will

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really tell us if this is a trend.

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If we see another really weak jobs

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report that suggests that places

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aren't hiring, maybe places

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are even letting people go.

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We worry about what this fall might

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look like in terms of higher

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unemployment as well.

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Speaking of that, the economy polls

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as a key election issue, as it

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always does.

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What is it like out there for the

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average voter in Wisconsin kind

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of heading into the midterm?

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Yeah, I mean, this anxiety

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that people feel, this worry that

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people feel, they take it out in

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lots of different ways.

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And so one of those ways is the

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government isn't doing it for me.

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And so I think this will

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particularly be hard for any

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incumbent, particularly anybody

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who's associated with the current

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administration is going to have to

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sort of make an argument that they

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didn't contribute to the problems.

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It's not clear that what any

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politician can do in the light of

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the current economic economic

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situation.

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But it certainly is making voters

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very anxious and perhaps a

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little bit rebellious in their votes

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this year.

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And your crystal ball would suggest

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that potentially it won't

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get better before November?

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The numbers have shown us,

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if anything, more negative

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signals than positive signals, so

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maybe things won't be getting as

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worse as the worst case

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scenario, but it looks very unlikely

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it's going to get a lot better.

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Well, thank you for your insights,

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J. Michael Collins.

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Yeah, it was great.

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Thanks. I love that.