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You

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We should note that PBS Wisconsin is a part of UW Madison trying to make

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college more affordable could help the problem of student loan defaults thousands

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of people across Wisconsin are not keeping up with repayment of student loans according

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to Wisconsin watch more than 100,000 or 15% of borrowers in the state carry loans that

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are in default having not made a payment in 360 days.

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What kind of a bell weather is this for the overall economy and what's the consequence?

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We turn to J. Michael Collins a consumer finance expert and professor at the La Follette

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School of Public Affairs 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 loan defaults for larger economic struggles?

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I mean it's a little bit of a scenario in the coal mine because if you think about it

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many people who have student loans also have credit card loans they might have mortgages

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auto loans these are the loans that they probably have delayed on making payments on so once

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they get behind on these loans there could be a cascade where they get fall behind on

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their credit card loans and other kinds of loans so it is something that's very concerning.

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How predictable is it that people who hold potentially hefty student loans wouldn't be

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able to repay them once the Biden era help kind of phased out?

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There's a lot of different things going on.

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I mean the Biden era help was also with the pandemic and so there was this long period

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where no payments were required almost three years.

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So now borrowers have to get back in the habit of making payments again simultaneously

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though we change the rules meaning the federal government changes the rules and so it's even

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a conscientious borrower is going to have a hard time when the payment plans are changing

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when they're getting opt into plans if they don't take an action so that's made it really

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hard I think for people to try to keep up with what the current rules and regulations are.

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What's an example of how payments might have ballooned when these favorable repayment

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plans went away?

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I mean the one of the examples is we had at one point in time we had probably too many

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different repayment plans that people could opt into but the sort of standard plan today

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would result in borrowers who win a repayment plan before seeing their payments go up at

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least five hundred dollars a month so that's a big big shift especially when they were

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maybe paying very little during the COVID period.

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Other plans you actually have to take action to step up and get to your servicer that

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means standing in a virtual line for the phone or otherwise trying to reach them it's

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been really hard there's a big backlog to try to get access to that help that you need.

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What is the consequence for people who actually go into default on these loans?

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The big issue with student loans unlike almost all our friends of debt is these are unsecured

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loans and they don't go away in bankruptcy so you have to pay them back if your wages

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will be garnished even your Social Security could be garnished as you get older so there

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really is no recourse but to pay these loans back.

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Most of the new payment plans are actually stretching payments now over 30 years so that's

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quite a long time to have that burden of payments that you're going to take care of.

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Meanwhile consumer spending ticked down this summer and job numbers were revised down.

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How is the weight of inflation the higher cost of things dragging down the economy amidst

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all of the rest of what we've talked about?

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The surveys of consumer sentiment that the University of Michigan and other places do

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are all ticking downwards.

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People seem troubled.

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I think if you look at the inflation numbers it's not terrible outside of particularly

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oil but what people really feel like is that their wages aren't keeping up.

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In other words the paycheck is not going up as much as prices for everything else and

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so in lots of surveys people think that they will actually their budget will be worse off

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this year because their raises and their income won't match their cost of living and

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so that's really that squeeze that people are feeling and making it hard to keep up

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with everything including student loans.

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And meanwhile you also say that September 4 is a day that people will be looking at too

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wide.

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Right now the information that we have, the data we have is pretty mixed so consumer

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sentiment seems kind of weak, inflation 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 and draw any conclusions but the

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last jobs report as you mentioned was pretty negative 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 report that suggests that places aren't hiring, maybe

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places are even letting people go.

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We worry about what this fall might look like in terms of higher unemployment as well.

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Speaking of that the economy pulls as a key election issue as it always does.

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What is it like out there for the average voter in Wisconsin kind of heading into the

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midterms?

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This anxiety that people feel, this worry that people feel, they take it out in lots

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of different ways and so one of those ways is the government isn't doing it for me.

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And so I think this will particularly be hard for any incumbent, particularly anybody who's

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associated with the current administration is going to have to sort of make an argument

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that they didn't contribute to the problems.

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It's not clear that what any politician can do in the light of the current economic situation

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but it certainly is making voters very anxious and perhaps a little bit rebellious in their

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votes this year.

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And your crystal ball would suggest that potentially it won't get better before November?

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The numbers have just not shown us if anything more negative signals than positive signals.

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So maybe things won't be getting as worse as the worst case scenario but it looks very

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unlikely it's going to get a lot better.

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All right.

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Well, thank you for your insights.

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James Michael Collins.