WEBVTT 00:00.000 --> 00:02.000 You 00:30.000 --> 00:59.800 We should note that PBS Wisconsin is a part of UW Madison trying to make 00:59.800 --> 01:05.200 college more affordable could help the problem of student loan defaults thousands 01:05.200 --> 01:10.560 of people across Wisconsin are not keeping up with repayment of student loans according 01:10.560 --> 01:17.280 to Wisconsin watch more than 100,000 or 15% of borrowers in the state carry loans that 01:17.280 --> 01:22.520 are in default having not made a payment in 360 days. 01:22.520 --> 01:27.880 What kind of a bell weather is this for the overall economy and what's the consequence? 01:27.880 --> 01:33.120 We turn to J. Michael Collins a consumer finance expert and professor at the La Follette 01:33.120 --> 01:35.800 School of Public Affairs and thanks very much for being here. 01:35.800 --> 01:36.800 Thanks for having me. 01:36.800 --> 01:41.600 So what kind of a marker are student loan defaults for larger economic struggles? 01:41.600 --> 01:45.840 I mean it's a little bit of a scenario in the coal mine because if you think about it 01:45.840 --> 01:49.640 many people who have student loans also have credit card loans they might have mortgages 01:49.640 --> 01:54.920 auto loans these are the loans that they probably have delayed on making payments on so once 01:54.920 --> 01:59.080 they get behind on these loans there could be a cascade where they get fall behind on 01:59.080 --> 02:03.680 their credit card loans and other kinds of loans so it is something that's very concerning. 02:03.680 --> 02:09.400 How predictable is it that people who hold potentially hefty student loans wouldn't be 02:09.400 --> 02:13.680 able to repay them once the Biden era help kind of phased out? 02:13.680 --> 02:16.000 There's a lot of different things going on. 02:16.000 --> 02:20.200 I mean the Biden era help was also with the pandemic and so there was this long period 02:20.200 --> 02:22.920 where no payments were required almost three years. 02:22.920 --> 02:27.040 So now borrowers have to get back in the habit of making payments again simultaneously 02:27.040 --> 02:31.640 though we change the rules meaning the federal government changes the rules and so it's even 02:31.640 --> 02:36.280 a conscientious borrower is going to have a hard time when the payment plans are changing 02:36.280 --> 02:40.200 when they're getting opt into plans if they don't take an action so that's made it really 02:40.200 --> 02:44.600 hard I think for people to try to keep up with what the current rules and regulations are. 02:44.600 --> 02:50.600 What's an example of how payments might have ballooned when these favorable repayment 02:50.600 --> 02:51.600 plans went away? 02:51.600 --> 02:55.360 I mean the one of the examples is we had at one point in time we had probably too many 02:55.360 --> 03:01.040 different repayment plans that people could opt into but the sort of standard plan today 03:01.040 --> 03:04.960 would result in borrowers who win a repayment plan before seeing their payments go up at 03:04.960 --> 03:09.120 least five hundred dollars a month so that's a big big shift especially when they were 03:09.120 --> 03:12.720 maybe paying very little during the COVID period. 03:12.720 --> 03:17.800 Other plans you actually have to take action to step up and get to your servicer that 03:17.800 --> 03:23.800 means standing in a virtual line for the phone or otherwise trying to reach them it's 03:23.800 --> 03:28.160 been really hard there's a big backlog to try to get access to that help that you need. 03:28.160 --> 03:34.480 What is the consequence for people who actually go into default on these loans? 03:34.480 --> 03:38.800 The big issue with student loans unlike almost all our friends of debt is these are unsecured 03:38.800 --> 03:44.840 loans and they don't go away in bankruptcy so you have to pay them back if your wages 03:44.840 --> 03:48.960 will be garnished even your Social Security could be garnished as you get older so there 03:48.960 --> 03:51.920 really is no recourse but to pay these loans back. 03:51.920 --> 03:56.040 Most of the new payment plans are actually stretching payments now over 30 years so that's 03:56.040 --> 04:00.400 quite a long time to have that burden of payments that you're going to take care of. 04:00.400 --> 04:06.680 Meanwhile consumer spending ticked down this summer and job numbers were revised down. 04:06.680 --> 04:11.880 How is the weight of inflation the higher cost of things dragging down the economy amidst 04:11.880 --> 04:14.520 all of the rest of what we've talked about? 04:14.520 --> 04:17.920 The surveys of consumer sentiment that the University of Michigan and other places do 04:17.920 --> 04:19.640 are all ticking downwards. 04:19.640 --> 04:21.160 People seem troubled. 04:21.160 --> 04:25.440 I think if you look at the inflation numbers it's not terrible outside of particularly 04:25.440 --> 04:29.520 oil but what people really feel like is that their wages aren't keeping up. 04:29.520 --> 04:34.240 In other words the paycheck is not going up as much as prices for everything else and 04:34.240 --> 04:38.040 so in lots of surveys people think that they will actually their budget will be worse off 04:38.040 --> 04:41.960 this year because their raises and their income won't match their cost of living and 04:41.960 --> 04:45.680 so that's really that squeeze that people are feeling and making it hard to keep up 04:45.680 --> 04:47.600 with everything including student loans. 04:47.600 --> 04:53.040 And meanwhile you also say that September 4 is a day that people will be looking at too 04:53.040 --> 04:54.480 wide. 04:54.480 --> 04:58.520 Right now the information that we have, the data we have is pretty mixed so consumer 04:58.520 --> 05:03.640 sentiment seems kind of weak, inflation numbers like a lot of the numbers are just kind of 05:03.640 --> 05:07.320 very middling and so it's hard to look at the numbers and draw any conclusions but the 05:07.320 --> 05:11.800 last jobs report as you mentioned was pretty negative and so this next jobs report will 05:11.800 --> 05:13.200 really tell us if this is a trend. 05:13.200 --> 05:18.080 If we see another really weak jobs report that suggests that places aren't hiring, maybe 05:18.080 --> 05:20.720 places are even letting people go. 05:20.720 --> 05:24.720 We worry about what this fall might look like in terms of higher unemployment as well. 05:24.720 --> 05:30.280 Speaking of that the economy pulls as a key election issue as it always does. 05:30.280 --> 05:34.920 What is it like out there for the average voter in Wisconsin kind of heading into the 05:34.920 --> 05:35.920 midterms? 05:36.920 --> 05:41.560 This anxiety that people feel, this worry that people feel, they take it out in lots 05:41.560 --> 05:46.080 of different ways and so one of those ways is the government isn't doing it for me. 05:46.080 --> 05:51.480 And so I think this will particularly be hard for any incumbent, particularly anybody who's 05:51.480 --> 05:55.040 associated with the current administration is going to have to sort of make an argument 05:55.040 --> 05:57.400 that they didn't contribute to the problems. 05:57.400 --> 06:04.080 It's not clear that what any politician can do in the light of the current economic situation 06:04.080 --> 06:08.520 but it certainly is making voters very anxious and perhaps a little bit rebellious in their 06:08.520 --> 06:09.760 votes this year. 06:09.760 --> 06:16.440 And your crystal ball would suggest that potentially it won't get better before November? 06:16.440 --> 06:21.640 The numbers have just not shown us if anything more negative signals than positive signals. 06:21.640 --> 06:26.640 So maybe things won't be getting as worse as the worst case scenario but it looks very 06:26.640 --> 06:28.240 unlikely it's going to get a lot better. 06:28.240 --> 06:29.240 All right. 06:29.240 --> 06:30.240 Well, thank you for your insights. 06:30.240 --> 06:42.360 James Michael Collins.