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Yahoo
2 days ago
- Business
- Yahoo
Millions of student loan borrowers are behind on payments. What it means for the economy.
After a roughly five-year hiatus, student loan borrowers are once again seeing their credit scores plunge if they fall behind on payments. Economists say it could be bad news for borrowers and the economy at large. A recent report from the Federal Reserve Bank of New York found the delinquency rate for student loans surged from less than 1% in the fourth quarter of 2024 to nearly 8% in the first quarter of this year as a pause on reporting delinquent loans ended. That's sent some credit scores into a free fall, making it more difficult for borrowers to secure affordable loans or pull off major purchases. The Federal Reserve Bank of New York said more than 2.2 million newly delinquent student loan borrowers' credit scores plunged more than 100 points. More than 1 million had scores drop at least 150 points. "We could see millions of borrowers potentially locked out of the conventional mortgage market, they could see the cost of a car loan double, they could find it harder to find rental housing," said Aissa Canchola Bañez, the policy director at the Student Borrower Protection Center, an advocacy group focused on alleviating student loan debt. "The immediate harm, but also the long-term harm, is just massive." The federal government's pandemic-era student loan payment pause lifted in September 2023, but it wasn't until the fall of 2024 that payments at least 90 days past due could be reported to credit bureaus. Those delinquencies started appearing on credit reports in 2025. As of the first quarter, nearly 1 in 4 student loan borrowers required to make payments were behind on their loans, according to the Federal Reserve Bank of New York. Much of that surge could be driven by confusion around loan payments restarting, according to Beth Akers, a senior fellow who focuses on the economics of higher education at the American Enterprise Institute, a conservative think tank. The pause – which began under President Donald Trump's first administration – was extended multiple times under former President Joe Biden. Meanwhile, online rumors claimed all student loans had been permanently canceled under Biden. Biden did attempt to forgive $400 billion worth of student debt, but the plan was ultimately struck down by the Supreme Court. 'For a long time, I think borrowers thought their loans were canceled. Or that they'd never have to repay them. And I don't blame anyone for believing that,' Akers said. 'We really confused the heck out of borrowers.' Other borrowers may not be financially prepared to pay back their loans, especially after falling out of habit with their monthly payments. "The economy is very different than it was pre-COVID," said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit based in Plymouth, Massachusetts. "Things like housing and eggs and lettuce cost a lot more than they did prior to COVID. So a payment that might have been affordable in 2020 might not be affordable now." A paper co-authored by Michael Dinerstein, an associate professor of economics at Duke University in North Carolina, found the student loan pause allowed borrowers to take on other forms of debt, such as mortgages, credit card loans and auto loans. Now, those borrowers are also on the hook for student loan payments that can cost hundreds, if not thousands, each month. Another possible factor? This year's surge may be tied to an influx of late payments that would have been spread out across multiple years without the pause, according to Kristin Blagg, principal research associate in the Work, Education, and Labor Division at the Urban Institute, a Washington, D.C.-based think tank. "In an average year, about a million people enter default," Blagg said. "And what we've had is almost five years of students not getting to that default period. So you can think of this being almost a build-up of folks who would have defaulted during that time who are just now reaching that point." About 5.6 million borrowers were considered newly delinquent in the first quarter of 2025. The Federal Reserve Bank of New York in March estimated that more than 9 million student loan borrowers will face significant credit score decreases by the end of June. Reese Wallace, 34 of Oakland, California, watched his credit score plunge from above 700 to 488 this year after he stopped paying his student loans. A 2023 graduate from the California College of the Arts, Wallace left school with roughly $50,000 worth of student debt. Monthly payments were nearly $500 per month, which Wallace said was untenable on a studio artist wage in the Bay Area. Wallace said he quit paying his loans last year to put the money toward graduate school applications, under the impression that his loans would be automatically deferred as he applied. He realized that wasn't true when his application for student housing at the University of Nevada, Las Vegas, was rejected due to his low credit score. The credit score has thrown a wrench in Wallace's plans to move for graduate school. He had to get a cosigner for housing, and worries he'll have trouble affording a car after years of traveling with public transportation in California. "What kind of vehicle can I get with a 488 credit score?' he asked. 'It's honestly going to be really, really difficult.' Akers believes resuming student loan payments is fair to taxpayers, but said there can be 'serious trickle-down implications' when credit scores take a hit, especially since the baseline interest rate is already high. 'People are quick to think about the ability to finance the purchase of a new home at an affordable interest rate,' she said. 'But also employers look at credit scores sometimes. When you're renting a home, they look at your credit score.' Borrowers could find themselves in more hot water if they continue to miss payments. After 270 days, the government can seize wages, tax returns or Social Security benefits. The Office of Federal Student Aid is expected to send notices on wage garnishments this summer. Student loan defaults: Benefits could be withheld from 5.3 million defaulted student loan borrowers, feds say Economists warn restarted payments and sinking credit scores could deliver another hit to an economy that has already shown signs of slowing this year. 'It's another potential drag,' Blagg said. 'We don't have a good sense of how big it is compared to all the other things that are going on in the moment, but any time there's a dollar spent servicing loans, it's a dollar that's not being put into the economy or saved for a big purchase." Morgan Stanley economists estimate increased loan payments could lower real GDP growth by up to 0.15 percentage points this year as payments increase by $1 billion to $3 billion per month. Their May 5 report says the GDP impact is "relatively small," but describes this as "another headwind" for consumers. Canchola Bañez of the Student Borrower Protection Center shared advice for borrowers who are delinquent on their loans: Borrowers should explore repayment options at Canchola Bañez said income-driven repayment plans are likely their best option. This shift could take time; there's a backlog of roughly 2 million federal student loan borrowers requesting income-driven repayment plans, according to figures from the Education Department. Borrowers can be in forbearance while their application is processing, which means they won't have to make their loan payments while they're waiting for approval on a more affordable payment plan. If a borrower is more than 270 days behind on their loan, the Education Department lays out three options to get out of default: Repay the loan in full (not practical for most borrowers). Loan rehabilitation: Borrowers can contact the loan holder and agree in writing to make nine affordable monthly payments within 20 days of a set due date, all within 10 consecutive months. Loan consolidation: Borrowers agree to repay a new "Direct Consolidation Loan" under an income-driven repayment plan or make three full, consecutive, voluntary, on-time monthly payments on the defaulted loan before it is consolidated. While this option is faster, accrued interest is added to the principal balance, which could have borrowers paying more overall. This article originally appeared on USA TODAY: Student loan delinquencies are up. What it means for the economy.
Yahoo
3 days ago
- General
- Yahoo
As SCOTUS considers porn access, an argument on why it's bad for society
The Supreme Court is expected to rule next month on a challenge to a Texas law aimed at preventing young people from accessing pornographic content online. The American Enterprise Institute's Christine Emba discusses her recent NYT piece 'The Delusion of Porn's Harmlessness'.
CNBC
3 days ago
- Politics
- CNBC
Arthur Brooks on Trump's targeting of Harvard: Reform is needed, but this is 'real overreach'
Arthur Brooks, American Enterprise Institute president emeritus, Harvard University professor, The Atlantic columnist and 'How To Build A Happy Life' podcast host, joins 'Squawk Box' to discuss the Trump administration's targeting of Harvard University, the administration's strategy to reshape higher education, what should be done to address antisemitism on campus, and more.
Yahoo
6 days ago
- Business
- Yahoo
Work till you drop? Here's why America's average retirement age keeps rising.
The average retirement age of American workers is creeping steadily up, according to a new report from a prominent economist. And that trend invites a question: When will America's retirement age stop rising? Over the past three decades, the average retirement age has risen by about three years, economist Alicia Munnell reports in an April research brief. The typical retirement age in 2024 was 64 for men, 62 for women. The upward trend is slow, but striking. In 1994, the average man worked to age 61, while the typical woman clocked out at 59. We're working longer for several reasons: ◾Americans are living longer, staying healthier, and working in less physically demanding jobs. ◾Workplace pensions have given way to 401(k) plans, which reward workers who delay retirement. ◾Social Security changes have pushed the 'full retirement' age from 65 to 67, penalizing those who claim the benefit earlier. ◾Fewer employers offer health insurance to workers who retire before 65, the year Medicare benefits begin. 'There were a lot of forces that encouraged people to work longer,' said Munnell, senior adviser at the Center for Retirement Research at Boston College, an organization she founded. Does the trend toward later retirement bode well or ill for American society? Among retirement researchers, opinion is divided. If Americans were working longer to stave off poverty, then a rising retirement age would be a bad thing, said Andrew Biggs, a senior fellow at the American Enterprise Institute. But he doesn't see that happening, at least not for most Americans. 'They're getting higher Social Security benefits, and the benefits they're getting from private retirement plans have increased,' he said. 'So, they don't need to work to stay out of poverty.' However, whether American retirees have enough savings and benefits to live comfortably in retirement is a matter of spirited debate. In a viral 2024 op-ed, Biggs made the case that most retirees are managing just fine, even with relatively modest savings. On the other hand, a 2024 AARP survey found that one-fifth of over-50 adults have no retirement savings, and that many worry they won't have enough funds to last through retirement. 'So, for a meaningful share of workers, postponing retirement is likely a necessity to keep their main income stream going,' said Nicola Bianchi, assistant professor of strategy at Northwestern University's Kellogg School of Management. American workers have decidedly mixed emotions about retirement. Millions of Americans dream of retiring early. As we age, dreams give way to reality, and many workers resolve to remain employed for as long as they can. The average over-50 worker expects to retire at 67, according to the Transamerica Center for Retirement Studies. 'Today's workers envision extending their working lives beyond traditional retirement age because they want and need to work,' said Catherine Collinson, CEO of the Transamerica Center. In the end, though, many of us retire earlier than we had planned, often because of corporate downsizing or declining health. Munnell's research sought to divine whether average retirement ages will rise further in years to come: One day, will most Americans work to age 70? Probably not. Munnell concluded that the upward trend has likely peaked. 'There are all these forces that pushed up the average retirement age, beginning in the mid-'90s,' she said. 'And the thing that struck me is that every one of them seems to have played itself out.' The gradual uptick in Social Security's full retirement age is done, with no more changes planned. The shift from pensions to the 401(k) is complete, and half of American workers now participate in the plans. Meanwhile, the trend toward longer and healthier lives has slowed. In the calculus of American retirement, two specific ages loom large. One is 62, the year most Americans become eligible for Social Security. The other is 65, the year Medicare kicks in. It's no surprise that the average retirement age for men and women falls between those years, said Craig Copeland, director of wealth benefits research at the Employee Benefit Research Institute, or EBRI. 'I think those two years are going to be key,' he said. 'Unless those are moved, I don't see that the average retirement age is going to move much.' The share of Americans who claim Social Security at 62 has dropped dramatically in recent decades. Based on expected longevity, most of us are better off financially if we wait until 70 to claim the benefit. Even so, 62 remains the most popular age for Americans to claim Social Security. Munnell predicts the average retirement age may actually decline in 2025, for a reason that she might not have predicted in 2024. The Trump administration's cost-cutting campaign across the federal government has triggered a torrent of new Social Security claims this year. New claims were up by more than 15% in March, compared with the same month in 2024. Munnell and others ascribe the surge to widespread fears about the stability of the retirement trust fund, amid staff cuts, rule changes, website outages and leadership shuffles. 'They're all racing in to claim benefits, which means they're likely to stop working earlier than they had planned,' she said. Future policy changes could determine whether America's retirement age continues to rise. Republicans in Congress have periodically proposed raising the full retirement age for Social Security, although President Trump has pledged not to touch it. If the age of eligibility for full Social Security benefits rose from 67 to, say, 70, America's average retirement age would probably resume its upward drift, Munnell said. If Congress were to raise the age of eligibility for Medicare, retirement ages could rise even more dramatically. But retirement experts say it's hard to imagine that scenario, given the high costs of health insurance. 'I don't see that happening,' said Copeland of EBRI. This article originally appeared on USA TODAY: America's retirement age is rising. Will the trend ever reverse?
Miami Herald
6 days ago
- Health
- Miami Herald
Fact check: Trump exaggerates speed and certainty of prescription drug price reductions
Under a new executive order, prescription drug prices will be reduced "almost immediately." President Donald Trump, in a May 11 post on Truth Social ____ President Donald Trump expressed high hopes for an executive order to reduce drug prices. On May 11, the day before he held a White House event to sign the executive order, Trump posted on Truth Social, "Prescription Drug and Pharmaceutical prices will be REDUCED, almost immediately, by 30% to 80%." However, the executive order's text, unveiled May 12, undercut the president's description of how soon consumers could experience this potential boon. The idea of the executive order, he said, was to lower high prescription drug costs in the U.S. to levels more typical in other countries. "We're going to equalize," Trump said at the order signing. "We're all going to pay the same. We're going to pay what Europe's going to pay." Experts said Trump's action could lower the cost of prescription drugs, perhaps by the 30% to 80% Trump said, but they cautioned that the order's required procedural steps would make it far from an immediate fix. The executive order says that within 30 days, administration officials must determine and communicate to drugmakers "most-favored-nation price targets," to push the companies to "bring prices for American patients in line with comparably developed nations." After an unspecified period of time, the administration will gauge whether "significant progress" toward lower pricing has been achieved. If not, the order requires the secretary of Health and Human Services to "propose a rulemaking plan to impose most-favored-nation pricing," which could take months or years to take effect. "Executive orders are wish lists," said Joseph Antos, a senior fellow emeritus in health care policy at the conservative American Enterprise Institute. The order "hopes that manufacturers will unilaterally lower U.S. prices. The legal authority to intervene in the market is unclear if this implausible scenario doesn't happen." When contacted for comment, the White House did not provide evidence that the executive order would provide immediate results. Why Do Americans Pay More for Prescriptions? There is wide agreement that drug prices are unusually high in the U.S. The prices Americans pay for pharmaceuticals are nearly three times the average among a group of other industrialized countries in the Organization for Economic Cooperation and Development. A study by the Rand Corp., a nonpartisan research organization, found that, across all drugs, U.S. prices were 2.78 times as high as the average prices across 33 OECD countries. The gap was even wider for brand-name drugs, with U.S. prices averaging 4.22 times as much. The U.S. has lower prices than comparable nations for unbranded, generic drugs, which account for about 90% of filled prescriptions in the U.S. But generics account for only a fifth of U.S. prescription drug spending. Experts cite several reasons for this pricing discrepancy. One is that the U.S. has more limited price negotiation with drug manufacturers than other countries do. Often, if another country fails to find the extra cost of a new drug is justified by improved results, it'll reject the drug application. Some countries also set price controls. Another factor is patent exclusivity. Over the years, U.S. pharmaceutical companies have used strong legal protections to amass patents that can keep generic competitors from the marketplace. Drug companies have also argued that high prices help pay for research and development of new and improved pharmaceuticals. When Trump released the executive order, Stephen J. Ubl, president and CEO of the drug industry group Pharmaceutical Research and Manufacturers of America, said in a statement, "It would mean less treatments and cures and would jeopardize the hundreds of billions our member companies are planning to invest in America." (In Trump's May 13 interview with Fox News' Sean Hannity, Trump offered a different picture of what drug company officials have told him; he said they agreed "it's time" to lower U.S. prices.) Recent studies have cast doubt on the idea that high prices pay for research and development. A 2023 study found that from 1999 to 2018, the world's 15 largest biopharmaceutical companies spent more on selling and general administrative activities, which include marketing, than on research and development. The study also said most new medicines developed during this period offered little to no clinical benefit over existing treatments. The long-standing reality of high U.S. drug prices has driven Democratic and Republican efforts to bring them down. Then-President Joe Biden signed legislation to require Medicare, the federal health care program that covers Americans over 65, to negotiate prices with the makers of some popular, high-cost medicines. And Sen. Bernie Sanders, I-Vt., has made lowering drug prices a cornerstone issue during his political career. During his first term, Trump sought to lower prices for certain drugs under Medicare, but the courts blocked the move on procedural grounds. Trump's drug-price push could attract bipartisan support, experts said. Jonathan Cohn, who has worked for several left-of-center media outlets and wrotetwo books on health care policy, offered measured praise for Trump's executive order in The Bulwark, a publication generally critical of Trump, calling it "a serious policy initiative, one that credible people think could bring some relief on drug prices." Andrew Mulcahy, a Rand Corp. senior health economist, said one part of Trump's statement - the possibility of a 30% to 80% price reduction - is plausible. "Of course, the devil's in the policy design and implementation details," Mulcahy said. "But at first blush, a savings of roughly two-thirds on what we spend now for drugs seems in line" with what Rand's research has shown. What Would Trump's Executive Order Do? Referring to high U.S. drug prices, Trump told Hannity that "I ended it" by issuing the executive order. But that's not how the order is structured. The executive order makes plain that any actions will not happen quickly. "That 'almost' in 'almost immediately' is doing a lot of work," Mulcahy said, referring to Trump's statement. The executive order also could face court challenges, just as Trump's first-term executive order did. "It seems unlikely that the federal government can set prices for drugs outside of the Medicare program," Antos said. If Trump wants reduced prices to benefit all U.S. consumers, experts said, Congress will likely have to pass new legislation. While executive orders direct federal agencies what to do, requiring action from privately owned companies likely would require legislation passed by Congress, experts said. If Congress gets involved, that will not only tack on extra time, but it also could draw opposition from the Republican majority in one or both chambers. Historically, Antos said, "federal price controls are anathema for many Republicans in Congress." Our Ruling Trump said that, because of his new executive order, prescription drug prices would be reduced "almost immediately." Experts said that if the goals of the executive order are achieved, price reductions would not happen "almost immediately." The order sets out a 30-day period to develop pricing targets for drugmakers, followed by an unspecified amount of time to see if companies achieve the targets. If they don't, a formal rulemaking process would begin, requiring months or even years. And if Trump intends to lower prices for all consumers, not only those who have federal coverage such as Medicare, Congress will likely have to pass a law to do it. Trump gives the impression that Americans will shortly see steep decreases in what they pay for prescription drugs. But even if the executive order acts as intended - which would require a lot to go right - it could take months or years. The statement contains an element of truth but ignores evidence that would give a different impression. We rate it Mostly False. Copyright (C) 2025, Tribune Content Agency, LLC. Portions copyrighted by the respective providers.
