Latest news with #RikardBandebo
CBS News
30-07-2025
- Business
- CBS News
Even households earning $150,000 a year are struggling with credit card and car payments
More high-income Americans around the U.S. are falling behind on their credit cards and auto loans, a sign that even people earning more than six figures are more likely to struggle financially amid shifts in the economy. Delinquencies across all loan products for households earning more than $150,000 have more than doubled since 2023. That compares with a 60% increase in delinquencies during that time for households earning between $45,000 and $150,000, and a 22% increase for people earning less than $45,000, according to data from credit-scoring company VantageScore. High-income households had weathered the post-pandemic years better than lower-earning Americans because they had more of a cushion to absorb soaring inflation and other shocks, according to VantageScore chief economist Rikard Bandebo. But these Americans are now feeling the impact of several economic changes, including a weaker job market for white-collar workers and higher housing costs, he told CBS MoneyWatch. "For white-collar workers, it's probably tougher than it has been," Bandebo said. "This trend has been consistent and seems to be continuing — it's not abetting." About 38% of all new jobs created in the five years before the pandemic paid above-average wages, VantageScore's data shows. But this year that share has fallen to 7%, signaling that companies are creating fewer white-collar positions. That poses a challenge to higher-income Americans who suffer a job loss because it may be tougher to find new employment than in previous years. "This group is being hit from a number of different aspects, which is making it harder for them to make ends meet," Bandebo said. To be sure, the overall rate of loan delinquencies in the U.S. remains higher for low- and middle-income consumers than for high-income earners, according to VantageScore. For instance, the delinquency rate for households earning at least $150,000 now stands at about 0.34%, versus 1.75% for low-income households. But the rise in delinquencies has accelerated faster for higher-income households than for other groups, the firm's data shows. A key question for the U.S. is whether the financial challenges facing high-income Americans could portend a broader economic downturn. Notably, consumption by wealthier Americans now contributes about half of all consumer spending, the main engine for economic growth. By comparison, in 1990 spending by Americans higher up the economic ladder accounted for about one-third of all spending. At the same time, low- and middle-income households are also facing stiffer financial headwinds with about three-quarters of middle-income consumers saying they're cutting back on non-essential purchases, according to a recent survey from financial services company Primerica. About one-third of middle-income households, or those earning between $30,000 to $130,000, say they've increased their credit card usage in the past year, the survey found. Retailers and major consumer brands have also been warning that some consumers are cutting back or are more cautious in their purchases. Shoppers are "looking for value, either in smaller packs and promotions or in larger pack sizes in the club channel and online," Procter & Gamble Chief Financial Officer Andre Schulten said on an earnings conference call Tuesday. "That's the behavior we've been outlined before, but it's not stopped. It continued." Widespread consumer frustration with high prices is thought to have boosted President Trump during the 2024 electoral campaign against Joe Biden, when Mr. Trump vowed to end the "inflation nightmare." So far, inflation has remained relatively muted in 2025, although June's 2.7% annualized rate remains higher than the Federal Reserve's goal of reaching a 2% rate. Yet more consumers are now expressing frustration with the Trump administration's economic policies, according to a new CBS News poll that found nearly 64% of Americans now disapprove of how the president is handling inflation. The survey was conducted from July 16-18 and polled 2,343 adults. As for Americans who are struggling to keep up with credit-card debt and auto loans, they aren't likely to see relief anytime soon. Although Mr. Trump has been pushing Federal Reserve Chair Jerome Powell to lower interest rates, economists think the central bank is very likely to stand pat when officials announce their latest policy move on Wednesday.
Yahoo
05-05-2025
- Business
- Yahoo
Student loan collections are back on today. Here's what to know
The Trump administration is restarting collections on defaulted federal student loans beginning Monday, May 5, targeting more than five million borrowers who haven't made payments in months — or, in some cases, years. Many of those borrowers now face aggressive consequences: wage garnishment, loss of tax refunds, and cuts to Social Security benefits. These measures, paused during the pandemic, are returning in full force as the Department of Education reactivates pre-2020 collection protocols. The move reverses the more lenient Biden-era approach, which included a long-running payment pause and a post-pandemic 'on-ramp' that shielded borrowers from immediate penalties. The Trump team, by contrast, says it lacks the legal authority to forgive the loans — and that enforcement must resume. As of 2025, total outstanding federal student loan debt in the U.S. stands at approximately $1.7 trillion, owed by more than 40 million borrowers. Over 5 million are currently in default. Monthly student loan payments vary based on loan type and repayment plan. According to Federal Reserve data, the average ranges between $300 and $500 — but can be much higher for borrowers with large balances or those not enrolled in income-driven plans. For those already in default, the numbers can get worse: collection fees can swallow nearly 20% of each payment or add up to 25% to the total balance. The Department of Education can also garnish up to 15% of disposable income, intercept tax refunds, and seize Social Security benefits through the Treasury Offset Program. The timing couldn't be worse. Millions of Americans had reorganized their budgets during the multi-year payment pause — and many didn't realize they were expected to start repaying again. 'It's a substantial additional cost,' said Rikard Bandebo, chief economist at VantageScore. 'People... are going to have to make harder choices on what they spend on.' Airplane mechanic Loren Linton, 51, told the Wall Street Journal that his credit score dropped by nearly 300 points in March, which was how he discovered his automatic payments had stopped due to a glitch. He's since picked up extra overtime hours to manage the debt, especially with two children starting college this fall. 'This was supposed to improve our lives,' he said. 'Not bring it down.' Borrowers who haven't made a payment in nine months are now considered in default. Many will begin receiving collection notices this week, with garnishments potentially starting as soon as early June. The broader economic backdrop only compounds the strain: new jobs are harder to come by, wages have plateaued, and consumer spending remains fragile. According to Conference Board data, 72% of U.S. consumers now believe a recession is 'somewhat' or 'very likely' in the next 12 months — the highest in two years. That's an 8-point jump since November and a sign of the growing disconnect between Wall Street's rally and Main Street's dread. Consumers report worsening views of their family finances, inflation fatigue, rising borrowing costs, and an abundance of layoff headlines. While these student-loan collection measures reflect a return to pre-pandemic norms, the emotional and financial toll for many borrowers — especially those who had hoped for cancellation — is anything but normal. For the latest news, Facebook, Twitter and Instagram.
Forbes
27-03-2025
- Business
- Forbes
Student Loan Delinquencies Soar As 9 Million Borrowers Fall Behind
After a historic pause in payments, student loan borrowers face a harsh reality check. A new Federal Reserve Bank of New York study estimates that roughly 9.2 million Americans have fallen behind on their student loan bills since repayments have resumed. This wave of delinquency – affecting about 43% of those required to make payments – marks a dramatic uptick that experts warn could surpass pre-pandemic levels. With more than $250 billion in student debt now delinquent, the fallout may only be beginning to unfold. Federal student loan borrowers enjoyed a pandemic-era payment pause for nearly three years. During this time, no payments were required, and no delinquency was reported to credit bureaus. That relief ended in late 2023, followed by a 12-month on-ramp in which missed payments carried fewer penalties. That on-ramp expired on Sept. 30, 2024, and the bills are now due – with troubling results. According to the New York Fed, roughly 9.7 million student loan borrowers became past-due on their bills once the Covid-era payment pause expired. By the end of the on-ramp period, 15.6% of federal student loan borrowers were behind on payments. In raw numbers, that's roughly 9 to 10 million people—far higher than the delinquency rate before the pandemic. As the Fed's report notes, this surge suggests delinquencies will exceed pre-2020 levels as they begin hitting credit reports. The speed with which borrowers have fallen behind and the magnitude of the problem - nearly half of those supposed to resume payments have missed at least one bill - raises alarm bells. Delinquencies are "going to be a shock to the system," warns Rikard Bandebo, Chief Economist at VantageScore, who foresees a "student loan delinquency bomb" in the making. The sudden jump in non-payment underscores that many borrowers weren't financially or logistically prepared to resume payments after the long break. One immediate consequence of the delinquency spike is a hit to borrower credit scores. For millions of Americans, the end of forbearance has flipped their credit reports from clean to blemished virtually overnight. As I wrote in a previous post on Forbes, student loan borrowers nationwide are seeing their credit scores plunging, sometimes by as much as 200 points. Given the importance of a strong credit profile for everything from mortgages to employment, such steep drops carry real repercussions. Crucially, these negative marks only started to be reported in early 2025, after the 90-day grace window ended. According to Vantage Score, an estimated 2.3 million borrowers could see their scores fall below 600 – the subprime threshold – as new delinquencies are recorded. 'According to data from Credit Karma, borrowers who formerly had the highest credit scores have seen the largest hits to their credit," notes Preston Cooper, a senior fellow at the American Enterprise Institute. 'Delinquent student loan borrowers with credit scores exceeding 720 saw an average 137-point drop in their scores, compared to a 71-point drop for borrowers with a credit score below 600." Some borrowers were caught off guard by the credit fallout, and the resumption of reporting was jarring. As Bandebo of VantageScore notes, "a credit score is like a reputation; it takes a long time to build but can fall very quickly." Unfortunately for millions of borrowers, that fall is happening all at once. The surge in delinquencies is not just a statistic – it carries serious personal and financial consequences. Missing payments for 90 days or more typically means a loan is considered in serious delinquency, and after 270 days, federal student loans enter default. Defaults can unleash a cascade of penalties. As the Pew Charitable Trusts warns, "failure to repay student loans can have serious financial consequences for borrowers, including collection fees; wage garnishment; money being withheld from income tax refunds, Social Security, and other federal payments; damage to credit scores; and even ineligibility for other aid programs." In other words, delinquency, and default can haunt borrowers long after the missed payments. Already, collections activity is poised to resume. Without a court order, the federal government can seize up to 15% of a defaulted borrower's paycheck via administrative wage garnishment. It can also claim tax refunds or deny new federal student aid. These tools were largely suspended during the payment pause, but with defaults now rising, borrowers may face these harsh remedies again. Credit score damage, however, remains the most immediate fallout. A dramatically lower credit score can raise the cost of borrowing from credit cards to car loans, making it harder to qualify for housing. The stakes are high for borrowers hoping to buy homes, finance vehicles, or even pass employer credit checks or apartment rental applications. Some 2.1 million borrowers who started in the prime credit tier could lose their prime status after a student loan delinquency hits, potentially locking them out of the best interest rates or any new credit. The return of student loan payments was always likely to be bumpy, but the sheer scale of delinquency now emerging could raise red flags. The New York Fed analysts caution that the impact of these delinquencies could ripple through the credit system: "If missed payments come largely from those with lower [credit] scores, the aggregate impact will be smaller… However, if prime and superprime borrowers fell behind on student loan payments, the aggregate drop in credit standing… could be much larger". Early data suggest that delinquencies span across credit tiers, not just among the most financially distressed. For now, the numbers continue to tick up. Over 9 million borrowers are already marked past-due, and that tally could grow as more missed payments are reported through June 2025. The situation marks a startling reversal from the pandemic pause when distressed student loan borrowers saw their credit scores improve while payments were on hold. The coming months will reveal whether this delinquency surge is a temporary shock or the start of a more persistent student debt crisis. Either way, the message for student loan borrowers is clear: ignoring student loan bills has consequences once again, and they can be severe.
