An overlooked group of borrowers will be hit hard as student loan repayments resume, former Fed economist says

An overlooked group of borrowers will be hit hard as student loan repayments resume, former Fed economist says
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  • Millennials with homes are an overlooked group in the student loan conversation, one economist argues.
  • Some millennials moved to the suburbs during the pandemic to take advantage of low mortgage rates.

One group of borrowers will face a unique set of challenges in the face of a return to student loan debt repayments, which resume Sunday, a former Fed economist told The Wall Street Journal.

"It's going to hurt a cohort we don't talk about very much. It's millennials who left the city when the pandemic hit," Danielle DiMartino Booth, a former researcher at the Dallas Fed, told the Journal's Dion Rabouin.

Booth explained that millennials making between $100,000 and $225,000 who decided to take advantage of record-breaking low mortgage rates at the pandemic's beginning, buy homes, and settle in the suburbs will now have an extra financial burden. However, they will be the group that cannot access any student loan relief.

"They bought a house, they have a mortgage payment for the first time, they have a car payment for the first time, they're Googling property tax because they want to know who the bad guy is," Booth said. "Their homeowners insurance is going up … They're the ones who surprised the country and started repaying them in August because they knew that interest was going to resume in September. The people who cannot avoid repaying them, that begins in October."


Booth continued: "You're going to see household bankruptcies go through the roof. It's going to be biblical."

Millennials, as well as their younger Gen Z counterparts, are already facing a mountain of money burdens, including inflation, healthcare costs, and ever-increasing housing and car costs. Student loans will become an additional financial headache for those balancing their housing costs.

Conversely, student loan payments will also prevent younger borrowers from being able to afford homes in the least affordable housing market in US history.