As you’ve probably heard, SCOTUS just axed President Biden’s student loan relief plan. The plan would have allowed eligible borrowers to cancel their student debt up to $20,000. Let’s step back and put the current student loan crisis in perspective:

According to a Congressional Research Service Report, as of 2022, 45 million people have an outstanding student loan, amounting to a little over 20% of working-age Americans. While calling them student loans may make you think this group is made up of primarily young, recent graduates, 85% of borrowers are over the age of 25 and 20% are over the age of 50. When shifting to loan balances, a whopping 65% of borrowers have balances over $10,000 and over 9 million Americans have student loan balances that shoot well above $50,000. With this data it’s not hard to see how Biden’s, now unconstitutional, relief plan could have halved this population of borrowers practically overnight. On top of already exorbitant principal balances, most borrowers were forced into predatory interest terms that often compounded daily. It’s not hard to find stories of people who’s loan balances have quite literally doubled from what they originally owed. For many who have voluntarily paid down their debts during the payment freeze, their balances are higher than when they started payments due to predatory interest. While Americans were granted a reprieve from paying their student loans for several years due to emergency pandemic legislation, SCOTUS’s recent decision has ended this détente. Financial institutions have been studying the economic effects of resuming student loan payments and let’s be honest… the math just isn’t mathing.

Economic Hardship on the Horizon

British multinational bank Barclays has released it’s findings and estimates that resuming student loan payments “will be an aggregate headwind to US consumer spending of $15.8bn a month.” That’s driven primarily by what they deduce is an average monthly payment of $390 per borrower. They also put it another way: their conservative estimate is that resuming student loan payments is expected to consume 8-9% of the average borrower’s salary.

Now let’s take a moment to zoom back out: in a time where layoffs are still rolling through all industries, prices are staying high despite easing inflation and real wages have stagnated… where the hell is this money going to come from?

The economic precarity of the average American in 2023 cannot be understated. Less than half of Americans have enough emergency savings to cover three months of essential expenses and just over 20% have no emergency savings whatsoever. As a result, Americans are increasingly turning to credit cards to pay for basic necessities like groceries, leading our country’s collective credit card debt to hit an all-time high. (And skyrocketing interest rates are only making this debt more and more expensive for people to pay off.) So it’s not all that surprising that there’s a burgeoning movement among borrowers to ignore loan repayments all together.

Resuming Repayment? Make Me.

Of course, the slightest suggestion of defaulting on loan payments is met with a laundry list of possible punishments. Once the loan is in default, the government can collect on the loan through a variety of ways like garnishing wages, seizing a tax refund, or holding on to the borrower’s Social Security benefits. While at first these sound like strong sticks to keep borrowers in line, these threats are toothless when aimed at people who have an inability to pay. Seizing money form poor folks doesn’t do the government any good as those people are likely to turn right back to the government for welfare assistance. The uptick in economic hardship will likely lead to increased enrollments to programs like SNAP and Medicaid as more Americans will need help taking care of basic expenses like groceries and healthcare.

The government could turn their back on these borrowers and prevent them from qualifying for welfare programs but that would just spill the problems of poverty further out into public. Garnishing wages will likely lead families to go hungry or forego medical care, which will only lead to higher healthcare costs in the longterm. Others may fall behind on rent and become homeless which often leads to joblessness as it’s unbelievably difficult to continue working when you don’t have a home. (In addition, you quite literally can’t apply to most jobs without an address to list on a job application.)

Simply put, imposing this type of economic hardship on a wide swath of Americans doesn’t really help anyone (and may, in fact, hurt everyone.) Some borrowers will be forced to endure the economic, psychological and physical burdens of poverty. Those who default on their loans will likely become dependent on government assistance as their income is taken away from them. And everyone, especially corporations, will have to deal with the fact that nearly a quarter of the entire working-age population will be forced to spend less money. That means cancelling streaming subscriptions, less food deliveries, fewer flights and hotel stays, and just an all around reduction in spending on anything that’s not considered a necessity.

Personal Disclaimer: I was lucky enough to attend university without ever having to take out a single student loan, largely thanks to my mother’s savings (thanks mom!) and institutional grant money from my university that lowered my cost to attend drastically. I care deeply about the cancellation of student loans despite the fact that I would not directly benefit from this relief as I believe all Americans should have access to higher education, regardless of their financial situation.