Here in New York, it is officially "graduation gowns on the subway" season, and it is marvelous. For a few weeks each year, commuters get to be momentarily distracted by the sight of joyous youths sheathed in NYU's royal purple, Columbia's stately pale blue, and ... whatever color CUNY is that's probably just as nice but costs a lot less.
That's nice, we say to ourselves as we look up from our phones. Those kids have their whole lives ahead of them. And then the train jerks and stalls and we go back to our little games and our emails.
As nice as those collegiate milestones are to witness, the reality of the debt burden many of those students took on to earn that cap and gown is one the US has yet to resolve. And this week we got a reminder of how the weight of that burden is about to hit millions of Americans' wallets.
On Tuesday, Education Secretary Miguel Cardona confirmed that the pause on student loan repayments is set to end "no later than June 30."
ICYMI: Borrowers have been mostly off the hook for their student loans over past three years thanks to a policy — extended eight times — aimed at helping people through the pandemic.
As my colleague Katie Lobosco writes, the end-of-June guideline on repayment is tied to the Supreme Court's expected ruling sometime in the next two months on President Biden's sweeping one-time student loan forgiveness program, which would allow 44 million Americans to erase up to $20,000 in federal student loans debt.
The forgiveness plan is popular, especially (obviously), among college-educated people who've been hamstrung by a financial burden that many of them agreed to take on when they were teenagers. But it's far from certain whether the Supreme Court will allow it to stand. And it's not clear what the Biden administration will do if the court rules against it.
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Policymakers and economists are fixated on the looming debt ceiling X-date, which may come as early as June 1, and threatens all manner of financial pain. But some are looking ahead at the resumption of student loan payments as the next fiscal cliff that could tip the US into a recession or exacerbate the downturn by crimping consumers' ability to, uh, consume things.
Thomas Simons, an economist at Jefferies, told Marketwatch in March that the average student loan payment for a borrower not in deferment was $393 a month. "This may sound like a modest hit," he said. "But the impact on income is very similar to the tax increases associated with 'the Fiscal Cliff' of 2013, which was followed by a noticeable slowdown in consumption."
The repayment timeline could also collide with a lingering banking crisis and a particularly tough job market for students hoping to land in tech, media, finance or other typically higher-paying white-collar industries.
RELATED: Senate Majority Leader Chuck Schumer urged leading bank executives to push members of Congress to take the threat of a disastrous default off the table.
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