Past due: Student loan borrowers under pressure

Summary

Marketplace Morning Report - Episode: "Past due: Student loan borrowers under pressure"
Release Date: March 28, 2025
Host: David Brancaccio

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Overview

In this episode of the Marketplace Morning Report, host David Brancaccio delves into pressing financial issues affecting Americans, including recent Senate decisions on bank overdraft fees, a surge in home loan applications, the impact of tariffs on the auto industry, and escalating pressures on student loan borrowers. Through insightful discussions and expert analyses, the episode provides listeners with a comprehensive understanding of the current economic landscape and its implications for everyday consumers.

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1. Senate Upholds High Overdraft Fees

Key Points:

• The U.S. Senate voted to allow banks to continue charging high overdraft fees, which currently average around $35 per occurrence.
• This decision reverses the Biden administration's efforts to cap these fees at $5, aligning congressional action with the banking industry's stance.

Notable Quotes:

• Novo Safo (Marketplace Reporter) at [00:27]: "The Consumer Bankers Association applauded the Senate's action, saying it would particularly benefit consumers who lack access to credit and count on overdraft protections to pay for necessities."

Discussion: The Senate's narrow 52-48 vote, predominantly along party lines with some bipartisan dissent, signifies a significant setback for consumer protection advocates. The decision solidifies the banking industry's position against the Consumer Financial Protection Bureau's (CFPB) regulation aimed at eliminating so-called "junk fees." Experts highlight that this move could have long-term implications, as any reversal of this policy would require explicit congressional authorization, making future regulatory efforts more challenging.

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2. Surge in Home Loan Applications Despite Mixed Signals

Key Points:

• Bank of America reported an 80% increase in mortgage applications from January to March, signaling heightened activity in the housing market.
• Mortgage rates experienced a slight decline from around 7% in January to approximately 6.5% in March.

Notable Quotes:

• Samantha Fields (Marketplace Reporter) at [01:38]: "Alan Seelenbinder from Bank of America says in this market, even that small dip can make a difference."

Discussion: The uptick in mortgage applications is attributed to both the minor decrease in interest rates and a modest rise in housing inventory. However, conflicting data presents a nuanced picture. While mortgage applications rose, pending home sales fell by nearly 4% compared to the previous year. Daniel Hale, Chief Economist at Realtor.com, suggests that the increase in mortgage applications may be more reflective of borrowers shifting from cash purchases rather than an overall rise in home buying activity. Chris Mayer from Columbia Business School echoes this sentiment, indicating that the housing market isn't showing robust signs of recovery.

Economic Implications: The slower-than-expected spring selling season points to perennial affordability challenges and broader economic uncertainty. Potential homebuyers are grappling with fluctuating housing prices and economic policies, contributing to hesitancy in the market.

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3. Tariffs Weigh Down Auto Industry Stocks

Key Points:

• Major auto manufacturers, including GM, Ford, and Toyota, saw significant stock declines following announcements related to upcoming tariffs.
• President Trump indicated that higher tariffs would cover all imported cars, trucks, and parts, leading to uncertainty in the sector.

Notable Quotes:

• David Brancaccio at [02:56]: "GM stock is down another 4.10 of a percent in pre-market trading now."

Discussion: The imposition of higher tariffs on imported vehicles and parts has led to investor concerns, resulting in notable drops in stock prices for major automotive companies. The Wall Street Journal reported that President Trump advised auto CEOs against raising prices despite the tariffs, suggesting that any costs incurred from these tariffs would likely be absorbed by shareholders rather than passed on to consumers. The potential for punitive measures against non-compliant companies heightens market anxiety, potentially leading to further declines in the auto sector.

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4. Student Loan Borrowers Face Increasing Pressures

Key Points:

• As pandemic-era relief measures expire, nearly 10 million student loan borrowers have fallen past due on their payments.
• The total U.S. student loan debt remains relatively stable at $1.6 trillion, partly due to reduced higher education enrollment and prior forgiveness programs.

Notable Quotes:

• Betsy Mayott (Institute of Student Loan Advisors) at [05:20]: "The 90-day delinquency numbers are not just a canary in that coal mine. That's a whole flock of birds in that coal mine. So we have a big concern about future default."
• Mike Pearce (Executive Director, Student Loan Protection Center) at [05:54]: "We expect that to be double or triple. In the best case scenario here, it's possible that 5 million student loan borrowers could default this year."

Discussion: The cessation of pandemic-related interest pauses has exposed vulnerabilities among student loan borrowers. Without the temporary suspension of payments and interest accrual, many borrowers are struggling to keep up, leading to a spike in delinquencies. This situation is compounded by recent executive orders from President Trump that restrict debt forgiveness programs and pause affordable repayment plans, further increasing the likelihood of defaults.

Expert Insights:

• Dalia Jimenez from UC Irvine emphasizes that the pandemic-era interest pause was a significant factor in maintaining current debt levels, and its removal is a primary driver of the recent delinquency surge.
• Betsy Mayott warns that the increasing delinquency rates are indicative of a broader crisis, with potential long-term repercussions for borrowers' credit health and financial stability.
• Mike Pearce projects a troubling future, where up to 5 million borrowers could default within the year, signaling a looming crisis in the student loan sector.

Economic and Social Implications: Rising student loan defaults could have far-reaching effects, including diminished credit scores for millions, increased strain on financial institutions, and broader economic impacts as consumer spending potentially decreases. Additionally, the stress on borrowers may lead to increased demand for credit counseling and financial assistance programs.

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Conclusion

This episode of the Marketplace Morning Report provides a multifaceted examination of current economic challenges, from regulatory decisions affecting everyday banking fees to significant shifts in the housing and automotive markets. Most notably, the episode highlights the growing crisis among student loan borrowers as pandemic-era relief measures wind down, painting a concerning picture for future financial stability. Through expert analysis and detailed reporting, listeners gain valuable insights into the interconnectedness of these economic factors and their potential impact on personal finances and broader market trends.

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Credits:
Executive Producer: Kelly Silvera
Digital Producers: Jarrett Dang and Dylan Miettinen
Engineers: Jay Sebold and Brian Allison
Reporting: Novo Safo, Samantha Fields, Kaylee Wells, Betsy Mayott, Mike Pearce

Produced in Los Angeles by David Brancaccio.
Marketplace Morning Report from APM American Public Media.

Transcript

[David Brancaccio]

Bank fees, home loans, student loans, we've got you covered this morning. I'm David Brancaccio in Los Angeles. The Senate has voted to let banks keep charging more for overdrafts. They're typically around $35 per occurrence. But the Biden administration had moved to push the fees down to as little as $5. But the banking industry opposed this and Congress could take the bank's view Marketplaces Novo Safo has more.

[Novo Safo]

The vote in The Senate was 52 to 48 along party lines, with Republican Senator Josh Hawley joining Democrats in opposition. The Consumer Bankers association applauded the Senate's action, saying it would particularly benefit consumers who lack access to credit and count on overdraft protections to pay for necessities. The rule at issue came about as part of the Biden administration's campaign against so called junk fees. The Consumer Financial Protection Bureau said banks were charging customers far more than what it cost to provide overdraft protections. The House will also have to vote to overturn and President Trump would have to sign the resolution. The CFPB issued the overdraft fee limit during the waning days of the Biden administration. That gave Congress a 60 day window to reverse the regulation. Any reversal would be permanent. A future administration would not be allowed to issue a similar rule without specific congressional authorization. I'm Novisafa for Marketplace.

[David Brancaccio]

Applications for home loans are way up at bank of America. The number of people trying for mortgages is up 80% January through now. I mean, tis the season as people, people with families buy in winter, spring to close ahead of the next school year. But it's not all seasonal. Here's Marketplace's Samantha Fields.

[Samantha Fields]

In January, mortgage rates were hovering around 7%. By March, they'd come down closer to six and a half percent. Alan Seelenbinder @ Bank of America says in this market, even that small dip can make a difference.

[Novo Safo]

The slight change in interest rates and also the slight increase in housing inventory.

[Samantha Fields]

He says both helped drive up mortgage applications recently. Daniel Hale, Chief [e-mail] says it's too early to say whether that's a good sign for the housing market. Other data is mixed. Pending home sales, for example, are down almost 4% compared to a year ago. Mortgage applications are up, but pending home sales are down. That might suggest that more buyers in the market today are using mortgages as opposed to cash buyers, not necessarily that more people are buying either way. Chris Mayer at Columbia Business School says there's not much to indicate the market is really picking up.

[David Brancaccio]

Overall spring selling market is kind of a bit slower than people had kind of hoped it would be.

[Samantha Fields]

Some of that is perennial affordability issues. But he says some of it is uncertainty.

[David Brancaccio]

The nervousness in the economy, the nervousness about policy. There's some of that that is hitting.

[Samantha Fields]

The housing market with headlines about car prices and other things may be spiking soon, he says. People may be wondering is now the moment to buy a home? I'm Samantha Fields for Marketplace, checking the numbers.

[David Brancaccio]

Dow S&P and Nasdaq futures are all down in the 0.002% range. Stock and car companies are coming off a bad day with GM down 7.4% yesterday, Ford down 4%, Toyota fell 2.8%. Some of this is President Trump saying his higher tariffs next week will cover all imported cars, trucks and parts. It's also an article in the Wall Street Journal revealing that earlier this month Trump told auto CEOs they'd better not prices given the tariffs. If this were backed up by punishment of some sort, the price difference would largely come out of the pockets of stockholders. GM stock is down another 4.10 of a percent in pre market trading now. Student loan balances and repayments remain stable through the end of last year. That's the top line on a report from the New York Federal Reserve. But there may be turbulence ahead with the end of some relief programs that started during the worst of the pandemic. Marketplace's Kaylee Wells reports there are a few reasons.

[Kaylee Wells]

The total $1.6 trillion in US student loan debt hasn't gone up much. Biden era forgiveness programs is one. A decline in higher education enrollment is another. But Dalia Jimenez, who runs the student loan law initiative at UC Irvine, says the biggest reason was the pandemic era interest pause.

[Betsy Mayott]

For three plus years, student loan borrowers who had federal loans didn't have to make any payments on their student loans and their balances weren't increasing because interest wasn't being assessed.

[Kaylee Wells]

But that relief ended at the end of September. Now nearly 10 million student loan borrowers are past due.

[Betsy Mayott]

This isn't bad news relative to, I think the really bad news that are.

[Kaylee Wells]

Coming because once you're 90 days late on a loan payment, it can hurt your credit score. At that point, the debt is reported as delinquent. The Fed says that based on these numbers, delinquency rates of 90 days or more will likely be higher than they were before the pandemic.

[Betsy Mayott]

I've had a lot of borrowers be like, oh my goodness, my credit just dropped and I wasn't paying any attention to my student loans until I saw my credit score dropped.

[Kaylee Wells]

Betsy Mayott founded the Institute of Student Loan Advisors. She says the delinquency spike is serious.

[Betsy Mayott]

The 90 day delinquency numbers are not just a canary in that coal mine. That's a whole flock of birds in that coal mine. So we have a big concern about future default.

[Kaylee Wells]

Default is what comes after delinquency. For most loans, that happens after it's delinquent for 270 days. The loan can get sent to collections and the government can garnish Social Security benefits or wages. It's way worse. And that rate wasn't great before the pandemic either.

[Mike Pearce]

Before the pandemic, a student loan borrower defaulted every 26 seconds. More than a million people defaulted on a loan every year.

[Kaylee Wells]

Mike Pearce is executive director of the Student Loan Protection Center. He points to two recent executive orders from President Trump. One restricts a program that forgives debt for workers in nonprofit and public sector jobs after a decade of service. The other pauses affordable repayment plans. These two moves are not reflected in this data, and Pierce says they will make even more borrowers default.

[Mike Pearce]

We expect that to be double or triple. In the best case scenario here, it's possible that 5 million student loan borrowers could default this year.

[Kaylee Wells]

It takes about nine months to default on a student loan, so those notices likely won't start showing up until later this year. I'm Kayleigh Wells for Marketplace, and here's.

[David Brancaccio]

A number expressing the widening chasm between the US And Canada as a trade war unfolds. Travel Weekly is reporting that bookings of Canada US plane tickets are down 70% through this coming summer. Summer. Our executive producer is Kelly Silvera. Our digital producers are Jarrett Dang and Dylan Miettinen. Our engineers are Jay Sebold and Brian Allison. In Los Angeles, I'm David Brancaccio. It's the Marketplace Morning Report from APM American Public Media.