Student-Loan Borrowers Hit by Steep Drop in Credit Scores

Summary

WSJ What’s News: Episode Summary – "Student-Loan Borrowers Hit by Steep Drop in Credit Scores" Release Date: February 27, 2025

The latest episode of WSJ What’s News, hosted by Alex Osolo from The Wall Street Journal, delves into several pressing issues shaping the economic and political landscape. This summary captures the key discussions, insights, and conclusions from the episode, structured into clear sections for easy comprehension.

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1. President Trump's Tariff Announcements and Market Reactions

Overview: The episode opens with President Donald Trump’s announcement of another 10% tariff on Chinese imports, escalating the ongoing trade tensions between the U.S. and China. This move specifically targets products related to China’s involvement in the fentanyl trade, effectively doubling the earlier tariff imposition.

Key Points:

• Tariff Details: The new tariffs are set to take effect on Tuesday, adding to the initial 10% increase declared earlier in the month.
• Additional Tariffs Threat: Trump also reiterated his threat to impose a 25% tariff on products from Canada and Mexico, despite previously hinting at potential delays.
• Chinese Response: A spokesperson from the Chinese Embassy in Washington defended China’s efforts in combating drug trafficking, rejecting the U.S. tariffs as unjustified.

Notable Quote:

“President Trump said today that he expected any Ukraine Russia peace deal would hold, but that his approach toward talks involving the Kremlin will be 'trust and verify.'” – Alex Osolo [01:15]

Market Impact: The markets reacted negatively to the tariff announcements, with major indices experiencing declines:

• Dow Jones Industrial Average: Fell approximately 0.5%.
• S&P 500: Dropped around 1.6%.
• Nasdaq: Decreased by about 2.8%.

Insight: The episode highlights the precarious balance between political maneuvers and economic stability, emphasizing how tariff policies can swiftly influence market sentiments.

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2. Student-Loan Borrowers Face Credit Score Declines

Overview: A significant portion of the episode focuses on the challenges faced by federal student-loan borrowers as pandemic-era relief measures expire. With the end of the 90-day payment grace period in October, many borrowers have not resumed payments, leading to a notable drop in their credit scores.

Key Points:

• Delayed Payments: Approximately 43% of borrowers who owed payments have yet to resume them, raising concerns about widespread credit score impacts.
• Lack of Communication: Many borrowers reported insufficient communication from their loan servicers, leaving them unaware of the repayment resumption.
• Economic Ripple Effects: The decline in credit scores jeopardizes borrowers' abilities to achieve major financial milestones such as homeownership and new car purchases.

Notable Quotes:

“People felt like they were finally getting their head above water… and then they get this ding on their credit report that could infringe on their possibility to obtain a home or get a car.” – Oyen Adedoyan [05:10]

“Credit reports are things that take a long time to build up. Some of these blemishes on your credit report could stay on for up to seven years.” – Oyen Adedoyan [05:25]

Discussion with Oyen Adedoyan: Personal finance reporter Oyen Adedoyan elaborates on the systemic issues leading to the credit score drops:

• Delayed Impact: Unlike credit card debts, student loans do not immediately affect credit scores until they are 90 days late.
• Generational Impact: The affected generation already grapples with achieving the American dream, with rising costs and inflation exacerbating financial strain.

Conclusion: The segment underscores the urgent need for improved communication from loan servicers and potential policy interventions to mitigate long-term financial damage to borrowers.

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3. The Strong Dollar’s Impact on U.S. Companies with Global Operations

Overview: Kristin Broughton, a corporate finance reporter for the Wall Street Journal, discusses how the current strength of the U.S. dollar poses challenges for American companies operating internationally.

Key Points:

• Exchange Rate Effects: A strong dollar means that when foreign earnings are converted back to USD, the reported revenues decrease, adversely affecting financial statements.
• Affected Companies: Notable companies impacted include E.L.F. Beauty, Medtronic, and Rockwell Automation, spanning industries from cosmetics to medical devices and industrial automation.
• Mitigation Strategies: Companies are employing hedging techniques such as forward contracts and options to manage currency risks. Medtronic is also implementing FX-adjusted pricing and sales incentives in certain markets.

Notable Quote:

“This is a headache when it comes to financial reporting. So when they report their earnings every quarter to investors, when the company translates the sales that they generated abroad back into the dollar, the earnings abroad take a hit.” – Kristin Broughton [07:35]

Economic Drivers: The strong dollar is attributed to several factors:

• Interest Rate Policies: Higher interest rates in the U.S. attract foreign investment, strengthening the dollar.
• Tariff Policies: Ongoing tariffs contribute to currency appreciation.
• Economic Strength: The robust U.S. economy compared to other global economies supports a stronger dollar outlook.

Outlook: Analysts anticipate the dollar to maintain its strength in the near term, posing continued challenges for U.S. companies with significant international operations.

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4. Larry Ellison’s Agri-Tech Startup Stumbles

Overview: The episode briefly touches upon Larry Ellison's significant investment in Sensei Ag, an agriculture startup aimed at revolutionizing farming through advanced technology. Despite the half-billion-dollar infusion and ambitious goals, the company has underperformed in terms of technology adoption and crop yields.

Key Points:

• Investment Purpose: Sensei Ag was envisioned as a cutting-edge venture to develop nutrient-rich and tastier crops using innovative agricultural techniques.
• Current Status: The startup has yet to realize significant technological breakthroughs, with crop yields falling short of projections.
• Future Prospects: Co-founder Dr. David Agus emphasizes that the venture remains in the R&D phase, indicating that profitability is not the immediate focus.

Notable Quote:

“This is an R and D process they're working on perfecting the technology that could end up changing the face of agriculture.” – Tom Doton [10:29]

Insight: The segment highlights the high-risk nature of agricultural innovation and the patience required for R&D-intensive projects to yield tangible results.

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5. The Rise of Beer Sommeliers

Overview: In a lighter segment, the podcast explores the niche profession of beer sommeliers, highlighting the growing sophistication in beer pairing similar to wine.

Key Points:

• Profession Rarity: There are only 28 certified beer sommeliers worldwide, known as master cicerones.
• Certification Process: The rigorous training involves extensive examinations, including essays, blind tastings, and oral exams.
• Career Pathways: Certified individuals typically engage in beer education events and collaborate with brewing companies to develop new brews.

Notable Quote:

“After all that, they can expect to get a job not in a restaurant, but running beer education events and developing new brews at a beer company.” – Alex Osolo [10:50]

Conclusion: The segment emphasizes the evolving landscape of beverage expertise and the parallel development of specialized roles within the industry.

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Production Credits

The episode was produced by Pierre Bienname and Anthony Banci, with Michael Kosmides serving as the supervising producer.

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Final Thoughts: This episode of WSJ What’s News provides a comprehensive overview of crucial economic and financial developments, from international trade policies and currency impacts to personal finance challenges and innovative industry niches. By blending in-depth analysis with expert interviews, the podcast offers listeners valuable insights into the factors influencing today’s global and domestic markets.

Transcript

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[Alex Osolo]

President Trump plans another 10% tariff on products from China. Plus, Americans have to pay their federal student loans. Again, not doing it comes with consequences.

[Oyen Adedoyan]

This can have ripple effects throughout the economy. It puts things like homeownership at risk or getting a new car further out of reach for late payers. And so folks who are in this position told me that this just kind of felt like a nail in the coffin.

[Alex Osolo]

And for some US Companies, the strong dollar is kind of a nuisance. It's Thursday, February 27th. I'm Alex Osolo for the Wall Street Journal. This is the PM edition of what's News, the top headlines and business stories that move the world today. President Trump has announced an additional 10% tariff on imports from China over its role in the fentanyl trade. The move doubles up on the previous 10% of additional tariffs the president placed on Chinese products earlier this month. The new tariffs are set to go into effect on Tuesday. In a post today on his Truth Social platform, Trump also reinforced his threat to impose 25% tariffs on products from Canada and Mexico, a day after hinting that they could be delayed again. A spokesman at the Chinese Embassy in Washington defended China's record in fighting drug trafficking.

[Kristin Broughton]

Foreign.

[Alex Osolo]

MARKETS Today stocks slipped after President Trump made fresh tariff threats and investors remained unimpressed by Nvidia's forecast beating results after yesterday's close. The Dow fell about half a percent, The S&P 500 dipped roughly 1.6%, and the Nasdaq dropped about 2.8%. President Trump said today that he expected any Ukraine Russia peace deal would hold, but that his approach toward talks involving the Kremlin will be quot trust and verify. Asked whether he believed Russian President Vladimir Putin would negotiate in good faith, Trump said that he has confidence that if there is a deal, it's going to hold. The remarks, made while sitting next to British Prime Minister Keir Starmer in the Oval Office showcase the president's confidence in his own deal making skills. At a press conference after the meeting with Starmer Trump said he's working for a ceasefire in Ukraine.

[Kristin Broughton]

The next step we're making is toward a very achievable cease fire. We hope that that can happen quickly because thousands of young people in this case, we're not talking about Americans, we're talking about Ukrainians and Russians are being killed every week.

[Alex Osolo]

US Officials have said it is premature to decide on the American role in any peacekeeping force until an agreement to stop the fighting is reached. For people with federal student loans, the payment clock is ticking again. In October, pandemic era relief on federal student loans ended kicking off the 90 day window. People have to make payments before their credit scores take a hit, and it seems that many of them haven't. According to credit score provider VantageScore, about 43% of borrowers who owe payments haven't resumed making them. To talk more about the impact, I'm joined now by personal finance reporter Oyen Adedoyan. Oyen, why is this happening? Did millions of people just like forget that payments have restarted?

[Oyen Adedoyan]

No, not exactly. One of the biggest thing that borrowers who are experiencing this have told me is that they feel like they didn't receive sufficient communication from their student loan servicers. Student loan delinquencies are really interesting because unlike credit card debt, they don't really start to ping you or hit your credit report until 90 days late. So if you are 30 days late or 60 days late, you don't really hear anything. And at a time like this, when student loans have been paused for so long, people didn't realize that this on ramp period ended in October. So now, you know, everyone from, you know, folks who are maybe freshly graduated from college to people who are in their 40s trying to get another house are seeing this in their credit report and kind of freaking out.

[Alex Osolo]

What is the impact if you happen to be one of those among the 43% who has not made your payment yet?

[Oyen Adedoyan]

This can have ripple effects throughout the economy. It puts things like homeownership at risk or getting a new car further out of reach for late payers. Lower scores could also mean lower credit card limits and higher rates. One of the borrowers that I spoke with told me that she was just getting ready to request a higher limit on her credit card before this happened and her credit score had dropped over 100 points. So, you know, credit companies are going to see that and tighten their lending.

[Alex Osolo]

This is a generation for whom things like home buying kind of feels off limits. Is merely forgetting an individual payment going to have really that big an impact on some of those big economic items.

[Oyen Adedoyan]

For them, you hit it exactly right. This is a generation of people who are already feeling like the American dream is out of reach for them. Everything just seems to be getting more expensive with the lasting effects of inflation. And so folks who are in this position told me that this just kind of felt like a nail in the coffin. People felt like they were finally getting their head above water and some of these things saved up for a down payment, things like that. And then they get this ding on their credit report that could infringe on their possibility to obtain a home or get a car or just further their adult lives. And credit reports are things that take a long time to build up. Some of these blemishes on your credit report could stay on for up to seven years. So this can be a really long lasting negative impact for people.

[Alex Osolo]

That was WSJ personal finance reporter Oyen Adedoyan. Thank you so much, Oyin.

[Oyen Adedoyan]

Thank you.

[Alex Osolo]

Coming up, why for some US Companies, a strong dollar can be a big pain. That's after the break.

[Kristin Broughton]

Foreign.

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[Alex Osolo]

For Americans traveling abroad, a strong dollar is often a good thing. But for US Companies with global operations, a strong dollar can actually be a bit of a headache. And right now, the dollar is really strong. The WSJ Dollar Index, which tracks the dollar against a bunch of other currencies, rose 6% during the four. And though that's down a bit from its latest peak, as of yesterday, the dollar is up 2.4% from a year earlier. Kristen Broughton, who covers corporate finance for the Journal, is here to tell us more. So, Kristin, break this down a bit for me. Why can a strong dollar make life difficult for some US Companies, even if they're posting strong sales abroad?

[Kristin Broughton]

Really, this is a headache when it comes to financial reporting. So when they report their earnings every quarter to investors, when the company translates the sales that they generated abroad back into the dollar, the earnings abroad take a hit.

[Alex Osolo]

What are some of the companies that are affected by this?

[Kristin Broughton]

We spoke to three for the story. E L F Beauty, a cosmetics company. They recorded their largest ever hit from Conversion of British pounds to the US dollar. Medtronic is another a medical device company that's technically based in Ireland, but has its headquarters in Minneapolis. And then Rockwell Automation, an industrial automation company also based in the Midwest. So it cuts across industries, it cuts across companies. The through line here is if they have operations abroad.

[Alex Osolo]

So these companies are dealing with this issue primarily when they're reporting earnings. What are they doing about this?

[Kristin Broughton]

Yeah, there really is a question facing companies on, you know, how much they can control because this is just a translation impact. It doesn't reflect their underlying performance. And some companies choose just to take the hit and explain the charge to investors. So that's a course that many companies take. There are things that companies can do. Companies can hedge so they can enter into forward contracts where they agree to a certain exchange rate at a given moment in time to just smooth out the impact of some of those currency hits. They can also use options as another form of hedging. Some of the companies that we spoke to are doing some new things. Medtronic, the Minneapolis based medical device maker, they have decided to use FX adjusted pricing in certain emerging markets and also set their sales incentives for some of their employees using FX adjusted metrics on that as well. It is a financial reporting issue, but not something that's reflective of the underlying operations of companies.

[Alex Osolo]

What is driving the strength of the dollar and what is the kind of outlook here?

[Kristin Broughton]

The dollar has been strong for a couple of years. A lot of the impact is related to interest rate policy, the prospect of greater tariffs which is beginning to come to fruition, and then just the overall strength of the US economy. Compared other economies abroad, analysts I spoke to expect the dollar to remain strong. There's nothing to suggest at the moment that that would change course.

[Alex Osolo]

That was WSJ reporter Kristin Broughton. Thank you so much, Kristin.

[Kristin Broughton]

Thank you.

[Alex Osolo]

Over the past eight years, Oracle co founder Larry Ellison has poured half a billion dollars into an agriculture startup called Sensei Ag. Ellison and his Sensei Ag co founder, celebrity Dr. David Agus, envisioned the farm as an ambitious tech venture that would use new techniques to grow tastier nutrient rich crops. So far, though, it's mostly been a bust. The company is using little of the revolutionary technology and its crop yields have been far lower than promised. WSJ reporter Tom Doton told our Tech News Briefing podcast about where the company might go from here.

[Tom Doton]

According to Dr. Agus, there is no directive from Ellison to turn a profit on this thing yet. This is an R and D process they're working on Perfecting the technology that could end up changing the face of agriculture and R and D is a very capital intensive process. And so it's hard to put a price tag on that. And so even though they are selling their lettuce and tomatoes on Hawaii and their lettuce on the east coast of the US and in Canada, they're not really talking too much these days about turning a profit on these things.

[Alex Osolo]

To hear more from Tom, check out today's episode of our Tech News Briefing podcast. And finally, close your eyes and come with me on a little journey. You're out at a nice restaurant for dinner. You choose something delicious off the menu. The day's special, full of fresh ingredients. Yum. You ask the sommelier for a recommendation for a wine with delicate notes that would pair perfectly with your meal. Okay, now would you ask for a similar recommendation for a beer? Turns out there is such a thing as a beer sommelier, and there are only 28 of them in the world. Like in wine, a master cicerone studies for years to take a certification exam. The test for the Highest level involves 16 essays, eight blind beer tasting panels, and 12 oral exams over two days. And after all that, they can expect to get a job not in a restaurant, but running beer education events and developing new brews at a beer company, Cheers. And that's what's news for this Thursday afternoon. Today's show is produced by Pierre Bienname and Anthony Banci with supervising producer Michael Kosmides. I'm Alex Osola for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.