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good morning I saw this article and I I wanted to bring it to you I wanted to go over some stuff that uh is somewhat timely this is October of 2023 and the student loan repayments have uh begun this month and I think it's going to dramatically impact the economy in a negative way um but let's go through it so here's the first article I saw it says student loan bills resume for 40 million Americans how it could shake the economy well that sounds ominous right now with me being in real estate I'm kind of more concerned on the real estate side than anywhere else but I mean the larger economy does matter right so I was going through this article and the first thing that I I saw is it says the pandemic ER pause on federal student loan payments and Sunday leaving as many as 40 million Americans on the hook for a new monthly bill that they haven't needed to make in more than 3 years so for the last 3 years no one's had to pay their student loans economists caution that the impact on households in the economy remains largely uncertain as there's little precedent for borrowers getting such a long break from their loan bills but as the Biden Administration ramps up repayment of the more than $1.7 trillion in federal student loan debt retailers and lenders are bracing for a hit so look I'm not just on the record I I feel bad that people have to pay back student loans and I feel like student loans have been predatory for a long time um I think that the cost of higher education is out of control and ridiculous and uh I don't wish that anybody being in debt from school I think that they should be able to pay for it um out of their earnings uh but that is a concept similar to housing that has uh has has gone away you I mean most schools you're not going to be be able to you know pay your way through in cash I mean it's just it's just the way things have become and they're not better that's not a that's not a better thing that you know we always think about the United States getting better at this and that it's not better that we have uh saddled these students with all this debt um it's not better that we have to have young couples and even um you know middle-aged people can't afford a house uh this is not a good thing this is not something positive it says financial services firm Jeff is warning that there could be a significant risk to consumer spending ahead because the resumption of student loan payments it recently surve about 600 consumers with student debt finding that half their borrowers are very concerned about meeting all of their expenses around 70% of borrowers plan to postpone Big Ticket purchases come October meanwhile many people with student loan debt plan to cut back on their spending on clothing travel and food now look the typical response is oh too bad you can't afford a new um thing at L lemon right or you know you can't afford to go eat it can't go to can't go to Florida for a spring break it's going to be terrible but that's not it's not the right response also the idea that um if if we've gone through the last couple years here with the lowest interest rates and a favorable housing market to be able to afford something at least until it got out of hand um and these people are saying that they're going to postpone a large uh purchase well what probably one of the bigger purchases in your life is that of a home a mortgage uh so this this could be an issue I mean we talk about buyer demand all the time well buyer demand will shrink quite quite quickly when um people are stuck making a monthly payment that they haven't had a made for the last three years it says Scott mushkin founder and CEO of R5 Capital consumer research consult consulting firm estimates that starting in October around 7 billion to 8 billion per month will be re reallocated to student loan payments which you know when we're talking about trillions of dollars due it doesn't seem like much 7 billion to 8 billion per month then we have this in quote it says the payment shocks will be significant the payment shocks will be significant for borrowers and lenders says Li Pagel or Pagel we'll go with whatever senior vice president and head of TransUnion consumer lending business many student loan bers have taken on additional debt during the payment pause which I believe that I I believe that many many young people took on a new home purchase during this three-year um situation this three-year moratorium on uh on and I think that I think I think that a lot of people used the co money that they got in addition to not having to pay their loans to go crazy in the economy now I'm not I I don't you I'm not looking down on these people okay I'm just saying I I think it's a very high likelihood that this is going on um and it [Music] says nearly a third of people with student debt put a balance on a new credit card over the last three years if it found around 15% took out a personal loan these additional credit products mean additional monthly payments which may pose added challenges the typical student loan bill is around $350 a month but at least 10% of borrowers have a payment of over $700 a month now look if you're a young person and you have a student loan payment of over $700 a month and you've bought a used or new car and your car payment is over $1,000 a month and you're looking for shelter home and your rent your combined rent or home mortgage is $1,500 to $2,000 a month or more I mean you've got to be making an awful lot of money coming out of college and I just don't see this as as I don't think this is sustainable at all the Consumer Financial Protection Bureau has also found that student loan borrowers have fallen deeper into debt during the pandemic with more than a half of the borrowers holding higher monthly debt related expenses than they did before the pause on bills began March of 2020 now to me that is absolutely a perfect storm you didn't even have to pay for the last three years and yet you got behind more than one in 13 borrowers are currently behind on other payment obligations these borrowers May might unable to make payments on their student loans if they are already missing payments on their credit cards or auto loans well what if they've got a mortgage so I looked at this article here this came out of housing now Mark xandy and I don't get along just so you know uh he's a he's a he's an analysis or he he provides analysis for I think it's I think it's Moody's but um anyway says according or it says Federal loan payments resuming on October 1st will negatively affect consumer loan asset quality including credit card Auto and to a lesser extent Residential Mortgages however the overall effect will be modest according to mood Moody's Analytics report now I don't think that it's going to be modest I think it is going to Rattle the housing market in total 24 million borrowers whose payments were suspended since the onset of Co P the co pandemic will owe an average of $275 per month when federal student rep student loan payments resume per Moody's Analytics estimates now look we we know that some people do have $300 a month payments coming due other people have over $700 a month as the interest burden on student debt increases we expect the additional financial obligation will mostly strain borrowers ability to

pay that that is not good right when you have to choose what you're going to to be able to pay on your bills every month it's a it's a very I mean have being a small business owner and knowing the life that I that I have to live and knowing what it's like when you do have to like kind of prioritize what you're going to spend your money on per month or what bills you're going to pay uh it's not a good feeling it drags on you tremendously although student loans are non-dischargeable in bankruptcy their priority in consumer's debt repayment hierarchy is low relative to other major cons Consumer Debt classes so it says and let's let's continue with this it says borrowers are much more likely to prioritize servicing mortgage or auto loans and even credit cards since they stand to lose their house or car or access to credit or credit card rewards if they fall behind on such Consumer loans the argument here is is that they don't care this is the argument people don't care about paying their student student loans back they would much rather spend it on their house or on a car payment or on their credit cards so they will uh it it's not a big deal that is their hypothesis I think they're absolutely wrong um from my time as a as a uh as a property manager I noticed that people uh who could pay the rent always did the people that couldn't pay the rent couldn't pay the rent because they literally didn't have the money it's not like they went out of their way to say oh I'm not going to pay the rent this month it's like uh my job ended or I've got you know an unexpected medical expense or something where if I had the money I definitely would pay you but I don't have the money for Mortgage Debt the share of Performing loans that were 30 or more days to linkoln from less than 2% in Q3 2021 to about 2.5% in uh Q2 2023 uh credit card delinquencies jumped from 4% to about 7% in the same period meanwhile auto loans Rose from about 5 to 7% now look I don't I don't predict a crash in the in the housing market I expect stagnation in the housing market for many many years um now I mean that's not a positive thing I don't I don't think they've made it too expensive to live and I think that's terrible I uh I I have very much compassion for those who are going to get stuck in this uh endless debt Loop cycle I think it's absolutely ridiculous um I'm I'm frightened by um by what what you're doing to the younger population by loading them with debt before they even get to be old enough to know what debt is I mean it's ridiculous um do I have a solution for this no no I don't I mean housing has gotten really really expensive um so with that I do think it will cause some issues in the housing market I I do think people generally want to pay all their bills and all their debts and I think that when you add the student loan repayments into an already levered Market let's just take one example let's see this let's say a 20 a 22y old saw on Tic Tac that you can be a millionaire landlord overnight as long as you uh buy short-term rentals airbnbs and we know that the um the cost has been um going up dramatically and the payments but say they got in late so they've and and then you know on on on Tik Tok then all you have to do is keep buying units right you just keep buying houses uh short-term rentals and and things are going to be great well so say you bought one or you bought two okay and now all of a sudden the short-term rentals the economy itself is uh starting to show signs of weakness people are spending Less on vacations and so all of a sudden your your Airbnb isn't isn't profitable you have had to ever pay student loans since you got out of school you already have a car payment I mean it's not hard to see where this could be

going not good I'm not I'm not happy for these people I feel bad but anyway that's what I have for you today uh thank you for watching thank you for listening I'll catch you on the next one