Many student loan borrowers are in for a big, bad surprise in 2025

Published On Dec 14, 2024, 10:28 AM

The article discusses the upcoming resumption of federal collections on defaulted student loans in 2025, after a hiatus during the pandemic. Approximately 5.6 million borrowers, many of whom are low-income and may not fully understand their loan terms, are at risk of wage garnishments and other collections measures. The Biden administration paused collections in 2023 but plans to restart them next year. The newly elected president, Donald Trump, may need to clarify his administration's approach to handling student loan debt.

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With the resumption of collections on defaulted student loans beginning in 2025, consumer spending among affected individuals may decrease as they will have to allocate funds to pay off debts or face financial penalties. This trend could negatively impact sectors reliant on discretionary spending by lower-income consumers. Companies in those sectors, particularly retail and consumer discretionary, may see a decline in sales. Investors should be cautious with stocks related to consumer spending in these sectors.

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