The resumption of student loan repayments in October, following a period of forbearance, has had a less severe economic impact than initially feared, according to a team of economists at JPMorgan led by Michael Feroli. The team noticed an initial surge in repayments, which then moderated, indicating the emergence of a new trend.
This trend represents an annual rate of approximately $75 billion or 0.2%-0.3% of GDP, a substantial increase from the $10 billion noted during the moratorium period. If consumer spending were to decrease directly in line with these repayments, it could potentially affect real GDP growth by 1% within a quarter.
Despite this potential impact, economists predict a less significant economic drag due to the current positive state of household balance sheets. This observation suggests that families may be better equipped to handle the increased financial burden than initially expected, thus mitigating some of the potential negative effects on the wider economy.
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