10/31/2023
In this edition: town names that are ready for Halloween and potential student loan repayment habits.
Fuel Up! 🚀
Consumer Activity Buoys Strong Q3 GDP
On the backs of consumers who weren’t afraid to spend, the United States’ Q3 GDP rose 4.9%, its highest QoQ growth since Q4 2021. Consumer spending specifically rose 4% in Q3 after only rising 0.8% in Q2 of this year – all this in the face of high interest rates and the continued inflation fight.
Changes In The 1977 Community Reinvestment Act (CRA)
U.S. regulators have approved changes to ensure there is more oversight of online banks in low-income areas, with the goal of modernizing fair lending standards. The changes will take effect in 2026!
Towns That Are Spooky Year-Round 👻
Everyone could use a trip to Truth or Consequences, New Mexico, from time to time. But in case a trip to New Mexico isn’t in the cards, you could check out one of the two Sleepy Hollows the U.S. has to offer.
One glaring omission: You can’t have a spooky-sounding town list without Hell, Michigan.
The Survey of Consumer Expectations Household Spending Survey, conducted by the Federal Reserve Bank of New York, indicated that the resumption of student loan repayments will have a negligible impact on the overall health of the economy.
The study, which analyzed the estimates of roughly 1,000 survey respondents, found borrowers reentering student loan repayment only expect to reduce their monthly consumption by $56. This would result in a 0.1% decrease in monthly spending compared to August 2023 personal consumption expenditures (PCE).
This may seem surprising, given there are over 43 million federal student loan borrowers with an average student loan debt of $37,718.
The anticipated small decrease in spending is likely at least in part due to the introduction of the Saving on a Valuable Education (SAVE) income-driven repayment (IDR) option.
This IDR option lowers payments for low-income borrowers. The survey results indicated that overall, IDR participation is expected to grow from 50% to 58% of borrowers, with 78% of first-time re-payers intending to enroll.
Another surprising insight coming out of the survey is that women are more than twice as likely as men to believe they will miss a debt payment in the 3 months following the resumption of student loan payments. Other demographic areas showing differences in expected likelihood of missing payments are split by education, household income and repayment status pre-pandemic.
While it’s important to remember that these findings are self-reported with a small sample size, the results show that overall, the reintroduction of student loan repayments are not expected to significantly impact the overall health of the economy. The Fed has remained steadfast in its intent to reduce inflation to 2%, and a resilient economy reinforces the implication that we should expect rates to stay higher for longer.
