Need to Know: There’s another looming cliff — the end of the student-loan repayment moratorium

by | Mar 27, 2023 | Stock Market

Is the banking crisis over? Well, famous last words and all that, but in the early hours of Monday things are looking better: no bank collapsed over the weekend, SVB has a new owner, and even Deutsche Bank
shares are trading higher. Or maybe not. There’s still the issue of commercial property, which accounts for 40% of all loans made by banks outside the top 25 by assets, according to Capital Economics.

“In a worst case scenario it’s possible that a ‘doom loop’ develops between smaller banks and commercial property, in which concerns about the health of these banks leads to deposit flight, which causes banks to call in commercial real estate loans, which then accelerates a downturn in a sector that forms a key part of its asset base, which intensifies concerns about the health of the banks and thus completes the vicious cycle,” the firm warns. And Thomas Simons, money market economist at Jefferies, says there’s another worry on the horizon: the looming end of the student loan repayment moratorium. Student loan payments will have to resume by the end of August, or possibly earlier depending on a Supreme Court decision, meaning 45 million people will have to start paying loans again. Related: SoFi CEO Anthony Noto on suing over student-loan payment pause: ‘I’m also protecting our shareholders’ Citing New York Fed data, he says the average student loan payment for a borrower not in deferment was $393 per month — about 1% of spending, depending on which metric is used. “This may …

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