The past few years have been hell for American automakers. The profits are good, very good. Ford, General Motors and Stellantis have made $250 billion since 2013 and are expected to make another $32 billion by the end of the year. Economic Policy Research Institute. But just beyond the smooth sea of profits, dark clouds are looming over the Big Three. Student loan debt crisis.
We know that the auto industry has so much going on right now, but what will happen to the expansion of the auto industry? United Auto Workers strike And an uncertain future for both. EV and self-driving car,nevertheless, Student loan payments resumed Automakers should be panicking.
And before you cry, “I paid my loan!” Why should anyone get a pass! As you say.I’m pretty sure At least you have All interest paid will be refunded. Probably more. Our schools, which are nothing more than football palaces with libraries attached, should not be funded by taxes again. through Mortgage a teenager’s futures.But,he how it works Not the world we’re in now, but an ideal world. Wheather Rightly or wrongly, we must admit that these huge loan payments are draining an entire generation of economic powerhouses.
America’s already cash-strapped post-boomer generation is in many cases facing $1.569 trillion worth of hardship to their own governments. Auto loans recently overtook student loans as the largest debt owed by Americans outside of mortgages, at $1.582 trillion. wall street journal Report:
Some college students, who lost their jobs during the financial crisis and are seeking education or new training, took out large amounts of student loans starting in early 2010, and since then they have taken out more student loans than car loans.
However, the U.S. government froze payments and interest on federal student loans in preparation for the pandemic, and this emergency measure has now ended. Meanwhile, consumers bought cars at inflation-fueled prices. In June 2021, the inflation rate for new and used cars reached 20.4% and remained elevated until the second half of 2022.
There are currently some cracks appearing in the auto loan market. According to the news agency, the auto loan delinquency rate rose to a seasonally adjusted 3.59% in August, the highest level since April 2010, right after the financial crisis. Moody’s analysis.
Now that long-delayed student loan payments are coming due, this pressing issue is unlikely to help automakers. Between record price gouging and inflation, predatory rent hikes, two financial crises, and now the student loan crisis, America’s Millennials and Gen Z have little leeway, and the numbers are already alarming. I am behind on my car loan. in fact, People of that generation are reaching delinquency rates. not seen since the Great Recession, car news It was reported in the summer.
Car payments now average a whopping $730. 17% of your monthly car loan payment Although reaching four-digit levels, the average Millennial borrower pays about $547 a month, while Gen Z pays $429. experian data. This does not include car insurance, but This is also on the rise thanks to Natural disasters, Technical complexity of new cars, and good old inflation. According to , the average monthly student loan payment is about the same amount, about $503 per month. education data initiative. During the three-and-a-half year delay, many people have seen the purchasing power of their dollars shrink, effectively erasing all of the budget space for the full price of a new car.
That means some people will now have to choose between paying off their car or paying off their student loans.Since then 76% of Americans use a private car to commute to work, According to the World Economic Forum, a car is a must. Given the underfunded public transportation options in most of America, these people don’t have many options for commuting.
So what happens? Student loan delinquency leads to wage garnishment, leaving the borrower in exactly the same situation as before. With cars lasting longer than ever, many Millennials and Gen Z are reaching out to the used market more frequently as they live longer, but prices remain high. But the idea that “I could buy a car if I didn’t have to pay off my student loans” becomes more pronounced the longer the high-cost loans are allowed to persist. These are the people automakers need to replace as the aging boomer generation drives less as they age or simply retire from work.
According to the Detroit News, the push for student loan reform is entirely in the interests of the auto industry, which spent $80 million lobbying last year. Putting just a little bit of that political will behind student loan reform could keep the nation in the mood to buy cars. This allows automakers to protect their existing and future profits by giving a break to generations surviving on less wealth than their ancestors, who will need to continue commuting by car for decades to come. That’s what it is.
