Today, researchers from the Center for Microeconomic Data released the 2022 Student Loan Update, which contains statistics summarizing who holds student loans along with characteristics of these balances. To compute these statistics, we use the New York Fed Consumer Credit Panel (CCP), a nationally representative 5 percent sample of all U.S. adults with an Equifax credit report. For this update, we focus on individuals with a student loan on their credit report. The update is linked here and shared in the student debt section of the Center for Microeconomic Data’s website. In this post, we highlight three facts from the current student loan landscape.

Andreas I. Mueller, Johannes Spinnewijn, and Giorgio Topa

In addition to its terrible human toll, the COVID-19 pandemic has also caused massive disruption in labor markets. In the United States alone, more than 25 million people lost their jobs during the first wave of the pandemic. While many have returned to work since then, a large number have remained unemployed for a prolonged period of time. The number of long-term unemployed (defined as those jobless for twenty-seven weeks or longer) has surged from 1.1 million to almost 4 million. An important concern is that the long-term unemployed face worse employment prospects, but prior work has provided no consensus on what drives this decline in employment prospects. This post discusses new findings using data on elicited beliefs of unemployed job seekers to uncover the forces driving long-term unemployment.

We model the United States macroeconomic and financial sectors using a formal and unified econometric model. Through shrinkage, our Bayesian VAR provides a flexible framework for modeling the dynamics of thirty-one variables, many of which are tracked by the Federal Reserve. We show how the model can be used for understanding key features of the data, constructing counterfactual scenarios, and evaluating the macroeconomic environment both retrospectively and prospectively. Considering its breadth and versatility for policy applications, our modeling approach gives a reliable, reduced form alternative to structural models.

Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw

Homeownership has historically been an important means for Americans to accumulate wealth—in fact, at more than $15 trillion, housing equity accounts for 16 percent of total U.S. household wealth. Consequently, the U.S. homeownership cycle has triggered large swings in Americans’ net worth over the past twenty-five years. However, the nature of those swings has varied significantly by race and ethnicity, with different demographic groups tracing distinct trajectories through the housing boom, the foreclosure crisis, and the subsequent recovery. Here, we look into the dynamics underlying these divergences and explore some potential explanations.

A quick look at the 2016 Survey of Consumer Finances highlights key patterns and disparities in U.S. homeownership. For the median home-owning American household, home equity is their most important asset. This is especially...

A critical risk during the COVID-19 pandemic has been the possibility of the hospital system becoming overwhelmed. COVID-19 not only has killed nearly 2 percent of people with confirmed infections but causes many more who contract it to develop severe complications that are potentially fatal if not treated in an intensive care unit (ICU). As ICU capacity is based on typical needs for intensive care before the pandemic, a surge of COVID-related ICU patients may leave no room for individuals requiring intensive care for other reasons—such as heart attacks—or may exceed the total ICU capacity to treat even COVID-19 patients. In this post, we investigate the extent to which members of different racial and ethnic groups faced different levels of hospital system stress during the “third wave” of COVID-19 in the winter of 2021, which, as the largest wave to hit the United States, briefly brought intensive care units around the country to the point of being overwhelmed. We find that...

In the map below, we look at the forbearance participation rates of all states, beyond Texas. Texas and Oklahoma rank the highest, both having been affected by the storms: it is unlikely that this reflects forbearances associated with the CARES Act and more likely are weather related. The map reveals substantial geographic differences in the participation in pandemic mortgage forbearance programs, with states in the Southeast having the highest lingering forbearance rate, excepting the Carolinas. This dispersion likely captures a combination of the severity of the pandemic’s local economic impact and differences in the borrowers’ awareness, interest in, and access to these programs.

Forbearance on debt repayment was a key provision of the CARES Act, legislation intended to combat the widespread economic losses stemming from the COVID-19 pandemic. This pause on required payments for federally guaranteed mortgages and student loans has provided temporary relief to those affected by the COVID-19 pandemic, and servicers of nonfederal loans often provided forbearances or other relief on request as well. Here, using a special survey section fielded with the August 2020 Survey of Consumer Expectations, we aim to understand who benefitted from these provisions. Specifically, were there differences by age, race, income, and educational background? Did individuals who suffered job or income losses benefit differentially? Did renters receive more or less nonhousing debt relief than homeowners? Answers to these questions are not only key for understanding the economic recovery and implications for inequality and equitable growth, they can provide important insight...

Marco Cipriani and Gabriele La Spada In March 2020, U.S. prime money market funds (MMFs) suffered heavy outflows following the liquidity shock triggered by the COVID-19 crisis. In a previous post, we characterized the run on the prime MMF industry as a whole and the role of the liquidity facility established by the Federal Reserve (the Money Market Mutual Fund Liquidity Facility) in stemming the run. In this post, based on a recent Staff Report, we contrast the behaviors of retail and institutional investors during the run and explain the different reasons behind the run. Retail and Institutional Investors during the COVID-19 Run of March 2020 The chart below shows cumulative percentage outflows from prime MMFs offered to retail and institutional investors from January to April 2020. Institutional funds suffered larger outflows than retail ones, with outflows for institutional funds reaching 29 percent by March 26 versus only 7 percent for retail funds. The...

Matthew Higgins and Thomas Klitgaard Household saving has soared in the United States and other high-income countries during the COVID-19 pandemic, despite widespread declines in wages and other private income streams. This post highlights the role of fiscal policy in driving the saving boom, through stepped-up social benefits and other income support measures. Indeed, in the United States, Japan, and Canada, government assistance has pushed household income above its pre-pandemic trajectory. We argue that the larger scale of government assistance in these countries helps explain why saving in these countries has risen more strongly than in the euro area. Going forward, how freely households spend out of their newly accumulated savings will be a key factor determining the strength of economic recoveries. The pandemic sent consumer spending into retreat, helping drive up saving Consumer spending plummeted in the United States and other high-income economies with...

Donghoon Lee and Joseph Tracy Efforts in the spring of 2020 to contain the spread of COVID-19 resulted in a sharp contraction in U.S. economic growth and an unprecedented, rapid rise in unemployment. While the first wave of the pandemic slowed the spring housing market, home sales rebounded sharply over the rest of the year, with strong gains in house prices. Given the rising house prices and continuing high unemployment, concerns arose that COVID-19 may have negatively affected first-time homebuyers. Using a new and more accurate measure of first-time homebuyers, we find that these buyers have not been adversely affected by the pandemic. At the same time, gains from lower mortgage rates have gone to existing homeowners and not to households purchasing their first home. The strong performance of the housing market during 2020 is reflected both in terms of the volume of home purchases as well as the growth in house prices. The chart below shows total purchase...

Rajashri Chakrabarti, Sebastian Heise, Davide Melcangi, Maxim Pinkovskiy, and Giorgio Topa In our previous post, we looked at the effects that the reopening of state economies across the United States has had on consumer spending. We found a significant effect of reopening, especially regarding spending in restaurants and bars as well as in the healthcare sector. In this companion post, we focus specifically on small businesses, using two different sources of high-frequency data, and we employ a methodology similar to that of our previous post to study the effects of reopening on small business activity along various dimensions. Our results indicate that, much like for consumer spending, reopenings had positive and significant effects in the short term on small business revenues, the number of active merchants, and the number of employees working in small businesses. It is important to stress that we are not expressing any views in this post on the normative...

Rajashri Chakrabarti, Sebastian Heise, Davide Melcangi, Maxim Pinkovskiy, and Giorgio Topa The spread of COVID-19 in the United States has had a profound impact on economic activity. Beginning in March, most states imposed severe restrictions on households and businesses to slow the spread of the virus. This was followed by a gradual loosening of restrictions (“reopening”) starting in April. As the virus has re-emerged, a number of states have taken steps to reverse the reopening of their economies. For example, Texas and Florida closed bars again in June, and Arizona additionally paused operations of gyms and movie theatres. Taken together, these measures raise the question of how closures and reopenings affect consumer spending. In this post, we investigate how much consumer spending increased after the reopenings. It is important to stress that we are not expressing any views on the normative question of whether, when, or how states should loosen or tighten...

William Chen, Marco Del Negro, Michele Lenza, Giorgio Primiceri, and Andrea Tambalotti U.S. inflation used to rise during economic booms, as businesses charged higher prices to cope with increases in wages and other costs. When the economy cooled and joblessness rose, inflation declined. This pattern changed around 1990. Since then, U.S. inflation has been remarkably stable, even though economic activity and unemployment have continued to fluctuate. For example, during the Great Recession unemployment reached 10 percent, but inflation barely dipped below 1 percent. More recently, even with unemployment as low as 3.5 percent, inflation remained stuck under 2 percent. What explains the emergence of this disconnect between inflation and unemployment? This is the question we address in “What’s Up with the Phillips Curve?,” published recently in Brookings Papers on Economic Activity. Inflation Has Been Less Responsive to Unemployment since 1990 To illustrate this...

Jaison R. Abel, Jason Bram, Richard Deitz, and Jonathan Hastings The New York Fed today unveiled a set of charts that track COVID-19 cases in the Federal Reserve’s Second District, which includes New York, Northern New Jersey, Fairfield County Connecticut, Puerto Rico, and the U.S. Virgin Islands. These charts, available in the Indicators section of our Regional Economy webpage, are updated daily with the latest data on confirmed COVID-19 cases from The New York Times, which compiles information from state and local health agencies. Case counts are measured as the seven-day average of new reported daily cases and are presented on a per capita basis to allow comparisons to the nation and between communities in the region. Recent data indicate that after spiking to extraordinary levels in April, new cases have remained relatively low and stable in and around New York City. Cases didn’t reach nearly as high in upstate New York, and have held fairly low in recent...

Michael Fleming In a recent Liberty Street Economics post, we showed that the newly reintroduced 20-year bond trades less than other on-the-run Treasury securities and has similar liquidity to that of the more interest?rate?sensitive 30-year bond. Is it common for newly introduced securities to trade less and with higher transaction costs, and how does security trading behavior change over time? In this post, we look back at how liquidity evolved for earlier reintroductions of Treasury securities so as to gain insight into how liquidity might evolve for the new 20-year bond. New 20-Year Bond Trades Less than Other Securities In May 2020, the Treasury Department reintroduced the 20-year bond, which it had last sold in 1986. The new 20-year bond trades less than other on-the-run Treasury securities, with daily trading volume on the BrokerTec platform in late May averaging $2.4 billion, versus $30.8 billion for the 10-year note and $10.1 billion for the...

Antoine Martin, James J. McAndrews, Ali Palida, and David Skeie Since 2008, the Federal Reserve has dramatically increased the supply of bank reserves, effectively adopting a floor system for monetary policy implementation. Since then, the behavior of short-term money market rates has been at times puzzling. In particular, short-term rates have been surprisingly firm in recent months, despite the large increase in reserves by the Fed as a part of its response to the coronavirus pandemic. In this post, we provide evidence that both the supply of reserves and the supply of short-term Treasury securities are important factors for explaining short-term rates. Money Market Rates in a Floor System During the 2007-09 crisis the Fed sought to stabilize financial markets by greatly increasing the supply of reserves through lending facilities, subsequently, post-crisis, shifting to large-scale asset purchases to stimulate the economy. The Fed was able to maintain control...

Elizabeth Caviness and Asani Sarkar This post is part of an ongoing series on the credit and liquidity facilities established by the Federal Reserve to support households and businesses during the COVID-19 outbreak. The asset-backed securities (ABS) market, by supporting loans to households and businesses such as credit card and student loans, is essential to the flow of credit in the economy. The COVID-19 pandemic disrupted this market, resulting in higher interest rate spreads on ABS and halting the issuance of most ABS asset classes. On March 23, 2020, the Fed established the Term Asset-Backed Securities Loan Facility (TALF) to facilitate the issuance of ABS backed by a variety of loan types including student loans, credit card loans, and loans guaranteed by the Small Business Administration (SBA), thereby re-enabling the flow of credit to households and businesses of all sizes. In this post, we describe how the TALF works, its impact on market conditions,...

Andrew F. Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw Total household debt was roughly flat in the second quarter of 2020, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. But, for the first time, the dynamics in household debt balances were driven primarily by a sharp decline in credit card balances, as consumer spending plummeted. In an effort to gain greater clarity, the New York Fed and the Federal Reserve System have acquired monthly updates for the New York Fed Consumer Credit Panel, based on anonymized Equifax credit report data. We’ve been closely watching the data as they roll in, and here we present six key takeaways on the consumer balance sheet in the months since COVID-19 hit. 1. Growth in Household debt balances has stalled—mainly due to a decline in credit card balances. Mortgages crept up, and student loans and auto loans remained...

Matthew Higgins and Thomas Klitgaard It may be hard to remember given the pandemic, but trade tensions between the United States and China eased in January 2020 with the inking of the Phase One agreement. Under the deal, China committed to a massive increase in its purchases of U.S. goods and services, with targets set for various types of products. At the time of the pact, the U.S. economy was operating near full capacity, and any increase in U.S. exports stemming from the pact would likely have resulted in only a small boost to growth. The environment is now starkly different, with the U.S. economy operating far below potential. While the promised increase in Chinese purchases seems unlikely to be achieved, any appreciable increase in exports from the agreement is now more likely to deliver a meaningful boost to the economy. A Cooling of Trade Tensions with Phase One The Phase One agreement, signed by the United States and China in January 2020, covers a...

Daniel Lewis, Karel Mertens, and James Stock At the end of March, we launched the Weekly Economic Index (WEI) as a tool to monitor changes in real activity during the pandemic. The rapid deterioration in economic conditions made it important to assess developments as soon as possible, rather than waiting for monthly and quarterly data to be released. In this post, we describe how the WEI has measured the effects of COVID-19. So far in 2020, the WEI has synthesized daily and weekly data to measure GDP growth remarkably well. We document this performance, and we offer some guidance on evaluating the WEI’s forecasting abilities based on 2020 data and interpreting WEI updates and revisions. Understanding the WEI As detailed in our March post (and associated Staff Report), the WEI is the first principal component of a collection of daily and weekly series covering consumer behavior, labor market conditions, and industrial production. It is scaled to track four-quarter...

Kevin Clark, Antoine Martin, and Tim Wessel The repo market faced extraordinary liquidity strains in March amid broader financial market volatility related to the coronavirus pandemic and uncertainty regarding the path of policy. The strains were particularly severe in the term repo market, in which borrowing and lending arrangements are for longer than one business day. In this post, we discuss the causes of the liquidity disruptions that arose in the repo market as well as the Federal Reserve’s actions to address those disruptions. Overnight and Term Repo Markets As described in this Staff Report, the repo market serves in part to transfer liquidity from cash investors to cash borrowers, with securities dealers acting as intermediaries. In addition, dealers typically finance a substantial portion of their securities inventory through repo. A number of investors, the largest of which are money market mutual funds (MMFs), lend cash to dealers. Other major cash...

Woojung Park, Julia Gouny, and Haoyang Liu On March 23, the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York initiated plans to purchase agency commercial mortgage-backed securities (agency CMBS) at the direction of the FOMC in order to support smooth market functioning of the markets for these securities. This post describes the deterioration in market conditions that led to agency CMBS purchases, how the Desk conducts these operations, and how market functioning has improved since the start of the purchase operations. The Agency CMBS Market Agency CMBS are primarily securitizations of multifamily residential properties, typically apartment buildings or complexes with five or more rental units. The multifamily real estate market accounts for a significant portion of households in the United States, providing housing to about one-half of the nation’s 44 million rental households. As opposed to single-family houses that are often...

Jaison R. Abel and Richard Deitz Many students are reconsidering their decision to go to college in the fall due to the coronavirus pandemic. Indeed, college enrollment is expected to be down sharply as a growing number of would-be college students consider taking a gap year. In part, this pullback reflects concerns about health and safety if colleges resume in-person classes, or missing out on the “college experience” if classes are held online. In addition, poor labor market prospects due to staggeringly high unemployment may be leading some to conclude that college is no longer worth it in this economic environment. In this post, we provide an economic perspective on going to college during the pandemic. Perhaps surprisingly, we find that the return to college actually increases, largely because the opportunity cost of attending school has declined. Furthermore, we show there are sizeable hidden costs to delaying college that erode the value of a college degree,...

Paul Goldsmith-Pinkham, Maxim Pinkovskiy, and Jacob Wallace Consumer financial strain varies enormously across the United States. One pernicious source of financial strain is debt in collections—debt that is more than 120 days past due and that has been sold to a collections agency. In Massachusetts, the average person has less than $100 in collections debt, while in Texas, the average person has more than $300. In this post, we discuss our recent staff report that exploits the fact that virtually all Americans are universally covered by Medicare at 65 to show that health insurance not only improves financial health on average, but also is a major explanation for the heterogeneity in financial strain across the country. We find that Medicare affects different parts of the United States differently and plays a particularly important role in improving financial health in the least advantaged areas. People make many lifestyle changes in their 60s—they typically...

Rajashri Chakrabarti, William Nober, and Wilbert van der Klaauw In an October post, we showed the effect of college tuition subsidies in the form of merit-based financial aid on educational and student debt outcomes, documenting a large decline in student debt for those eligible for merit aid. Additionally, we reported striking differences in these outcomes by demographics, as proxied by neighborhood race and income. In this follow-up post, we examine whether and how this effect passes through to other debt and consumption outcomes, namely those related to autos, homes, and credit cards. We find that access to merit aid leads to an immediate but temporary increase in eligible individuals’ consumption in these categories. The increase is followed by a decline in consumption and a reduction in total debt of these types in the longer term. Importantly, there are marked differences in these consumption and debt patterns across income and race groups. Our analysis...