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Investing.com -- Forty-one percent of student loan borrowers with payments due have missed at least one payment since October, and Morgan Stanley (NYSE:MS) warns that these delinquent borrowers are especially likely to fall behind on buy-now-pay-later and personal loans, putting those segments most at risk as stress ripples through the broader debt market.
“Payment resumption may pressure other delinquencies, as student borrowers are more likely to miss payments on other debt. BNPL & personal loans = most student loan exposure,” Morgan Stanley economists said in a recent note, highlighting the spillover risk to other forms of consumer credit.
The survey found that most missed payments stemmed from an inability to pay, but a significant share of borrowers cited unwillingness or confusion: 56% said they could not afford to pay, while 21% said they did not wish to pay, 13% were unaware a payment was due, and 8% did not know how to pay. Delinquency rates are sharply higher among lower-income borrowers, with 63% of those earning less than $50,000 missing at least one payment, compared to just 25% in the $100,000+ group.
Morgan Stanley expects the overall student loan delinquency rate to fall from the current 41% as some borrowers resume payments, but it is likely to remain elevated versus pre-pandemic levels of 16%.
The resumption of payments is also expected to dampen consumer spending, particularly among those with missed payments, who report lower savings and weaker spending intentions than those current on their loans.
Borrowers who have missed payments have just 2.1-2.6 months of savings on average, compared to 3.9 months for all student loan holders and 5.1 months for the general survey population.