Local economists warn that Long Island's economy might be significantly impacted by the Trump administration's decision to resume student loan collections. Starting May 5, involuntary collections will be enforced, causing potential wage garnishments and withholding of government payments for those in default. The region's higher percentage of college graduates contributes to a greater number of student debt holders, raising concerns about the timing given current economic uncertainties and potential recession, according to experts like John Rizzo. The federal payment suspension since March 2020 had lowered delinquency rates, a trend that could reverse with the new collections.
Long Island's economy could suffer greatly from the resumption of student loan collections, particularly as the region has a higher proportion of degree holders.
The decision to begin involuntary collection through the Treasury will withhold tax refunds, salaries, and federal benefits from borrowers with past-due debts.
John Rizzo stated that with existing economic challenges, resuming collections is ill-timed, adding more financial strain to the region's economy.
The federal suspension of payments since March 2020 had reduced delinquency rates below 1%, but the return to collections could disrupt this trend.
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