Omnia Family Wealth in Nasdaq: Will Student Loan Payments Spark a Recession?

The time for student loan repayments, which were temporarily paused during the pandemic, to resume is almost here, with loan interest restarting on September 1, 2023, and payments due in October. According to economist David Rosenberg, this resumption and the Federal Reserve’s aggressive rate hike campaign will fuel a consumer-led recession. But is this really the case?

While this development might create a financial strain for numerous American students, Nasdaq spoke with Michael Wagner, co-founder and chief operating officer of Omnia Family Wealth, to find out what this development might mean for the broader economy.

“I do not believe that student loan payments will spark a recession. At most, they would be one part of a larger trend of people becoming more mindful of their discretionary spending,” says Wagner, adding that he is not convinced that we are even headed into a recession in the immediate future.

“If the job market were much weaker, I might be more inclined to say that the resumption of student loan payments would be a drag on the economy, but I do not think it would push us over the edge into a recession,” he explains.

Clarifying this stance, Wagner states that he believes that the economy will experience a soft landing. As long as employment figures stay robust in the face of elevated inflation, he believes the U.S. should be able to avoid a major disturbance to its economy.

“The talk of a potential recession may be causing some people to reduce their discretionary spending, but we may also be seeing a rolling recovery,” he tells the publication. “This means that some sectors of the economy, such as tech, may be feeling the effects of a recession, while other sectors, such as healthcare, may be doing well.”

In fact, Wagner takes his dissenting opinion one step further to say that at present, with the economy still moving along and the job market looking strong, “to me that now might actually be a good time to resume student loan payments.”

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