Overlooked risks? Former Fed economist: This will lead to massive household bankruptcies

An overlooked risk in the U.S. could emerge this Sunday, with former Fed economists saying it could lead to massive household bankruptcies...

A former Fed economist said some borrowers will face a unique set of challenges when student loan repayments resume this Sunday.

"It will hurt an overlooked group." Danielle DiMartino Booth, a former researcher at the Dallas Fed, said "it was millennials who left the city when the pandemic hit."

Booth explained that millennials earning between $100,000 and $225,000, who decided at the start of the pandemic to take advantage of record-breaking low mortgage rates, buy a home and settle in the suburbs, will now face an additional financial burden. However, they will be the group that will not be able to receive any student loan forgiveness.

"They bought a house, they paid their mortgage for the first time, they paid their car loan for the first time, and they're still Googling property taxes because they want to know who the bad guys are," Booth said. "Their homeowners insurance is going up ... They are the ones who shocked the whole country and they started repaying their loans in August because they knew that the interest would resume calculation in September".

Booth continued, "You're going to see a surge in family bankruptcies, and it's going to be a massive explosion."

Millennials, and younger Gen Z, already face a mountain of money burdens, including inflation, health care costs, and rising housing and car costs. Student loans will become another financial headache for those trying to balance housing costs.

Conversely, student loans will also deter these young borrowers from buying homes in the most unaffordable housing market in U.S. history, risks that may be overlooked.