Higher prices for rental cars, airplane tickets and uncooked beef roasts have economists and consumers wondering whether we’re living through the start of an inflationary period.
This group of borrowers is “lucky,” Smetters said because, “you’re going to be paying back those loans with weaker purchasing power dollars than what you borrowed.” Put another way: the money these borrowers are using to repay their loans buys less stuff than it did when they took the loan out. “Your asset,” in this case your labor or human capital, “is essentially keeping up with inflation,” Smetters said. “But your liabilities,” or your student debt, “are getting wiped out, not completely, but still getting reduced by inflation.”
When economists think of inflation, they assume that when prices go up, wages will go up too. But when consumers, workers and borrowers think about it, they often don’t take into account that their wages may increase, Schreger said, which means they’re likely only internalizing the increase in prices.
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