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Transcript
- Lucas: So the headline this morning from the New York Fed is that household worries about finances are at their highest level since July of 2022. That's pretty striking, especially because we've been talking for weeks now about how real wage growth has finally turned positive. Luna: Right — wages are up, but people are still feeling squeezed. What gives? Lucas: Well, I think part of the answer is that not everyone is benefiting equally. But there's one specific area where the math has actually shifted in borrowers' favor for the first time in years: student loan payments. Luna: I was wondering when we'd get to that. The pandemic pause ended over a year ago now, and a lot of people had to restart payments at a higher cost of living. Lucas: Exactly. But here's the thing — if you look at average hourly earnings, they were $37.41 in April 2025, and by May 2026 they hit $37.50. That's only a 0.2% monthly gain, but over the past year, wages have risen about 4.3%. Luna: And that's outpacing inflation. Core CPI is running around 2.6% year-over-year, so real wages are growing. Lucas: Right. Now compare that to student loan payments. For most federal borrowers, their monthly payment is based on income from two years ago, under income-driven repayment plans. So if your income went up over the past year, your payment doesn't adjust immediately — there's a lag. Luna: But for borrowers on the standard ten-year plan, payments are fixed. So if you're on that plan, your payment hasn't changed, but your income has gone up. That's a real improvement in your budget. Lucas: That's the key insight. The median usual weekly earnings are now $1,204, up from $1,159 a year ago. That's about $45 more per week, or roughly $2,340 more per year. Meanwhile, the average federal student loan payment for a borrower with a bachelor's degree is about $350 a month. Luna: So the raise is bigger than the payment increase — if there even is one. Lucas: Precisely. And for borrowers on the new SAVE plan, which is still in legal limbo but available for some, payments are capped at 5% of discretionary income for undergraduate loans. For someone earning the median wage, that could be as low as $50 a month. So the gap between what you owe and what you earn has widened. Luna: But the New York Fed survey shows worries are still high. Why? Lucas: Because not everyone has federal loans. Private loans often have variable rates, and those have gone up with the Fed's rate hikes. Plus, borrowers who didn't recertify their income for IDR plans might have been pushed onto a standard plan with a higher payment. And of course, the average masks a lot of variation. Luna: And there's also the psychological factor. Even if the math works out, having a $350 monthly bill come back after a three-year pause feels like a shock. Lucas: Absolutely. But I want to focus on the structural shift here. For the first time since 2020, wage growth is clearly outstripping student loan payment growth for the typical borrower. The Employment Cost Index for wages rose to 177.5 in the first quarter of 2026, up from 176.23. That's a 0.7% quarterly gain. Luna: And the breakeven inflation rate on 10-year Treasuries is 2.35%, basically stable. So markets expect inflation to moderate, which means real wages could keep growing. Lucas: Yeah — if that holds, then the purchasing power of that raise isn't eroded. And for borrowers, that extra $45 a week could go to paying down principal faster, or just rebuilding savings. Luna: You know, it's funny — we talk so much about how inflation eats raises, and it does. But for a specific group, the student loan burden is actually getting lighter, relatively speaking. Lucas: It's a good reminder that aggregate numbers can miss these micro stories. The CPI is up, but your personal inflation rate might be lower if your biggest fixed cost hasn't changed. And for many borrowers, student loans are one of the few fixed costs that isn't rising. Luna: Unless you're renting. Rent has been a different story. Lucas: Right — and that's where the squeeze is real. But on the student loan front, there's a genuine bright spot. If you're on an income-driven plan, your payment adjusts with a lag, so you're getting a tailwind from inflation and wage growth. Luna: And if you're like me, just hearing that the math is working for some people is a nice change of pace. Lucas: Yeah, it is. And speaking of making the math work — if you're someone who follows this show and finds these breakdowns useful, it's partly because of listeners who chip in to keep us ad-free. If you've ever thought about supporting what we do, you can buy us a coffee at buy me a coffee dot com slash fexingo. No pressure, but it helps us keep digging into these angles. Luna: And we really appreciate it. Even a small contribution goes a long way. Lucas: Alright, back to the data. We've got the May jobs report coming out on Friday. The ADP report showed private payrolls grew by 122,000 in May, which was stronger than expected. That suggests wage growth might hold up. Luna: But long-term unemployment is still surging. We saw that headline from CNBC last week. So there's a split between people who are employed and seeing raises, and people who've been out of work for six months or more. Lucas: That's the other side of this. The strong wage numbers mask the fact that not everyone is participating in the recovery. The long-term unemployed often have student loans too, and their payments are still due. Luna: And for them, the raise never came. So while the average looks good, the distribution is uneven. Lucas: Exactly. The New York Fed survey probably reflects that anxiety. Even if you're working, you might worry about losing your job, or you might be underemployed. The household financial worries index captures that uncertainty. Luna: So the bottom line: for the typical borrower with a job, the student loan payment is becoming a smaller share of income. But for the unemployed or underemployed, it's still a heavy burden. Lucas: And that's the nuance we try to bring here. The good news is real, but it's not universal. If you're in the fortunate position of having a job and a fixed student loan payment, your wallet is actually getting a bit of relief. But the policy debates about SAVE and loan forgiveness still matter for the millions who aren't seeing that benefit. Luna: I think that's a fair take. We'll see what Friday's jobs report tells us about the broader labor market. Lucas: We'll break it down for you next week. For now, keep an eye on that real wage number — it might be the most important figure in your personal finances.