WSJ What’s News - Student-Loan Borrowers Hit by Steep Drop in Credit Scores

Episode Date: February 27, 2025

P.M. Edition for Feb. 27. A pandemic-era freeze on federal student loans has been lifted, but many borrowers haven’t resumed their payments. WSJ personal finance reporter Oyin Adedoyin discusses why that has effects on individuals and the broader economy. Plus, a strong dollar complicates things for U.S. companies with global operations. Kristin Broughton, who covers corporate finance for the Journal, joins to talk about what companies are doing to stabilize their financial reporting. And the art of the beer sommelier—who wants to become a Master Cicerone? Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

I've got this condition where I don't feel pain. You're a superhero. No, I'm not. This is how intense Novakane sounds. Oh, wow. Imagine how it looks. Is there more? Yeah, big time.

Novakane, forming theaters March 14th. President Trump plans another 10% tariff on products from China. Plus, Americans have to pay their federal student loans again. Not doing it comes with consequences. This can have ripple effects throughout the economy. It puts things like homeownership at risk or getting a new car further out of reach for late payers. And so folks who are in this position told me that this just kind of felt like a nail

in the coffin. And for some US companies, a strong dollar is kind of a nuisance. It's Thursday, February 27th. I'm Alex Osolo for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. President Trump has announced an additional 10% tariff on imports from China over its role in the fentanyl trade. The move doubles up on the previous 10% of additional tariffs the president placed on

Chinese products earlier this month. The new tariffs are set to go into effect on Tuesday. In a post today on his Truth Social platform, Trump also reinforced his threat to impose 25% tariffs on products from Canada and Mexico, a day after hinting that they could be delayed again. A spokesman at the Chinese embassy in Washington defended China's record in fighting drug trafficking. In U.S. markets today, stocks slipped after President Trump made fresh tariff threats and investors remained unimpressed by Nvidia's forecast beating results after yesterday's close.

The Dow fell about half a percent, the S&P 500 dipped roughly 1.6 percent, and the Nasdaq dropped about 2.8 percent. President Trump said today that he expected any Ukraine-Russia peace deal would hold, but that his approach toward talks involving the Kremlin will be, quote, trust and verify. Asked whether he believed Russian President Vladimir Putin would negotiate in good faith, Trump said that he has confidence that if there is a deal, it's going to hold. The remarks, made while sitting next to British Prime Minister Keir Starmer in the Oval Office, showcase the president's confidence in his own deal-making skills.

At a press conference after the meeting with Starmer, Trump said he's working for a ceasefire in Ukraine. The next step we're making is toward a very achievable ceasefire. We hope that that can happen quickly because thousands of young people, in this case, we're not talking about Americans, we're talking about Ukrainians and Russians are being killed every week. U.S. officials have said it is premature to decide on the American role in any peacekeeping force until an agreement to stop the fighting is reached.

For people with federal student loans, the payment clock is ticking again. In October, pandemic-era relief on federal student loans, the payment clock is ticking again. In October, pandemic-era relief on federal student loans ended, kicking off the 90-day window people have to make payments before their credit scores take a hit. And it seems that many of them haven't. According to credit score provider VantageScore, about 43% of borrowers who owe payments haven't resumed making them. To talk more about the impact,

I'm joined now by personal finance reporter Oyen Ededoyan. Oyen, why is this happening? Did millions of people just like forget that payments have restarted? No, not exactly. One of the biggest thing that borrowers who are experiencing this have told me is that they feel like they didn't receive

sufficient communication from their student loan servicers. Student loan delinquencies are really interesting because unlike credit card debt, they don't really start to ping you or hit your credit report until 90 days late. So if you are 30 days late or 60 days late, you don't really hear anything. And at a time like this,

when student loans have been paused for so long, people didn't realize that this on-ramp period ended in October. So now, you know, everyone from, you know, folks who are maybe freshly graduated from college to people who are in their 40s trying to get another house are seeing this in their credit report and kind of freaking out. What is the impact if you happen to be one of those among the 43% who has not made your payment yet? This can have ripple effects throughout the economy. It puts things like homeownership at risk or getting a new car further out of reach for late payers.

Lower scores could also mean lower credit card limits and higher rates. One of the borrowers that I spoke with told me that she was just getting ready to request a higher limit on her credit card before this happened and her credit score had dropped over 100 points. So you know, credit companies are going to see that and tighten their lending. This is a generation for whom things like home buying kind of feels off limits is merely forgetting an individual payment going to have really that big an impact on some of those big economic items for them? You hit it exactly right.

This is a generation of people who are already feeling like the American dream is out of reach for them. Everything just seems to be getting more expensive with the lasting effects of inflation. And so folks who are in this position told me that this just kind of felt like a nail in the coffin. People felt like they were finally getting their head above water and some of these things saved up for a down payment, things like that. And then they get this ding on their credit report

that could infringe on their possibility to obtain a home or get a car or just further their adult lives. And credit reports are things that take a long time to build up. Some of these blemishes on your credit report could stay on for up to seven years. So this can be a really long lasting negative impact for people. That was WSJ personal finance reporter Oyin Adedoyin.

Thank you so much Oyin. Thank you. Coming up, why for some US companies, a strong dollar can be a big pain. That's after the break. Rise to it with the BMO Eclipse Rise Visa Card, the credit card that rewards your good financial habits. Earn points for paying your credit card bill in full and on time every month. Level up from bill payer to reward slayer.

Terms and conditions apply. For Americans traveling abroad, a strong dollar is often a good thing. But for US companies with global operations, a strong dollar can actually be a bit of a headache. And right now, the dollar is really strong. The WSJ Dollar Index, which tracks the dollar against a bunch of other currencies, rose 6% during the fourth quarter of 2024.

And though that's down a bit from its latest peak, as of yesterday, the dollar is up 2.4% from a year earlier. Kristin Broughton, who covers corporate finance for the journal, is here to tell us more. So Kristin, break this down a bit for me. Why can a strong dollar make life difficult for some U.S. companies, even if they're posting strong sales abroad? Really, this is a headache when it comes to financial reporting. So when they report their earnings every quarter to investors, when the company translates the sales that they generated abroad back into the dollar, their earnings abroad

take a hit. What are some of the companies that are affected by this? We spoke to three for the story. Elf Beauty, a cosmetics company, they recorded their largest ever hit from conversion of British pounds to the US dollar. Medtronic is another medical device company that's technically based in Ireland, but has its headquarters in Minneapolis. And then Rockwell Automation, an industrial automation company also based in the Midwest.

So it cuts across industries, it cuts across companies. The through line here is if they have operations abroad. So these companies are dealing with this issue primarily when they're reporting earnings. What are they doing about this? Yeah, there really is a question facing companies So these companies are dealing with this issue primarily when they're reporting earnings. What are they doing about this? Yeah, there really is a question facing companies on how much they can control because this is just a translation impact.

It doesn't reflect their underlying performance. And some companies choose just to take the hit and explain the charge to investors. So that's a course that many companies take. There are things that companies can do. Companies can hedge so they can enter into forward contracts where they agree to a certain exchange rate at a given moment in time to just smooth out the impact of some of those currency hits. They can also use options as another form of hedging. Some of the companies that we spoke to are doing some new things. Medtronic, the Minneapolis-based medical device maker, they have decided to use FX-adjusted pricing in certain emerging markets and also set their sales incentives for some of their

employees using FX-adjusted metrics on that as well. It is a financial reporting issue, but not something that's reflective of the underlying operations of companies. What is driving the strength of the dollar and what is the kind of outlook here? The dollar has been strong for a couple of years. A lot of the impact is related to interest rate policy, the prospect of greater tariffs, which is beginning to come to fruition, and then just the overall strength of the US economy compared to other economies abroad. And unless I spoke to you, expect the dollar to have made it strong, there's nothing to

suggest at the moment that that would change course. That was WSJ reporter Kristin Broadden. Thank you so much, Kristin. Thank you. Over the past eight years, Oracle co-founder Larry Ellison has poured half a billion dollars into an agriculture startup called Sensei Ag. Ellison and his Sensei Ag co-founder, celebrity doctor David Agus, envision the farm as an ambitious tech venture that would use new techniques to grow tastier, nutrient-rich

crops. So far, though, it's mostly been a bust. The company is using little of the revolutionary technology, and its crop yields have been far lower than promised. WSJ reporter Tom Dutton told our tech news briefing podcast about where the company might go from here. According to Dr. Agus, there is no directive from Ellison to turn a profit on this thing yet. This is an R&D process. They're working on perfecting the technology that could end up changing the face of agriculture. And R&D process. They're working on perfecting the technology that could end up changing the face of agriculture. And R&D is a very capital intensive process. And so it's hard

to put a price tag on that. And so even though they are selling their lettuce and tomatoes on Hawaii and their lettuce on the East Coast of the US and in Canada, they're not really talking too much these days about turning a profit on these things. To hear more from Tom, check out today's episode of our Tech News Briefing Podcast. And finally, close your eyes and come with me on a little journey. You're out at a nice restaurant for dinner. You choose something delicious off the menu the day's special, full of fresh ingredients. Yum.

You ask a sommelier for a recommendation for a wine with delicate notes that would pair perfectly with your meal. Okay, now, would you ask for a similar recommendation for a beer? Turns out there is such a thing as a beer sommelier, and there are only 28 of them in the world. Like in wine, a master Cicerone studies for years to take a certification exam. The test for the highest level involves 16 essays, 8 blind beer tasting panels, and 12 oral exams over two days. And after all that, they can expect to get a job not in a restaurant, but running beer

education events and developing new brews at a beer company. Cheers! And that's what's news for this Thursday afternoon. Today's show is produced by Pierre Bienneme and Anthony Bansi with supervising producer Michael Kosmitis. I'm Alex Osola for the Wall Street Journal. We'll be back with a new show tomorrow morning.

Thanks for listening.