The interest rate on some private student loans can “float” in line with a benchmark interest rate. In the U.S., loans from the Federal government are linked using a formula to 10-year Treasurys.
So as Treasury yields rise, which they are almost certain to do as the Fed hikes rates and as Congress may borrow increased amounts to finance the Trump administration’s policies, payments on new loans will rise as well.
Tightening liquidity could also impact other segments of the global markets, he added.
“The question is, as the global environment tightens, are those effects going to spread to markets that haven’t yet experienced the consequences of the past,” he asked. “There are also countries that dodged the financial crisis but have had very buoyant markets since then: housing markets in Australia, housing markets in Canada.”
—Tom Anderson contributed to this article.
