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A year ago New York’s governor, Kathy Hochul, a Democrat, proposed to adjust a state cap on charter schools, the publicly funded but privately run schools that have become a locus of innovation and controversy in American education. Ms Hochul’s plan was not ambitious, but it would have allowed dozens of new charter schools to open in New York City, where they already attract about 15% of public-school students and where thousands of families languish on waiting lists. But the governor’s plan drew fervent protests from fellow Democrats, including state legislators aligned with teachers’ unions. After a bruising fight, the governor had to settle last autumn for a small increase.
The row reflected a discouraging change in the politics of charter schools. Once a topic of unusual bipartisan enthusiasm, the schools have become divisive, particularly among Democrats. Barack Obama campaigned on charter-school expansion in 2008, but Joe Biden declared in 2020 that he was not enamoured of them. (His administration has nonetheless maintained federal funding for charters.) Republicans are more favourably inclined overall, and Donald Trump increased support during his presidency. But Republican priorities have shifted since George W. Bush, as president, and his brother Jeb, as governor of Florida, championed charters as beacons of racial equity. These days Republicans prioritise vouchers that allow parents to use taxpayer funds to enroll children in religious schools.
The relative neglect of charters comes just as fresh evidence has arisen that they are successful. Last June a comprehensive new study emerged from Stanford University. It is the latest of three national studies carried out over two decades by the Centre for Research on Education Outcomes (CREDO). The first study analysed 13 states and three big cities between 2000 and 2008 by comparing charter pupils with peers in other public schools. On average charter pupils performed worse in reading and maths. This was hardly inspiring. Four years later, a follow-up study had mixed results: charter pupils performed better in reading but worse in maths.
Image: The Economist
Fast forward to June’s study, which used data from 2014 to 2019. Its results show a positive trajectory over time (see chart). In all 31 geographic locations studied (29 states, New York City and the District of Columbia), pupils in charters outperformed their traditional public-school peers, on average. Pupils gained the equivalent of six days of learning in maths and 16 days in reading each year. “We don’t see a revolution,” says Macke Raymond, the lead researcher of the Stanford studies. “We are seeing thousands of [charter] schools getting a little bit better every year.” Other recent studies, such as research by Douglas Harris at Tulane University and investigators at the University of Arkansas, also report positive results.
This is a departure not just from past findings of CREDO but also from the broader patterns of past research. During the 1990s and early 2000s, as the charter movement gathered momentum, Democrats and Republicans promoted the innovation more from instinct or a preference for parental choice than on the basis of evidence. It can be hard to study how particular schools shape educational outcomes, since so many other factors—economic circumstance and parental educational attainment, for example—are influential. Early studies often delivered mixed results. Research was like a Rorschach test: stakeholders interpreted new studies according to their own biases.
The latest CREDO report provides clear evidence of success and also describes which types of charter schools seem to be working best. Larger charter management organisations (cmos in the jargon), which run multiple schools at a time, have stronger results on average than stand-alone charters. There were also hundreds of successful charters where disadvantaged pupils (black, Hispanic, poor pupils or English-learners) performed similarly to or better than their more advantaged peers.
Charter enrolment is growing and the schools’ impact on American children is substantial. In 2021 about 4m public-school pupils studied in charters, more than double the number enrolled back in 2010. Forty-five states and the District of Columbia allow them. In Chicago, where 15% of public-school students enroll, black and Hispanic families are disproportionately represented, as is typical in cities that offer them. In poverty-stricken Philadelphia, a third of public-school children are educated in charters.
Republican support for charters reflected a preference for parental choice among right-leaning politicians, but the policy did not pay clear dividends at election time, since the schools had the most impact in big cities, which are often dominated by Democrats. Vouchers offer political benefits because they are attractive to religious, home-schooling and suburban voters. Amid great fanfare, Arizona, Arkansas, Florida and other Republican-led states have passed laws allowing parents to use vouchers to direct public dollars to private schools they choose, including religious ones, or for other educational assistance. “Republicans have long been supportive of charter schools even though most of their constituents do not attend,” says Michael Petrilli of the Fordham Institute, a think-tank. However, school-choice plans “can result in money actually in the pockets of Republican constituents…and so I think that has obvious appeal.”
Mr Trump has seized on school choice as a campaign issue for 2024. He hopes to tap into the emotional “parents’ rights” movement visible in the form of shouting matches at school-board meetings, as conservative parents have lately battled teaching about DEI and trans rights while their liberal opponents seek curriculums they regard as inclusive and essential.
Democrats have no obvious parent-friendly education policy to promote now they have turned away from charter-school expansion. According to a survey by Education Next, a journal, while 55% of Republicans support charter schools, only 38% of Democrats do. More white Democratic voters oppose charters than do non-white Democratic voters. Many of the white respondents say they fear charters undermine racial equity, which may surprise the black and Hispanic voters whose children are flourishing in them. ■
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Wall Street is warning that the U.S. Department of Education’s crack down on student loan repayments may take billions of dollars out of consumers’ pockets and hit low income Americans particularly hard.
The department has restarted collections on defaulted student loans under President Donald Trump this month. For first time in around five years, borrowers who haven’t kept up with their bills could see their wages taken or face other punishments.
Using a range of interest rates and lengths of repayment plans, JPMorgan estimated that disposable personal income could be collectively cut by between $3.1 billion and $8.5 billion every month due to collections, according to Murat Tasci, senior U.S. economist at the bank and a Cleveland Federal Reserve alum.
If that all surfaced in one quarter, collections on defaulted and seriously delinquent loans alone would slash between 0.7% and 1.8% from disposable personal income year-over-year, he said.
This policy change may strain consumers who are already stressed out by Trump’s tariff plan and high prices from years of runaway inflation. These factors can help explain why closely followed consumer sentiment data compiled by the University of Michigan has been hitting some of its lowest levels in its seven-decade history in the past two months.
“You have a number of these pressure points rising,” said Jeffrey Roach, chief economist at LPL Financial. “Perhaps in aggregate, it’s enough to quash some of these spending numbers.”
Bank of America said this push to collect could particularly weigh on groups that are on more precarious financial footing. “We believe resumption of student loan payments will have knock-on effects on broader consumer finances, most especially for the subprime consumer segment,” Bank of America analyst Mihir Bhatia wrote to clients.
Economic impact
Student loans account for just 9% of all outstanding consumer debt, according to Bank of America. But when excluding mortgages, that share shoots up to 30%.
Total outstanding student loan debt sat at $1.6 trillion at the end of March, an increase of half a trillion dollars in the last decade.
The New York Fed estimates that nearly one of every four borrowers required to make payments are currently behind. When the federal government began reporting loans as delinquent in the first quarter of this year, the share of debt holders in this boat jumped up to 8% from around 0.5% in the prior three-month period.
To be sure, delinquency is not the same thing as default. Delinquency refers to any loan with a past-due payment, while defaulting is more specific and tied to not making a delayed payment with a period of time set by the provider. The latter is considered more serious and carries consequences such as wage garnishment. If seriously delinquent borrowers also defaulted, JPMorgan projected that almost 25% of all student loans would be in the latter category.
JPMorgan’s Tasci pointed out that not all borrowers have wages or Social Security earnings to take, which can mitigate the firm’s total estimates. Some borrowers may resume payments with collections beginning, though Tasci noted that would likely also eat into discretionary spending.
Trump’s promise to reduce taxes on overtime and tips, if successful, could also help erase some effects of wage garnishment on poorer Americans.
Still, the expected hit to discretionary income is worrisome as Wall Street wonders if the economy can skirt a recession. Much hope has been placed on the ability of consumers to keep spending even if higher tariffs push product prices higher or if the labor market weakens.
LPL’s Roach sees this as less of an issue. He said the postpandemic economy has largely been propped up by high-income earners, who have done the bulk of the spending. This means the tide-change for student loan holders may not hurt the macroeconomic picture too much, he said.
“It’s hard to say if there’s a consensus view on this yet,” Roach said. “But I would say the student loan story is not as important as perhaps some of the other stories, just because those who hold student loans are not necessarily the drivers of the overall economy.”
A woman walks in an aisle of a Walmart supermarket in Houston, Texas, on May 15, 2025.
Ronaldo Schemidt | Afp | Getty Images
U.S. consumers are becoming increasingly worried that tariffs will lead to higher inflation, according to a University of Michigan survey released Friday.
The index of consumer sentiment dropped to 50.8, down from 52.2 in April, in the preliminary reading for May. That is the second-lowest reading on record, behind June 2022.
The outlook for price changes also moved in the wrong direction. Year-ahead inflation expectations rose to 7.3% from 6.5% last month, while long-term inflation expectations ticked up to 4.6% from 4.4%.
However, the majority of the survey was completed before the U.S. and China announced a 90-day pause on most tariffs between the two countries. The trade situation appears to be a key factor weighing on consumer sentiment.
“Tariffs were spontaneously mentioned by nearly three-quarters of consumers, up from almost 60% in April; uncertainty over trade policy continues to dominate consumers’ thinking about the economy,” Surveys of Consumers director Joanne Hsu said in the release.
Inflation expectations are closely watched by investors and policymakers. Federal Reserve Chair Jerome Powell has said the central bank wants to make sure long-term inflation expectations do not rise because of tariffs before resuming rate cuts.
A final consumer sentiment index for the month is slated to be released on May 30, and will likely be closely watched to see if the tariff pause led to an improvement in sentiment.
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Jamie Dimon, chief executive officer of JPMorgan Chase & Co., speaks during the 2025 National Retirement Summit in Washington, DC, US, on Wednesday, March 12, 2025.
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Wall Street titan Jamie Dimon said Thursday that a recession is still a serious possibility for the United States, even after the recent rollback of tariffs on China.
“If there’s a recession, I don’t know how big it will be or how long it will last. Hopefully we’ll avoid it, but I wouldn’t take it off the table at this point,” the JPMorgan Chase CEO said in an interview with Bloomberg Television.
Specifically, Dimon said he would defer to his bank’s economists, who put recession odds at close to a toss-up. Michael Feroli, the firm’s chief U.S. economist, said in a note to clients on Tuesday that the recession outlook is “still elevated, but now below 50%.”
Dimon’s comments come less than a week after the U.S. and China announced that they were sharply reducing tariffs on one another for 90 days. The U.S. has also implemented a 90-day pause for many tariffs on other nations.
Thursday’s comments mark a change for Dimon, who said last month before the China truce that a recession was likely.
He also said there is still “uncertainty” on the tariff front but the pauses are a positive for the economy and market.
“I think the right thing to do is to back off some of that stuff and engage in conversation,” Dimon said.
However, even with the tariff pauses, the import taxes on goods entering the United States are now sharply higher than they were last year and could cause economic damage, according to Dimon.
“Even at this level, you see people holding back on investment and thinking through what they want to do,” Dimon said.