What if a student-loan delinquency wave drags millions into subprime?
25% student-loan delinquency plus wage garnishment pushes 9M borrowers into deep subprime, draining discretionary income — the trade is short low-end discretionary retail (Dollar General, off-price, used autos) and wider consumer-ABS, HY the liquid read. Rhymes with the 2023 payment-restart squeeze on lower-income consumers, which dinged dollar stores and BNPL. Forward angle: garnishment is a direct, mechanical cash-flow hit unlike prior forbearance cycles, so the spending drag is more immediate and concentrated in the bottom income quintile.
Every number ships with its receipt — the odds, the range, the precedents, and a public grade at Reality Check. The statistical machinery that produces it is proprietary.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 6–18 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. Record 25% delinquency and renewed wage garnishment drag 9M defaulted borrowers into deep subprime, hitting discretionary retail and consumer-ABS spreads. The trigger decomposes into signed root‑shocks — Consumer spending ▼ · Credit spreads ▲ · Recession signal ▲ — which propagate through our causal graph to the markets below.