Target and Nordstrom, especially, face a potential big hit when student loan payments resume this fall.
For more than three years, federal student loan borrowers have not had to make monthly payments. But that pandemic-era pause is coming to an end this fall, setting up a financial shock for millions of Americans – and the big-name stores where they shop.
About 44 million borrowers in the U.S. were affected by the payment pause, which initially began in March 2020 at the onset of the COVID-19 pandemic. The Biden administrationin November with its broader debt forgiveness plan tied up in legal limbo, but will not do so again as part of the bipartisan debt ceiling deal approved by Congress. Payments, which are set to resume on Aug. 30, can be substantial: The average monthly bill hovers between $200 and $299 per person, although it is even higher for some borrowers, according to the most recent Federal Reserve data. Collectively, borrowers are set to resume paying about $10 billion a month, according to a recent analysis from JPMorgan. The resumption of these payments will likely force households to cut back on spending in other areas –"Inflation and the overall macro environment has caused U.S. consumers to defer many discretionary purchases over the past 18 months," Sole wrote in the note. "Apparel has proven to be the category consumers defer most often." Sole added: "Interestingly, market research of 1,392 U.S. consumers with student loans shows this trend is even more pronounced among this group. We believe this indicates Student Loan Consumers will reduce spending on apparel in a big way when they have to start paying off their student loan debt." A number of brands and retailers could be negatively affected by the spending reduction, including: American Eagle Outfitters, Carter's, Crocs, Foot Locker, Canada Goose, Gap, Nordstrom, Nike, Steve Madden, Under Armour and Victoria's Secret, according to UBS.
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