Student Debt to Hit Retail

The temporary pause on student debt payments, which has aided millions of borrowers, ends on August 30th as part of a debt-ceiling deal. Over 26 million borrowers may need to resume monthly payments averaging $222 for student loans, totaling between $5 and $10 billion per month and impacting the greater economy. The resumption of student loan payments will particularly impact younger Americans, who have higher credit card debt, limited emergency funds, and face inflation and rising interest rates. Younger consumers have experienced slower spending growth and higher credit card delinquencies than older generations. As they begin repaying their student loans, they may reduce discretionary spending, with apparel purchases being a category they are likely to defer. Clothing brands targeting student loan borrowers may witness a decline in sales. Retailers catering to millennials and Gen-X customers, who hold significant student debt, could also be negatively affected, potentially challenging their full-year outlooks.