• by Sarah Mahoney  @mahoney_sarah, July 5, 2023

The Supreme Court’s decision may hurt stores like Target

The Supreme Court’s decision to reject President Joe Biden’s student debt relief plan isn’t just a setback for his administration. In walloping the wallets of an estimated 40 million people, it’s also sending shivers through the retail universe, especially those serving middle- and lower-income shoppers.

“The Supreme Court’s decision to cancel the student loan forgiveness program is bad news for retail,” writes Neil Saunders, managing director of GlobalData, in his comment.

The White House says its plan was specifically intended to help middle- and lower-income borrowers. It offered up to $10,000 in debt relief for many borrowers and up to $20,000 for those who had gotten a Pell Grant.

“Nearly 90% would’ve gone to borrowers making less than $75,000 a year,” President Biden said in remarks made to the press just after the Supreme Court announced its 6-to-3 decision to reject the plan. “And no one making over $125,000 would qualify.”

If approved, that plan would have wiped out the debts of about 45% of borrowers, or roughly 20 million people.

Student loan repayments that had been paused for the last three years as part of COVID relief programs are set to resume this fall.

Estimates about just how much pain all this may cause will vary widely. CNBC reports that the Bank of America Institute estimates that payments for the median impacted household will be around $180 a month. It says Mark Kantrowitz, a higher education expert, puts the typical monthly bill at $350. And KeyBanc estimates an average monthly payment between $400 and $460, per CNBC.

While younger consumers, people of color and those with debt but no degree will feel the pinch most acutely, experts note student loan debt pressures all kinds of consumers, including plenty of Gen X and Baby Boomer parents and grandparents who have helped along the way.

Saunders writes that apparel and home furnishings are most likely to be affected. TJX, Dick’s Sporting Goods, Best Buy and American Eagle are among the specialty retailers most exposed. And CNBC says Target is also likely to feel squeezed, given its appeal to younger, college-educated shoppers.

And while plenty of experts predict the actual impact to be limited, some fear the psychological impact at a time when consumers already appear to be growing more cautious about their financial health.

“People will be understandably disappointed and angry about the decision, and some will be uncertain about what it means for their finances,” writes Saunders. “All of this has the ability to make consumers more cautious in their buying behaviors.”

President Biden insists the Supreme Court’s decision is a setback for debt forgiveness but not a death knell. In his post-decision remarks, he vowed to find a new route to debt forgiveness and announced a plan grounded in the Higher Education Act.

“This new path is legally sound,” he said. “It’s going to take longer, but in my view, it’s the best path that remains to providing for as many borrowers as possible with debt relief.”