As Student-Loan Payments Restart, Here's Who Is Hurting

Walmart is likely to be the season’s biggest winner

Student loan payments -- long a political football -- have been kicked all over the landscape, in constant flux since the pandemic's start.

But as of Oct. 1, many of the 27 million borrowers must restart monthly payments. That prospect has had retailers in a tea-leaf-reading tizzy, wondering how those borrowers can repay loans, make their rent and still find enough money for discretionary shopping.

In its recent holiday forecast, Kantar takes a closer look. Those loan payments will likely fall between $7.5 billion and $9 billion monthly, or $90 billion to $110 billion annually. And while that sounds huge, those repayments account for between 0.5% and 0.6% of aggregate after-tax income.

“In some ways, that's not overwhelming” -- at least for the overall retail forecast, says Doug Hermanson, Kantar’s principal economist in a webinar discussing the forecast. “But on an individual level, it’s more complicated, and that will create some stress.”



One buffer is that many of those more affluent borrowers have been saving, knowing that repayment might have to come sooner. Borrowers with household incomes greater than $250,000 a year, for example, out-saved their income peers without student loan debt.

But in all lower income brackets, resumption of payments will result in more money going out of bank accounts than in. And about 2.5% of their income will have to go to student loan repayment. “To make up the difference, they must use savings or cut spending. And they’ll probably do both,” says Hermanson.

Further clouding the outlook is the SAVE Program, launched by President Biden after the U.S. Supreme Court blocked his student loan forgiveness program this summer.

While that new program would sharply reduce payments for many lower-income borrowers, sometimes even to zero, Hermanson says only five million borrowers have signed up so far.

Another potentially concerning trend, he says, is that credit card delinquencies are on the rise and are now on par with 2019 levels. (They dipped sharply during the pandemic.)

That means some shoppers that typically rely on credit will struggle, “which hurts retailers not just in their sales but potentially in their internal finances.”

In Kantar’s research, 21% of the people surveyed plan to spend more on holiday shopping this year, compared to 26% who said that in last year’s study. And 49% say they’ll keep paying level to the prior year, up from 45%.

And because these increasingly cautious consumers are more focused on value, Kantar expects sales to rise in the mid-single digits at Walmart, in the low single digits at Target and club stores, and decline in the low single digits at department stores.

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