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Impending Fall Impact: Big-Name Retailers at Risk as Student Loan Repayments Loom

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Mounting Concerns: Big-Name Retailers Brace for Potential Impact of Student Loan Repayments

The pandemic-induced pause on federal student loan payments is set to expire this fall, marking an end to a three-year reprieve for millions of borrowers. This shift is projected to have a significant impact on the spending habits of these individuals, potentially affecting major retail stores like Target, Nike, Under Armour, and Gap.

The payment pause, which began in March 2020, benefited approximately 44 million borrowers in the U.S. This pause was extended eight times by the Biden administration but will not be extended further as part of the bipartisan debt ceiling deal approved by Congress. Payments are due to resume on August 30, with the average monthly bill ranging between $200 to $299 per person, and even higher for some borrowers, according to the most recent Federal Reserve data.

Once the payments resume, borrowers will collectively be paying around $10 billion a month, according to an analysis from JPMorgan. UBS analyst Jay Sole predicts that the restart of these payments will likely cause households to cut back on other areas of spending, particularly retail.

Sole's note highlights that inflation and the overall macro environment over the past 18 months have prompted U.S. consumers to defer many discretionary purchases. Apparel is often the first category to be deferred. Market research surveying 1,392 U.S. consumers with student loans shows this trend to be even more pronounced among this group. There is a strong indication that student loan consumers will significantly reduce spending on apparel when they have to start repaying their student loan debt.

Retailers and brands that could be hit by this spending reduction include American Eagle Outfitters, Carter's, Crocs, Foot Locker, Canada Goose, Gap, Nordstrom, Nike, Steve Madden, Under Armour, and Victoria's Secret. JPMorgan analyst Chris Horvers echoed this warning, stating that Target sales could face a hit once student loan repayments begin because Target caters to millennials, who carry a large share of student loan debt.

President Biden's broader student loan forgiveness plan, which was blocked by the U.S. Supreme Court in June, had proposed the elimination of $10,000 in student loan debt for individual borrowers who earned less than $125,000 in either 2020 or 2021 or married couples who made less than $250,000 annually in those same years. Despite the setback, the White House has recently announced plans to forgive $39 billion in loans.

The resumption of student loan repayments will undoubtedly shift the financial landscape for millions of Americans. The ripple effects of this change will be felt across various industries, most notably in retail, as consumers adjust their spending habits to accommodate this new financial responsibility.

Impact on New Businesses

Given these projections, the impact on new businesses, particularly those in the retail sector, could be significant. With the resumption of student loan payments, consumers will likely have less disposable income to spend on discretionary purchases. This can be particularly challenging for a new business, especially those registered as an LLC who are trying to establish a customer base and generate consistent revenue.

Strategic Shifts for New Businesses

Given this impending financial shift, new businesses may need to reconsider their marketing and sales strategies. They may need to focus more on essential products and services, or offer more competitive pricing and payment options to retain customers. Additionally, new businesses might need to adjust their financial forecasts and budgets to account for the expected drop in consumer spending.

Opportunities Amid Challenge

However, it's not all doom and gloom. This financial shift could present opportunities for businesses that cater to a more frugal lifestyle or provide essential goods and services. For instance, businesses that offer affordable alternatives to high-end products, or those that provide budgeting tools or financial advice, could see an increase in demand.

There's also the potential for an increased demand for second-hand or consignment goods as consumers look to save money. Therefore, a new business that can pivot quickly to accommodate these changing consumer behaviors may be able to weather the storm and even thrive during this period.


Ultimately, the expiration of the pandemic-induced pause on federal student loan payments will undoubtedly present challenges for new businesses, particularly those in the retail sector. However, any change in the economic landscape also brings opportunities. By staying attuned to shifts in consumer behavior and being willing to adapt, new businesses can position themselves for success in this new financial reality.

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