The U.S. Supreme Court’s decision to strike down student loan forgiveness will become the latest challenge for retailers coping with more cautious consumers, CNBC reports. The court’s ruling means student loan payments will restart this fall, which stock analysts say will most likely impact retailers that sell discretionary merchandise, such as clothing and electronics.
The court’s decision quashed President Joe Biden’s plan to forgive up to $20,000 per borrower in federal student loan debt. Student loans will already take a bigger bite out of budgets this fall as payments and interest accruals resume after a more than three-year pandemic-related pause. Biden announced steps Friday to make the transition to resuming payments easier and create a path to forgiveness of some loans.
The return of payments adds another disruption for the approximately 40 million Americans who have student loans at a time when consumers are showing more caution, the cable news network reports. Nearly all Americans said they are pulling back on spending in some way, according to a recent CNBC and Morning Consult survey.
The timing of the change could amplify its impact on retailers. Student debt repayment is poised to resume just before the all-important back-to-school and holiday seasons.
The loan changes won’t “make or break if we go into a recession or not,” said Brad Thomas, a retail analyst at KeyBanc Capital Markets. But he also said it may have a psychological effect on debt-saddled Americans who are back on the hook for hundreds of dollars in monthly payments again.
“It’s enough to potentially give us what could be an ugly and disappointing holiday season, relative to expectations,” he said.
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Barclays pointed to American Eagle Outfitters, Urban Outfitters and Figs as being among the most vulnerable because of their popularity with recent college graduates and newly employed. Several equity research firms, including KeyBanc, named Target as a retailer that will likely get squeezed, since its sales have already weakened and it draws younger and college-educated customers.
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