A graduation cap that says "student loans" on top of a pile of money
Photo: Canva

October’s resumption of student loan payments suspended during COVID could weigh on holiday results as affected consumers find an average of $300 added to their monthly expenses, according to a study by Earnest. This cohort accounted for more than 10% of spending at multiple national brands in 2022, which puts them at risk of losing sales if these consumers cut back during peak season.

Earnest noted that the pause in student loans provided borrowers with additional spending power. Now that payments are coming due and the Supreme Court struck down President Biden’s student loan forgiveness program, this shopper base will soon find themselves facing additional pressures on top of the lingering effect of inflation that is already slowing down spending, according to Reuters.

Peloton, which is aiming to “relaunch” its brand in the coming months, will be one of the most heavily exposed retailers, according to Earnest. The company saw a 13% share of spending from consumers with suspended payments in 2022. However, Peloton isn’t alone, as “dozens of national brands” will see a significant share of their audience resume loan payments in the fall, according to Earnest.

Apparel and department store retailers in particular are likely to be affected. Old Navy had a particularly high share of spend from the COVID-suspended cohort at 14%, the highest among apparel retailers included in the study, while Nordstrom had the lowest share at 8%. Other brands expected to feel the impact include IKEA, Ashley, HomeGoods, Wayfair, and Lowe’s.

Cash-strapped consumers with student loans could contribute to what some retail executives are already expecting to be a discount-heavy holiday season, according to a CNBC poll. Two-thirds of respondents expect shoppers to be on the lookout for sales, while just 13% expect consumers to remain strong despite the economy.

Additionally, the reduced spending power lends further credence to Salesforce’s prediction that 17% of gifts this holiday season will be resold items. While this trend is primarily based on the growing acceptability of second-hand items as gifts and the importance of sustainability — Salesforce expects 32 billion pounds of waste to be saved from landfills — resale may also enable shoppers to buy something a bit nicer than what they could otherwise afford.

BrainTrust

“Given that household budgets are already under pressure, anything that adds to the burden will have a negative impact on consumer spending.”

Neil Saunders

Managing Director, GlobalData


“I don’t worry about the impact of the payments on the retailer or the holiday. What concerns me is the impact on the total economy.”

Gene Detroyer

Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.


“Somewhere along the line, sales and manufacturing of new product has to shrink when resold product takes a bigger and bigger share of the market.”

Jeff Sward

Founding Partner, Merchandising Metrics

Discussion Questions

DISCUSSION QUESTIONS: Will student loan repayments have a significant impact on retail’s overall holiday performance, or will this just be one factor that won’t stand out on its own? Does the resumption of student loan payments create opportunities for savvy retailers that can communicate well with affected consumers?

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How large of an impact will the resumption of student loans have on overall retail spending?

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9 responses to “Will Renewed Student Loan Payments Dampen the Holiday Spirit?”

  1. Gene Detroyer Avatar
    Gene Detroyer

    $1.77 trillion. That’s the amount of student loans that exist in the U.S. Student loans have grown 765% since 1995. I have difficulty conceiving those numbers in my brain. Something is seriously wrong with our higher-education system.

    I don’t worry about the impact of the payments on the retailer or the holiday. What concerns me is the impact on the total economy. That $300 could be spent on anything, which becomes productive in the economy as spending is multiplied 5 to 7 times. Or it can be used to pay off the loan, which is non-productive and takes money out of the economy.

    1. Scott Norris Avatar
      Scott Norris

      Most of those repayments accrue to lenders rather than cycling back to the government, to boot. Lower total cost all around just to fund students’ education up front, with a much stronger economic benefit across the entire economy. Elections matter!

    2. Craig Sundstrom Avatar
      Craig Sundstrom

      At the risk of turning this into ‘PoliticalWire’, I would point out many would disagree with your description of someone paying their debts as “non-productive” . At any rate – no pun intended – I’d suggest you not lend money,

  2. Neil Saunders Avatar
    Neil Saunders

    Given that household budgets are already under pressure, anything that adds to the burden will have a negative impact on consumer spending. This includes the resumption student loan repayments. Will this destroy the holiday season? No. Will it take the edge off growth during the holidays and add to the pressures on retail? Yes. Of course, retail isn’t the only area consumers can cut back on, so the pain is going to be spread across other areas like travel, leisure, entertainment and so forth.

  3. Jeff Sward Avatar
    Jeff Sward

    Of course there will be an impact. That’s a lot of $$$ to siphon off from the market that may have been spent on discretionary or gift giving products. But the bigger, longer term question for me comes from the mention of the emerging importance of recycling and reselling. 17% sounds like an enormous number, but there is no mention or context for historical comparison. Hopefully recycling and reselling will grow, but how does that ripple back through the retail ecosystem to the sales of new product? And how does that ripple back through the supply chain? Somewhere along the line, sales and manufacturing of new product has to shrink when resold product takes a bigger and bigger share of the market. Not many brands or factories are going to want to be at the head of the line for that scenario.

  4. Brandon Rael Avatar
    Brandon Rael

    Considering how cash-strapped consumers are, the resumption of student loan repayments will add another complexity to an already disrupted economy. Savvy retailers have already extended a degree of goodwill with their everyday low prices, loyalty programs, and other benefits such as value-centric private label assortments. While the average consumer with college loans may be down $300 more per month, others have far more significant college loan and credit card debt to contend with.

    On the surface, our economic condition is improving. However, the relentless inflation and price increases continue. One of the more concerning developments is that more Americans are using buy now, pay later capabilities to afford groceries and other necessities. As consumers struggle to balance their finances, and now with the impact of the student loan restart, BNPL usage will only increase as we continue towards the holiday period for both discretionary and everyday use products.

    Retailers and brands will have to come up with unique strategies to attract consumers who are in a constant state of making tough tradeoffs.

  5. Cathy Hotka Avatar
    Cathy Hotka

    I’m with Gene. The sheer volume of student loan debt is staggering, and the resumption of payments will certainly affect retail spending.

  6. Craig Sundstrom Avatar
    Craig Sundstrom

    Despite an effort to make this sound like a big impact – $300 …10%…”dozens of brands” – I don’t believe in the total economy it means a whole lot. I’ll leave it there as the question is answered (and not get into the philosophical implications that we should goose sales by having people not pay what they owe…and – presumably – have others pick up the tab).

  7. Georges F Mirza Avatar
    Georges F Mirza

    Inflation is impacting everyone, and indeed this will affect young graduates therefore the spending power. Will see what retailers will creatively do to get their attention.

9 Comments
oldest
newest
Gene Detroyer
Gene Detroyer
14 days ago

$1.77 trillion. That’s the amount of student loans that exist in the U.S. Student loans have grown 765% since 1995. I have difficulty conceiving those numbers in my brain. Something is seriously wrong with our higher-education system.

I don’t worry about the impact of the payments on the retailer or the holiday. What concerns me is the impact on the total economy. That $300 could be spent on anything, which becomes productive in the economy as spending is multiplied 5 to 7 times. Or it can be used to pay off the loan, which is non-productive and takes money out of the economy.

Scott Norris
Scott Norris
  Gene Detroyer
14 days ago

Most of those repayments accrue to lenders rather than cycling back to the government, to boot. Lower total cost all around just to fund students’ education up front, with a much stronger economic benefit across the entire economy. Elections matter!

Craig Sundstrom
Craig Sundstrom
  Gene Detroyer
14 days ago

At the risk of turning this into ‘PoliticalWire’, I would point out many would disagree with your description of someone paying their debts as “non-productive” . At any rate – no pun intended – I’d suggest you not lend money,

Neil Saunders
Neil Saunders
14 days ago

Given that household budgets are already under pressure, anything that adds to the burden will have a negative impact on consumer spending. This includes the resumption student loan repayments. Will this destroy the holiday season? No. Will it take the edge off growth during the holidays and add to the pressures on retail? Yes. Of course, retail isn’t the only area consumers can cut back on, so the pain is going to be spread across other areas like travel, leisure, entertainment and so forth.

Jeff Sward
Jeff Sward
14 days ago

Of course there will be an impact. That’s a lot of $$$ to siphon off from the market that may have been spent on discretionary or gift giving products. But the bigger, longer term question for me comes from the mention of the emerging importance of recycling and reselling. 17% sounds like an enormous number, but there is no mention or context for historical comparison. Hopefully recycling and reselling will grow, but how does that ripple back through the retail ecosystem to the sales of new product? And how does that ripple back through the supply chain? Somewhere along the line, sales and manufacturing of new product has to shrink when resold product takes a bigger and bigger share of the market. Not many brands or factories are going to want to be at the head of the line for that scenario.

Brandon Rael
Brandon Rael
14 days ago

Considering how cash-strapped consumers are, the resumption of student loan repayments will add another complexity to an already disrupted economy. Savvy retailers have already extended a degree of goodwill with their everyday low prices, loyalty programs, and other benefits such as value-centric private label assortments. While the average consumer with college loans may be down $300 more per month, others have far more significant college loan and credit card debt to contend with.

On the surface, our economic condition is improving. However, the relentless inflation and price increases continue. One of the more concerning developments is that more Americans are using buy now, pay later capabilities to afford groceries and other necessities. As consumers struggle to balance their finances, and now with the impact of the student loan restart, BNPL usage will only increase as we continue towards the holiday period for both discretionary and everyday use products.

Retailers and brands will have to come up with unique strategies to attract consumers who are in a constant state of making tough tradeoffs.

Cathy Hotka
Cathy Hotka
14 days ago

I’m with Gene. The sheer volume of student loan debt is staggering, and the resumption of payments will certainly affect retail spending.

Craig Sundstrom
Craig Sundstrom
14 days ago

Despite an effort to make this sound like a big impact – $300 …10%…”dozens of brands” – I don’t believe in the total economy it means a whole lot. I’ll leave it there as the question is answered (and not get into the philosophical implications that we should goose sales by having people not pay what they owe…and – presumably – have others pick up the tab).

Georges F Mirza
Georges F Mirza
11 days ago

Inflation is impacting everyone, and indeed this will affect young graduates therefore the spending power. Will see what retailers will creatively do to get their attention.