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Student Loan Repayment Resumption May Affect Consumer Spending

S.J. Steinhardt
Published Date:
Sep 18, 2023

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U.S. retailers have already expressed their concerns that the resumption of student loan repayments on Oct. 1 could hurt their bottom lines. Those with outstanding loans have concerns of their own, The Wall Street Journal reported.

Retailers and economists disagree about the repayments’ effects on the overall economy; economists told the Journal that the renewed payments are a relatively small problem for the more than $18 trillion in annual U.S. consumer spending, with money saved during the payment pause between 0.4 percent and 0.6 percent of all consumer spending, according to calculations by Tim Quinlan, a Wells Fargo economist. But affected households do not see it that way, as borrowers are cutting their spending, worried about another financial obligation.

A 33-year-old postdoctoral researcher in Owego, N.Y., told the Journal that he and his wife need to find $300 to pay down loans. They will reduce their grocery bills by $50 a month by cutting out small luxuries such as freshly baked bread, and he will save gas money by working from home once a week and eschewing his daily cup of coffee.

Such stories worry national retailers such as Target, Macy’s and Best Buy. “The upcoming resumption of student-loan repayments will put additional pressure on the already-strained budgets of tens of millions of households,” Target CFO Michael Fiddelke told analysts last month. “Against this backdrop, we remain cautious in our planning.”

The payment resumption could create more competition for affordable rental units, especially in high-price areas, according to Moody’s Analytics.

Some borrowers have enrolled in Saving on a Valuable Education (SAVE), an income-driven repayment program, and others are taking on more work to boost their income.

Among those borrowers who had student debt in March 2020, around a third made payments during the freeze, according to research by Harvard economics doctoral candidate Justin Katz, who also found that borrowers did not use that extra money to increase their spending significantly.

Loan payments started to increase ahead of the official restart, according to the Department of Education and the U.S. Treasury, but some economists are concerned about rising debt levels and falling savings. More than half of consumers with student loans added bank credit-card debt during the pandemic, about a third took on new auto loans and 15 percent took out new mortgages. according to credit reporting agency TransUnion.

The NYSSCPA's NextGen magazine is seeking to hear from Society members of all ages who are facing repayment of their student loans in October, after the three-and-a-half-year pause. If you are facing repayment and are interested in being interviewed, please email Ruth Singleton at