Following the Supreme Court’s 6-3 decision Friday to nix President Biden’s student loan forgiveness plan, retailers will face heightened consumer caution, with back-to-school sales and the holiday season just around the corner, analysts say. In deeming the program unlawful, the court swept away plans that would cancel up to $20,000 in loan debt for individuals earning $125,000 or less a year.
“Today's announcement removes any cushion from the forthcoming resumption of normal, monthly student loan payments set to begin in the coming months,” Roth MKM Executive Director David Bellinger said in emailed comments.
Throughout the year so far, the retail segments followed by Retail Dive have posted solid year-over-year gains, despite consumers’ ongoing caution and preference for services like dining out. The pause in payments this year has bolstered retail sales at a time when consumers have already been wary, according to GlobalData Managing Director Neil Saunders.
“The student loan forgiveness program and the pause on repayments have provided a very nice fillip to the retail sector and have helped boost growth during some challenging times,” he said in emailed comments. “Now that both policies are on the way out, the sector will feel something of a chill and this will start to hit just before the holiday season gears up.”
The industry didn't take up the issue, despite analyst concerns about its impact on retail. The National Retail Federation didn't immediately respond to a request for comment Friday. Last week, the organization declined to comment on the potential impact of the student loan forgiveness program on retail, or whether it has worked on the issue. The Retail Indusry Leaders Association on Friday said it hadn't taken a position on it.
Retail in general is vulnerable to the shifts in buying behavior as the younger and lower-income households most affected by the student loan policy are hit anew with their loan balances. But apparel and home goods are poised to be hit hardest, according to GlobalData research.
Households are likely to make do with some existing school supplies, including electronics, rather than upgrading them this year, according to Mike Graziano, consumer products senior analyst at RSM U.S.
“Given the likely timing of payments resuming, families planning for the back-to-school season will need to rethink shopping plans,” he said in emailed comments. “It will also likely further push consumers to look towards discounts or shopping opportunities with lower cost providers.”
