Leticia Miranda: Retailers are nervous about your student loans

Leticia Miranda, Bloomberg Opinion on

Published in Business News

In a couple of weeks, U.S. consumers will be required to start making payments on some $1.6 trillion of student loan debt after a three-year moratorium. Economists estimate the repayments could curb consumer spending by anywhere from $9 billion a month to $70 billion a year. And that’s before accounting for the recent uptick in gasoline prices, which are now at their highest since October and closing in on $4 a gallon. Retailers must be pretty concerned about how this will effect shoppers, right? Well, yes and no. Ask three different retailers and you’re likely to get three different answers, underscoring how there is little consensus among even those closest to consumers on how all this will play out.

The stakes are high. The surprisingly resilient American consumer is the primary reason why economists have pushed back or even eliminated their forecasts for a recession. The level of concern among retail executives over the resumption of student loan payments run the gamut from brushing it off as a non-event to bracing for a big pullback in spending. Even the country’s largest retailer by sales volume, Walmart Inc., is uncertain how this will impact the consumer. Chief Financial Officer John Rainey told investors in August the company has “a pretty good look at what's going on with the consumer but it's far from clear is basically the message right now.”

After two years of stimulus-fueled spending, retailers are struggling to maintain their winning streak. Retail stocks have fallen from their highs this year as shoppers turned cautious or directed their spending from goods toward travel and dining out. The S&P Retail Select Industry Index, which includes retailers from Walmart to Macy’s Inc., outperformed the overall S&P 500 Index for the most of two years beginning in 2020, but has underperformed this year, especially last week after a tranche of retailers reported their financial results.

Much of the worry depends on who a retailer considers a core customer and what they’re selling. Bath & Body Works Inc., a retail chain that sells candles, lotions and soaps, is expecting its unit prices to be flat through the year and net sales to decline in the next quarter, which includes the beginning of the holiday shopping season. Chief Executive Officer Gina Boswell said at an investor conference last week that student loans might be partially to blame for the company’s sluggish outlook, saying it’s “not expecting any help” from repayments biting into spending dollars.

Farm and ranch supplier Tractor Supply Co. enjoyed a big boost in recent years as urban dwellers moved to the far suburbs and rural areas. Over the pandemic, the company’s revenues nearly doubled to more than $14 billion by 2022. Tractor Supply invested millions of dollars into the business to grow its newfound base. It reconfigured stores to refine its apparel section, broaden its assortment of power tools and create space for a service desk to handle the extra business. Now, CFO Kurt Barton said the company is “very conscious” of how the repayments might affect business but assured investors the new customers will keep spending because they have solid jobs and mortgages, possibly at rates that hit historic lows in 2020 and 2021. To them, a $200 to $299 monthly student loan payment may not be a big deal at a time when the national median mortgage payment is around $2,100 a month.

Discounters are betting they might get a lift if repayments squeeze inflation-fatigued consumers — but even they can’t say for sure. When asked about the impact of student loan repayments on customers in August, Burlington Stores Inc. CEO Michael Sullivan told investors, “We don't know.” For Burlington, their shoppers could either be too overwhelmed with repayments to shop at their stores or the company could benefit from people who may have never shopped there before but are now looking for a deal. “It's very difficult to predict what the overall impact will be,” he said.


The uncertainty across the retail industry speaks to broader ambiguity about consumers as the country recovers from a global pandemic. There is no rulebook for what happens when a pandemic shuts down the economy and the government responds with trillions of dollars of fiscal stimulus, enhanced public assistance and puts a pause on student loan payments. Retailers including discounter Dollar General Corp. and pharmacy Walgreens Boots Alliance Inc. noted a dent in sales when emergency Supplemental Nutrition Assistance Program (SNAP) benefits expired in March. But Walgreens has said little about any anticipated impact on spending from student loan repayments other than it is “closely watching” the development. Dollar General said in August that it doesn’t anticipate any significant impact from the end of the moratorium.

There are some things we do know. Many economists agree that the repayments are unlikely to drive the country into a severe recession. Those at Goldman Sachs Group Inc. recently characterized it as part of fourth quarter “pothole” where quarterly economic growth will slow briefly before picking back up next year. But for retailers who have already been squeezed by consumers who have turned toward spending on travel and restaurants, any sign of less money in shoppers pockets is cause for concern.


This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Leticia Miranda is a Bloomberg Opinion columnist covering consumer goods and the retail industry. She was previously a business reporter at NBC News and a retail reporter at BuzzFeed News.

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