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Student Loan Payments Are About To Restart. Retailers, Apartment Owners Could Share The Pain

Student loan repayments resume next month for the first time since March 2020, adding about $275 of expenses to tens of millions of budgets.

The burden has the potential to cut discretionary spending at places like WalmartTarget and luxury retailers while forcing some renters to move into cheaper places or double up within a unit, analysts and executives say.


Up to 22 million student loan borrowers will resume making payments averaging between $200 and $300 a month starting Oct. 1, Morningstar reported. Interest began accruing Sept. 1. 

"This will be a major financial shock and additional burden to younger renters or millennials, especially those in the low- and moderate-income group who are rent burdened," Moody's Analytics said in a report

This added expense could force some renters to move down a class in apartments, saving an average of $610 monthly, according to the Moody’s report. Others may be forced to move in with family or friends to avoid homelessness, the report says. 

Retailers have also expressed concern that student loan repayments could impact their bottom lines, The Wall Street Journal reported. Target Chief Financial Officer Michael Fiddelke told analysts last month that student loan repayments will put additional pressure on already-strained household budgets, per the WSJ.

“Against this backdrop, we remain cautious in our planning,” he said.

Other retailers acknowledging the risk include Macy’sUlta Beauty and Best Buy. Best Buy Chief Financial Officer Matt Bilunas said the business could be “more slightly exposed” than others given its consumer demographics, the WSJ reported. But many student loan borrowers have higher-than-average incomes, which might also make them better positioned to continue spending on electronics, Bilunas said.

A decline in discretionary budgets would start with luxury items, according to Moody’s. The loan repayments could dwindle borrowers’ financial buffers, slowing growth the retail sector seized upon in recent years, according to Moody's. 

Meanwhile, based on a median monthly income of $6K for the U.S. population, moving from a Class-A unit to Class-B or Class-C could net a surplus of $335 even when factoring in student loan payments, according the Moody’s report. 

The surplus could be even greater in markets like San Francisco, where the median monthly income is close to $11K, the report says. The cost difference between Class-A and Class-B or C rentals in the city is about $1,500, which could net a surplus of almost $1,300 for those trading down. 

If renters do trade down, that could magnify the housing shortage and deepen a structural imbalance, Moody’s said in its report. Class-B and C rental markets that haven’t seen much inventory growth could become even more competitive and less affordable for moderate- and low-income families, the report says.