The Wall Street Journal said in a report over the weekend that student-loan repayments are set to resume in the coming months, and it could cause a "big shock" for retailers.
The U.S. Government put a pause on student debt payments during the pandemic, allowing millions to forget about a large monthly bill for over three years.
However, they are due to restart student-loan payments in the coming months, and the WSJ states that the collective monthly impact on consumer wallets could be as much as $10 billion, potentially causing a significant impact on where they spend their money.
Reacting to the article, KeyBanc Capital Markets analysts stated that "the exposure to the U.S. consumer is significant, with nearly 30M Americans with loans in forbearance (about 10% of the adult population) that are expected to resume payments."
"The loan payment pause, in effect since March 2020, ends in August, though the government is considering a grace period of a few months to help borrowers from hitting 'delinquent' status immediately. As such, the full headwind likely won't be felt until 1Q24," explained the analysts.
While they noted that separately, the Supreme Court is soon expected to rule on President Biden's debt forgiveness program, they believe that even if forgiveness goes into effect, "the resumption of the other loan payments is still a net headwind for the consumer."
KeyBank believes Walmart (NYSE:WMT), Ollie's Bargain Outlet Holdings Inc (NASDAQ:OLLI), and Five Below (NASDAQ:FIVE) are best positioned to navigate the environment while there are ongoing risks to Target (NYSE:TGT), Best Buy Co Inc (NYSE:BBY), Dollar General (NYSE:DG), Dollar Tree (NASDAQ:DLTR), and Big Lots (NYSE:BIG).