Student Loans Return
With cultural mania surrounding Barbenheimer and concerts fueling spending this summer, a new mighty foe will approach consumers’ wallets. Starting on October 1st, student loan payments will resume after nearly a three-year moratorium for borrowers. With an initial pause spurred by the pandemic, the Biden administration made a large attempt to cancel over $100 billion of student debt. However, in the summer the Supreme Court ruled against Biden’s student loan forgiveness program, restarting all payments next month for tens of millions of student loan borrowers. These payments, which occur monthly, can range anywhere from an average of $200 and $300, really dampening the disposable income levels of several Americans.
Against all odds, the strength of the U.S. economy has been carried by the resiliency of the consumer. Despite rates at twenty-year highs, heightened spending from Americans has continued to carry on as recent as last month, where retail sales averaged far higher than estimates at 0.6% month-over-month. This added deadweight of over $100 billion to student loan borrowers has several economists and retailers fearful over what could come next. Staple-good retailers Walmart and Target have provided strong guidance over the future consumer, claiming spending should remain relatively high for necessary goods. But other corporations that provide goods and services that aren’t necessary may have a harder road ahead of them, especially for subscription-based businesses. In the broader sense, although a restart of over $100 billion in payments will have some effect, it does not compare to the $18 trillion worth of annual U.S. consumer spending. Later this week, words from the Federal Reserve may shine some light on the ways they plan to tackle decreasing inflation and maintaining consumer confidence.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.