They’re back. After three and a half years of relief, millions of Americans with federal student loan debt are expected to restart their engines payments starting Sunday, for the first time since March 2020.
The pandemic-era pause, which was extended multiple times, has been a welcome reprieve for the 45 million borrowers who owe a combined $1.6 trillion, according to the Biden Administration. Now, millions of Americans will once again be forced to make difficult trade-offs—between rent and groceries, or long-term saving and immediate expenses—in order to simply stay afloat.
Until recently, consumer spending has stayed relatively high despite rising inflation and interest rates. But the cracks are finally starting to show, Citigroup CEO Jane Fraser recently warned, and consumer spending habits were already showing strain before loan payments restarted.
Experts are divided on how repayments will impact the economic landscape, namely if a potential dip in consumer spending could help trigger a recession.
While it’s likely that companies with a primarily young, low- to middle-income consumer base will see the greatest student loan impact, consumers have been spending more than expected recently. And that’s probably why there’s been a surprising amount of variety in earnings calls: No one knows how much—or how little—student loan repayments will upend business as usual.
What companies are saying. In one corner, there’s a cohort that anticipates little to no student loan impact. Take the Darden Restaurants earnings call; the company owns suburban staples like Olive Garden and Yard House. CEO Rick Cardenas stressed that the restaurant industry’s biggest metric to look out for is changes in discretionary spending. Unless student loan repayments concretely impact that the company isn’t particularly worried.
“We don’t expect consumer repayment of student loans is going to be a material impact to Darden over time,” he said.
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There are other cautious optimists who acknowledge that student loan repayments could present a challenge but feel equipped to weather the storm.
During fast food restaurant Wendy’s Q2 earnings call, CEO Todd Penegor noted that as “student loan repayments start to come in and any other things that start to provide a little bit of pressure against personal disposable income, there could be a little bit of impact there,” but that Wendy’s is “really well positioned…for the outlook of the year.”
The message was similar for online personal styling service Stitch Fix whose most avid customers are Gen Z. In its latest earnings call, CEO Matt Baer said there’s “ample reason to take a cautious view of the US consumer,” blaming student loan payments along with rising energy prices and interest rates for a “continued drawdown in consumer savings.”
But even noting the challenging macroeconomic environment, Baer said the company is focused on “the factors that are within our control,” like pricing and client relationships.
Finally, there are the companies taking the same approach as the shrugging emoji: Who knows? That was the case during the Q2 earnings call for supermarket giant Kroger. CEO Rodney McMullen said he expects student loan repayments will have some kind of substantive impact on grocers—but that’s all he knows for sure.
“You don’t know for sure until it happens. We do believe that the impact on grocery would be less than other categories,” he explained. “So we’ve assumed that to be a headwind, but the specifics until it happens, you just don’t know.”