Most economists think that while the hit could be substantial, it will not be so big that it would plunge America into a recession. Goldman Sachs analysts expect renewed student loan payments to cost households about $70 billion per year. That would probably be enough to subtract 0.8 percentage points from consumer spending growth in the fourth quarter, helping to slow it to 1.4 percent, they estimate.
Yet major uncertainties remain. Such estimates of just how big the drag will be are rough at best, it is unclear when exactly it will bite and economists are unsure what it will do to consumer confidence. There are factors that could make the impact smaller: The Biden administration has taken steps to ease the pain, allowing for people with lower incomes to repay their loans more slowly and creating a one-year grace period in which missed payments will not be reported to credit rating agencies.
But the student loan payments will also restart at the same time consumers face a number of other headwinds, including shrinking savings piles, a cooler job market and higher price levels after two years of rapid inflation. It could also coincide with major strikes — Hollywood actors and writers have been locked in a work stoppage all summer, and the United Auto Workers began a targeted strike on Friday, one that economists warn could be disruptive if it lasts. Adding another source of looming uncertainty, Congress could fail to reach a funding agreement by the end of this month, forcing a government shutdown.
Retailers have begun to publicly fret that the resumption of student loan payments could collide with those other developments, pushing their shoppers closer to a breaking point. Executives from companies like Walmart, Macy’s, Best Buy and Gap have all warned analysts and investors that student loan payments may put pressure on shoppers’ budgets, eating into some of their sales in the process.
“I don’t think we have a very good grasp” on how the hit to consumers will play out, said Julia Coronado, the founder of MacroPolicy Perspectives, a research firm. “It’s still very unclear exactly what the impact will be.”