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CFOs Wonder If Student Loan Repayments Mean Spending Dropoffs

S.J. Steinhardt
Published Date:
Sep 5, 2023

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Chief financial officers are watching to see if a resumption of federal student loan repayments that start on Oct. 1 will have effects on their bottom lines, The Wall Street Journal reported.

As higher prices and rising interest rates weigh on consumer spending, tens of millions of student loan borrowers will, as soon as Oct. 1, face repayments after a three-year pause. CFOs are watching closely to see if consumer spending takes a hit.

The CFOs worry that borrowers concerned about being able to cover their student loan bills, after a three-year pause, will continue to cut back on their discretionary spending.

“Student loans will definitely be a change to the consumer,” Smucker CFO Tucker Marshall told the Journal. “It will now be a claim on their income for a given month or quarter.”

Roughly 43 million people, or around 17 percent of adults in the United States, have federal student loan debt. The typical monthly student loan payment falls between $209 and $314, equating to a pay cut of around 4 to 5 percent of U.S. median household income before taxes, according to a Wells Fargo analysis, which used data collected in 2019.

Beyond their loan payments, some consumers are feeling the effects of rising prices and, with pandemic-era savings dwindling, consumer credit is harder to come by and is more expensive, according to Tim Quinlan, a senior economist at Wells Fargo.

“I don’t think this, on its own, is what derails things,” he said of student loans. “But the consumer has already taken a couple of body blows and is on its heels. It doesn’t take much of a punch to knock them over at this point.” 

Executives at U.S.-listed companies mentioned “student loans” or “student loan” on 70 earnings calls from July 1 through the end of August, up by 268 percent from the same period last year, according to AlphaSense, a financial-research platform. Excluding financial-services companies, which  tend to discuss student loans more regularly than other companies, that increase is 800 percent, the data show. 

Some companies, such as restaurant chain Chipotle, and beauty and fragrance company Coty, have been contemplating or planning price increases. Chipotle CFO Jack Hartung told the Journal that his company is sensitive to what menu price hikes may mean for its consumers, particularly for a key demographic that may soon resume with loan payments. Coty’s planned mid-single-digit price increases this quarter for both its consumer beauty and prestige divisions are partly meant to offset inflation, CFO Laurent Mercier told the Journal. He said that as borrowers start paying back their loans, he doesn't expect a major reduction in demand, even with the price increases