Analysts Say Supreme Court Student Loan Decision Could ‘Significantly Impact’ Consumer Spending on Shoes

Following the U.S. Supreme Court’s decision on Friday to strike down President Biden’s student loan forgiveness program, immediate effects on the footwear and retail industries are coming into focus.

While some market watchers argue that the negative impact to the market could be a flash in the pan, most, like Liza Amlani, principal and founder of Retail Strategy Group, told FN that the weight on consumers will be “significant.”

“Those who were anticipating loan forgiveness or relief will now need to adjust budgets and spending to pay back loans which means spending less on apparel, footwear and other discretionary goods,” Amlani said. “Consumers were already spending less and were more cautious with their budgets as prices across grocery and essentials have been increasing day by day.”

Matt Powell, an advisor at Spurwink River and senior advisor at BCE Consulting, agreed. “This decision was not good for consumer spending,” Powell told FN. “I read recently that it’s billions of dollars a month that would have been available to spend on other things that’s now going to have to go to loan repayment. So, it’s just one more negative.”

Neil Saunders, managing director of GlobalData, added in a noted to clients that the Supreme Court’s decision is “bad news” for retail, citing mostly younger and lower-income households that “will need to pull back more heavily on spending once repayments resume.”

“Given that these households tend to spend a large portion of their incomes on retail, the sector is particularly exposed to the ramifications,” Saunders said.

Amlani also warned that department stores could take the biggest hit as they carry the most inventory. “Off-price and discount stores will continue to see growth as consumers will look for deals,” she said.

For footwear specifically, Powell noted that sales in the athletic shoe market could be impacted as the sector’s second largest demographic, which are post-college adults, are most affected by this Supreme Court decision. “There’s no path to say that this is a good thing for us,” Powell said. “So, I think it just adds to all the other negativity that’s out there. And I think it’s going to hurt sales.”

Matt Priest, president and CEO of Footwear Distributors & Retailers Of America (FDRA), on the other hand, isn’t overly concerned. “In a general sense, the less discretionary income consumers have can lead to less sales in footwear,” Priest told FN. “So, I think there will be some kind of impact. But, I’m not overly concerned that it will disrupt the market significantly.”

Sam Poser, senior equity analyst of footwear and apparel at Williams Trading, added that this move will undoubtedly cause consumers to be even more particular with what they purchase and offered advice to shoe players wishing to navigate this added financial stress.

“Now, companies need to get more focused,” Poser told FN. “What’s been working isn’t necessarily going to continue to work. As long as companies can appropriately satisfy demand and consumers are coming into the store asking for your brand, you will not have a problem.”

On Friday, the Supreme Court ruled 6-3 to stop the Biden administration from permanently canceling up to $20,000 in student loans for borrowers who qualify depending on criteria such as income and the type of loan held. If the motion was approved, the program would have forgiven $430 billion in student debt, with nearly 90 percent of the relief going to people making less than $75,000 a year.

“President Biden’s student loan giveaway is ruled UNLAWFUL,” crowed Republican House Speaker Kevin McCarthy on Twitter after the Supreme Court’s decision was handed down. “The 87 percent of Americans without student loans are no longer forced to pay for the 13 percent who do [have them]. This builds on the Fiscal Responsibility Act’s end to the payment pause. The president must follow the law.”

Biden, in a statement, marveled at “the hypocrisy of Republican elected officials.”

“They had no problem with billions in pandemic-related loans to businesses — including hundreds of thousands and in some cases millions of dollars for their own businesses,” the president said. “And those loans were forgiven. But when it came to providing relief to millions of hard-working Americans, they did everything in their power to stop it.”

Following the Supreme Court’s decision Biden wasted no time in hitting back. On Friday afternoon, the Biden administration took two steps aimed at providing debt relief for as many borrowers as possible, as fast as possible, and supporting student loan borrowers.

These moves include The Secretary of Education initiating a rulemaking process aimed at opening an “alternative path to debt relief” for as many working and middle-class borrowers as possible, using the Secretary’s authority under the Higher Education Act. Additionally, the Department of Education finalized its “most affordable repayment plan ever.”

The Department of Education is also instituting a 12-month “on-ramp” to repayment, running from October 1, 2023 to September 30, 2024, so that financially vulnerable borrowers who miss monthly payments during this period are not considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.