Federal student loan payments, which are set to resume by the end of August 2023 as part of a compromise to secure congressional approval for the debt ceiling, could significantly impact the 2023 holiday shopping season.

According to a report by economists at Bank of America, the resumption of loan payments is expected to put a strain on many consumers’ finances and may lead to an increase in delinquencies. The report noted that “seriously delinquent” student loan balances remained relatively stable between 2012 and 2019. Still, if full payments are required to resume, they will likely revert to at least pre-Covid levels.

It is worth noting that the Biden Administration’s debt relief plan will soon face a ruling by the Supreme Court, with a decision anticipated this week.

In the event that the court upholds Biden’s program, lower-income graduates could potentially have up to $20,000 in educational loans forgiven. However, if stricter measures are implemented regarding student loans, it could significantly impact the budgets of numerous consumers during the holiday season.

Retailers in the apparel and accessories business are particularly vulnerable. According to recent research by UBS analysts, U.S. consumers with student loans are expected to reduce their spending primarily on soft goods such as apparel. These consumers typically prefer branded products over private labels and favor specialty retailers over discount stores. As a result, brands like American Eagle, Crocs, Foot Locker, Canada Goose, Gap Inc., Nordstrom, Nike, Under Armour, and Victoria’s Secret are all at risk of declining sales.

Holiday season aside, if the pandemic-era student loan pause comes to a complete end, overall retail sales growth could potentially experience a decline of one percentage point. This impact would be most significant in discretionary categories. However, forgiveness programs like the one currently under consideration by the Supreme Court could help mitigate the negative effects.