Eastern Oregon University's graduating class of 2023 listens to the keynote address delivered by Teaching Excellence Award recipient Peter Wordelman during the commencement ceremony on June 17, 2023, at Community Stadium in La Grande. 

PORTLAND — More than half a million Oregonians may need to rework their budget to accommodate a new monthly bill, and that could have broader economic implications.

The 540,000 Oregonians with federal student loan debt owe more than $20 billion in all, according to the U.S. Department of Education. The federal government froze payments and interest accrual for those loans in March 2020 as part of a pandemic relief measure. The break created a financial cushion that allowed borrowers to use the money for rent, car payments, or other spending — or to pay down other debt or build savings.

But now that respite has ended. As of Sunday, Oct. 1, borrowers are on the hook again for paying their monthly student loan bills, and interest accrual resumed at the beginning of September. The Supreme Court this summer struck down the Biden administration’s plan to forgive about $400 billion in student debt for 43 million Americans.

While Oregon has relatively fewer borrowers than most states, their average debt is higher. The typical student loan borrower in Oregon owes just over $38,070, compared to $36,348 nationally, according to data provided by the Federal Reserve Bank of New York.

The economic impact of restarting student loan payments remains murky. Economists say the hit could be measurable, though perhaps short-lived.

“I think there’s a lot of uncertainty about how it’s going to impact the consumer, particularly at a time when households are already becoming more financially vulnerable,” Shannon Seery, a Wells Fargo economist, said. “We might see somewhat of a slowing in total spending in October, but it’s not going to have a significant effect on overall household spending.”

Seery said most student loan balances are manageable and that only people with very large balances will have to pull back on their spending. She said more than half of all U.S. borrowers held $20,000 or less in balance.

“The large balances are really concentrated in a small number of households,” Seery said. “It’s really your younger age cohorts that are most affected by student loan debt.”

More than 50% of Oregon borrowers, however, owe more than $20,000 in student loans, according to federal student loan data. Roughly 70% of borrowers in the state are between the ages of 25 and 49.

Josh Lehner, a senior economist with the Oregon Office of Economic Analysis, agreed that the end of the student loan pause will have minimal impact on the broader economy but that “some households will have a big adjustment to make.”

Data from his office show that student debt as a share of household income has declined, suggesting that borrowers may be better equipped to handle the payments because of rising wages.

“The folks struggling the most with student loan debt are typically those with relatively low loan balances — a few thousand dollars — of which many did not complete their degree,” Lehner said. “Most individuals with really large balances are able to pay them off, as they are in higher-paying jobs and are able to service the debt.”

Some major retailers still worry that the resumption of student loan payments could translate to reduced disposable income for many borrowers, which may result in decreased spending on nonessential items just as the holiday shopping season starts to loom.

“The upcoming resumption of student loan repayments will put additional pressure on the already strained budgets of tens of millions of households,” Target chief financial officer Michael Fiddelke told investors during an earnings call in June. “Against this backdrop, we remain cautious in our planning.”

After two years of stimulus-fueled spending, Target and other retailers are struggling to maintain their winning streak. In its most recent quarter, Target sold 5% less than it did in the same quarter last year.

Walmart executives have also warned investors that the resumption of student loan payments may put added pressure on shoppers’ budgets, eating into some of the retailer’s sales in the process.

“Rising energy prices, resuming student loan payments, higher borrowing costs and tightening lending standards, and a drawdown in excess savings mean that household budgets are still under pressure,” Walmart CEO Doug McMillon told investors when the retailer reported earnings in August.

A recent survey by investment bank Jefferies suggested that the restart of student loan payments could hurt sales at Nike, Foot Locker and other apparel retailers.

The firm surveyed more than 600 U.S. consumers with outstanding student debt and found that “nearly 90% of respondents are at least somewhat concerned about being able to meet all of their monthly expenses, while apparel, footwear, accessories, restaurants, and big-ticket items are likely to see the biggest pullbacks in spending.”

For the first time since 2016, the Free Application for Federal Student Aid was not be ready on Oct. 1 for the following academic year. Instead, students have to wait until December to fill out and submit a redesigned application for financial aid — including federal student loans, grants and work-study — for the 2024–25 school year. Page B2