Case Study_Evaluating the Impact of Student Loan Payment Resumption on Consumer Spendingpdf
Case Study_Evaluating the Impact of Student Loan Payment Resumption on Consumer Spendingpdf
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  1. EvaluatingtheImpactofStudentLoanPaymentResumptiononConsumerSpendingJuly2023TheCARES-actpauseonstudentloanpaymentsoverthepastthreeyearsisslatedtoexpirethisOctober.EarnestOriontransactiondatacanhelpassesstheimpacttheresumptionmayhaveonconsumerspending.UserscanleverageEarnest’sOriontransactionrowleveldata,availableviaDirectFeedtoanswerthesequestions.Thedataincludessalesrecordsforindividual,anonymoushouseholdsacrosstheircreditanddebitcardaccounts.Thisdataisidealforcustomercohortingbasedonincomeandbillpaybehavior,whichallowsclientstogainafullunderstandingofwhatisdrivingperformanceamongconsumer-facingcompanies.1AltDataforInvestorsandCompanies|https://www.earnestanalytics.com
  2. Borrowers’coststoincrease~$300/mo.thisfalThenumberofstudentloanpayersinEarnestOriondatadropped40%inApril2020comparedto1Q20astheCARESactsuspendedfederalstudentloanpaymentsandinterestaccruals.Thedeclinedeepenedto70%fewerpayersbyJune2023*.Theaverageloanpaymentsizewasjustunder$300/monthbeforecovid,anamountthatquicklyincreasedtothehigh$300s/low$400swhereitremainsasofJune2023.Thehighermonthlypaymentlikelyreflectsborrowersinastrongerfinancialpositionastheseindividualscontinuedtomakepaymentsvoluntarilydespiteloanforbearance.WithinterestresuminginSeptemberandpaymentsinOctober,a$300/monthbillonmanyconsumerbudgetsmayaddpressuretoanalreadycautiousspendingenvironment.PoweredbyEarnest’sOriontransactiondataset.ContactSalesformoredetails.2AltDataforInvestorsandCompanies|https://www.earnestanalytics.com
  3. Borrowers who suspended payments underspentEarnest cohorted the Orion panel into four groups with regards to student loan borrowers:●Covid-Suspended=lastpaymentbetweenFeb1,2020andApril1st,2021●Continuing=sawpaymentwithinmostrecent65days●Other=madeapaymentbutnotintheabovetwobuckets●Non-Borrower=nopaymentthroughoutthetimeseriesThe Covid-Suspended cohort began outspending their peers by~3 points per month oaverage when covid hit and their loans first went into forbearance, effectively adding~$300 to their monthly budget. However, beginning mid 2021, the Continuing cohorbegan to outspend their Covid-Suspended counterparts by~2 points per month oaverage. This cohort also outspent Other borrowers and Non-Borrowers by~1 point oaverage.While this outspending narrowed in 1H23, the Continuing cohort outspent earlier in theyear. This multi-year spending outperformance among the cohort who made voluntarypayments likely points to a consumer with a healthy household balance sheet.Importantly, Non-Borrowers also outspent the Covid-Suspended cohort from 2021 to2023, suggesting the resumption of loan payments this Fall may only serve to furtherwiden the spending gap between the Covid-Suspended cohort and their peers.Powered by Earnest’s Orion transaction dataset.Contact Salesfor more details.3Alt Data for Investors and Companies |https://www.earnestanalytics.com
  4. Discretionary,Travel,andHomeseehighestdeltaFromJanuary2022toJune2023,theContinuingandNon-BorrowercohortsoutspenttheCovid-Suspendedcohortacrossthemajorityofcategories.Discretionarycategoriesledthewayandexperiencedmorepronouncedoutspending,withmostoutperformancebeingatleastmid-singledigits.GeneralElectronicsandHomeFurnishingsoutperformedthemostamongtheContinuingcohort,whileAirTravel,Lodging,andHomeFurnishingsoutperformedamongNon-Borrowers.Conversely,spendingathighlyfrequentednon-discretionarysectors,suchasWarehouseClubs,BigBoxRetailers,DiscountGrocers,andDollarStoresdidnotdivergebetweenthecohorts.PoweredbyEarnest’sOriontransactiondataset.ContactSalesformoredetails.4AltDataforInvestorsandCompanies|https://www.earnestanalytics.com
  5. MerchantSensitivityAnalysisPlottingtheCovid-Suspendedcohort’sshareofspend(y-axis)againsttheirover/under-spendingrelativetoNon-Borrowers(x-axis)canhelpmeasureamerchant’ssensitivitytotheresumptionofstudentloanpaymentsthisOctober.Spendfromthecohortaccountedfor5to15%oftotalmerchantspendwithvaryingdegreesofover/underspendingrelativetoNon-Borrowers.Somehighlightsinclude:WithinTravel,FrontierAirlineswasthemostsensitivetotheCovid-Suspendedcohortin2022,with11%shareand2pointsofoutspendingfromthecohort.Incontrast,AlaskaAirlinesandUnitedAirlinesbothhad7%shareand10pointsofunder-spending.Airbnbhadahigh11%sharefromthecohortbutwith4pointsofunderspending.WithintheHomesector,Pelotonwasmostsensitive,with13%shareand11pointsofoutspendingfromtheCovid-Suspendedcohort;SherwinWilliamshad6%shareand10pointsofunder-spending.IKEA,Ashley,HomeGoods,Wayfair,andLowe’sallhad10%sharefromthecohortbutthecohortalsounderspentNon-Borrowersby~5pointsMostApparelandDepartmentStoreshadover10%sharefromtheCovid-Suspendedcohort:OldNavyhadthehighestshareat14%;NordstromFullPricehadthelowestshareat8%.OldNavyandBurlingtoneachhad3pointsofoutspendingfromthecohort,whilemostotherssawminimaltounderspending.PoweredbyEarnest’sOriontransactiondataset.ContactSalesformoredetails.5AltDataforInvestorsandCompanies|https://www.earnestanalytics.com
  6. NotesAnalysisincludesstudentloanpaymentsfromthefollowingloanservicers:Navient,Nelnet,Fedloan,ECSI,Mohela,GreatLakesEducationalLoanServices,SallieMae,Earnest,EdFinancialServices,OSLA,Aidvantage,KHESLC,andmorefromvariousUnidentifiedproviders.Note,manyoftheseprovidersservicetuitionpaymentandotherstudentpaymentservicesbesidesforstudentloanpayments,whichmayaddsomenoisetothedata.Inaddition,manyoftheseprovidersservicebothfederalandprivateloans(federalloansaccountfor~90%ofloansoutstandingaccordingtothecollegeboard;onlfederalloansweresuspendedintheCARESact).TotalconsumerspendingthroughoutthisanalysisreferstotheEarnestOriontransactiondatacs_panel_spendtable.Thetableisaproxyformacroconsumerspendingandhasan92%R-SquaredwithMRTS*AccordingtotheCollegeBoard,25.5millionoutof43.3milliontotalstudentborrowers,or~60%ofborrowers,wentintoforbearancefromtheCARESact.ThesmallerdropoactualpayersinthedatawhentheCARESactpassedsuggeststhatmanyborrowerschosetocontinuepaymentregardlessofthelegalpause.Thedeclineofpayersinthedata,particularlythegradualdeclinepostcovid,ispartiallyduetostructuralbiasesofthepanel,includingtheunder-capturingofnewstudentloanborrowers.Additionally,thepanel’sstructuralover-capturingofhigherincomehouseholdsmayalsoservetounderstatethedeclineinactualpayers.**NotethatborrowerswhoinfactpaidofftheirloansbetweenFeb1,2020andApril1st,2021willbeinadvertentlyincludedintheCovid-Suspendedcohort.6AltDataforInvestorsandCompanies|https://www.earnestanalytics.com
  7. AboutUsEarnestAnalyticsisthegoldstandardinconsumerandhealthcaredata.Earnestworkswithworld-classdatapartnerstotransformrawdataintoactionableinsightsforbusiness,consulting,andinvestmentprofessionals.Earnestproductsofferinsightintoconsumerbehaviortrendsandanunbiasedlookintocompetitivemarketdynamics,withahighdegreeofaccuracyagainstcompany-reportedmetrics.Earnest'sdatasuiteincludestwoindustryleadingtransactiondatasets,aswellasCPGScanner,FootTraffic,RetailPricing,Homebuilder,AutoSeller,andHealthcaredata.Disclosures&LegalCopyright©2023TheEarnestAnalyticsCompany.Allrightsreserved.AllcontentanddataaretheexclusivepropertyofEarnestAnalytics.Alldataandinsightsareprovided"asis"withnorepresentationsorwarrantiesofanykindastotheiraccuracyorcompleteness.www.earnestanalytics.com7AltDataforInvestorsandCompanies|https://www.earnestanalytics.com
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