American households could lose a huge chunk of their disposable income in a few weeks when the government’s student loan forbearance program comes to an end.

Starting Oct. 1, nearly 44 million student-loan borrowers must begin paying back their loans. According to the Wall Street Journal, the repayments could cost consumers up to $100 billion annually.

That’s $100 billion that could have been spent at shopping malls, restaurants, and movie theaters. Or used to pay down other debt and save for larger purchases.

The Journal estimates monthly student loan payments will average between $200-$300. The Education Data Institute forecasts a much higher monthly payment of $503 based on previously recorded average payments and median salaries of graduates.

Regardless of the exact amount, these are payments that people haven’t had to worry about since the start of the pandemic. And in many cases, the money that would have gone toward student loans has been allocated elsewhere.

The return of student loan payments couldn’t come at a worse time for retailers because the next three months leading up to the holidays are make-or-break for the entire industry.

Target and Walmart have already sounded the alarm, while others have put a freeze on seasonal hiring.

Stores brace for subdued holidays

There’s a growing concern that student loan payments will leave fewer dollars for costumes and candy, putting a dent in Halloween sales.

The spooky season generates more than $10 billion annually in retail revenue, according to the National Retail Federation (NRF). And even scarier, that’s just a drop in the bucket compared to Christmas.

Holiday sales in November and December account for nearly one-fifth of total retail sales for the whole year. That amounts to nearly $1 trillion, according to NRF.

There’s evidence that retailers are already bracing for a less cheerful holiday season this year.

According to a report from employment service Challenger, Gray & Christmas, stores expect to hire 410,000 seasonal workers this holiday season. But so far, they’ve only announced 8,000 planned hires—compared to 258,201 announced this time last year.

At this rate, it’s not clear when and for how long seasonal workers will be hired.

“It’s really surprising,” said Andrew Challenger, senior vice president at Challenger, Gray & Christmas. “We have never gone this far into September and not had big hiring predictions from retailers.”

Student loan payments aren't solely to blame for the apparent drop in planned hiring. After all, retailers depend on a healthy consumer to drive sales. But there’s certainly nothing healthy about consumers’ finances in 2023.

Loan repayments add to already-strained budgets

It’s not just student loans Americans have to worry about.

Credit card balances and outstanding personal loans are at all-time highs. Average monthly car payments are the highest on record. Nearly one-quarter of middle-class Americans are saddled with medical debt.

Paychecks have gotten slightly larger, but they buy fewer goods than a year ago. That’s because real wages are falling. After-tax incomes have also declined since Uncle Sam rolled back pandemic-era stimulus support.

“The upcoming resumption of student-loan repayments will put additional pressure on the already-strained budgets of tens of millions of households,” said Michael Fiddelke, Target’s chief financial officer. “Against this backdrop, we remain cautious in our planning.”

“If you look at our demographics, we potentially could be more slightly exposed,” said Matt Bilunas, chief financial officer at Best Buy.

A huge share of Best Buy’s customers are Gen Z—those who are saddled with some of the highest student debt burdens. They also make up the fastest-growing share of credit card borrowers.

While it’s difficult to know for sure how the end of student loan relief will impact Americans’ spending habits, some analysts have drawn parallels to the end of pandemic-era food-stamp benefits.

In February 2023, the government halted enhanced food-stamp benefits and immediately took away $3 billion of additional assistance per month, according to the Journal.

Dollar Tree, which operates one of the largest chains of dollar stores in the country, reported a 4.4% drop in same-store discretionary sales—goods that people want but don’t necessarily need.

We know one thing for sure: the typical student-loan borrower is younger and earning slightly less than the U.S. average. They’re more likely to carry high credit card balances and less likely to have a rainy-day fund.

For this demographic, splurging on holiday shopping doesn’t appear to be in the cards this year.