The economy might just have been saved by last week’s debt ceiling deal, however the tradeoffs to avert disaster are about to force a latest reckoning for student loan borrowers.

Under the terms of the deal between President Joseph Biden and House Speaker Kevin McCarthy, the roughly 43 million Americans with student loans are going to have to start out making payments again in September.

That might come as a splash of cold water for the already struggling fashion world after a three-and-a-half-year reprieve from repayments, which helped support the pandemic splurge on apparel and other goods. 

Joseph Brusuelas, chief economist on the RMS consultancy, estimated that the repayments will over time amount to an almost $40 billion reduction in disposable income. 

While the debt ceiling deal avoided U.S. default — which might have been unprecedented and by nearly all accounts catastrophic — fashion could acutely feel the lack of the dollars that can now go to student loans. 

Jay Sole, a retail analyst at UBS, was already bearish on softlines stocks and only became more so within the wake of the deal. 

“One aspect of our call has been lapping stimulus — reminiscent of the coed loan payment moratorium — will cause a much bigger consumer spending slowdown than the market expects,” Sole wrote in a research note on Sunday. “Our latest evaluation of U.S. consumers with student loans suggests they’re more likely to disproportionately reduce spending on soft goods vs. other categories as they shift funds to paying down student debt.”

And it’s a customer base that prefers brands, prompting Sole to single out American Eagle Outfitters Inc., Foot Locker Inc., Gap Inc., Nordstrom Inc., Under Armour Inc. and Victoria’s Secret & Co. as amongst those more likely to be hit hardest by the coed loan restart.  

Sole sketched out just who this consumer is, citing a survey of 1,392 U.S. consumers with student loans. Based on the study:

Student loans have turn out to be wrapped up within the increasingly divisive debate in Washington, with Biden keen to pause repayment and cancel some debts while McCarthy and his allies have pushed to get that cash flowing back into the federal budget. 

House leaders said the broader debt deal would “save taxpayers trillions of dollars by reclaiming unused COVID[-19] funds, stopping Biden’s student loan giveaway to the rich, and defunding his army of IRS agents.”

Biden, who has clearly pushed for student debt relief, said in his Oval Office address on the deal: “Nobody got every little thing they wanted, however the American people got what they needed. We averted an economic crisis, an economic collapse.”

Perhaps so, but shoppers on the sting with student debt looming are going to must pay closer attention now. 

“The patron’s going to spend until they’ll’t,” said Mike Graziano, consumer products senior analyst at RSM. “Consumers don’t stop spending once they should — they stop spending once they must stop.” 

Graziano said lower-income consumers are probably at the purpose “where they’ve to actually take into consideration what their monthly purchases are going to be.” 

The pandemic — which brought government stimulus, hybrid working, wage growth and a shift away from travel and dining out — supported the acquisition of products, Graziano said.

Apparel, he said, jumped from 3.1 percent of monthly consumption within the five years before the pandemic to three.5 percent in 2021, with the sector now reverting back closer to its norm. 

“Apparel spiked considerably within the last three years in comparison with the five years prior to the pandemic,” said Graziano, pointing to the boost to athleisure as people stayed closer to home.

Likewise, luxury goods had “a very good couple of years because consumers across the income spectrum were buying more,” he said. 

Now many patrons who’ve grown accustomed to spending are going to must reset their budgets as student loan payments come back into the image. 

“They’re going to must cut areas that they’ve gotten used to spending in,” he said. “Whether that’s luxury, whether that’s apparel — it’s likely going to be within the discretionary category.”