The Fate of Student Loan Debt Will Impact Multifamily, Retail, Hospitality
Uncertainty surrounds the Biden relief plan, which faces challenges in court.
Students, universities, and the overall economy are waiting until June to hear from the Supreme Court about the Biden Administration’s forgiveness plan for qualifying borrowers of student loan debt.
The decision will factor heavily on consumer spending, as students have not had to make payments on their student loan debt since early 2020 at the onset of the health crisis when the CARES Act froze repayment and interest accumulation on federal student loans.
Biden’s plan could wipe away between $10,000 and $20,000 of federal debt for eligible borrowers. “Uncertainty surrounds the plan, however, as it faces challenges in court,” according to a special report issued recently by Marcus & Millichap.
Student loan debt has a multi-generational effect, according to the report.
The Federal Government holds approximately $1.6 trillion in student loan debt, which is distributed among 44 million borrowers.
“For those with a bachelor’s degree, the average monthly student loan payment is around $267,” Marcus & Millichap reports. “The negative repercussions of this level of student loan debt are already prevalent among millennials and could begin to impact the older members of Gen Z.”
Marcus & Millichap suggests that three main property types are likely to be affected by resuming repayment: multifamily, retail, and hospitality.
To the benefit of multifamily, borrowers stay in the renter pool longer and student loan debt has been shown to delay life events, including first-time home purchases.
Meanwhile, the affordability gap, or the difference between a monthly payment on a median-priced home and monthly average effective rent, is widening, the report said. Hitting its highest difference since at least 2000 at ($1,142) at the end of 2022.
Falling discretionary spending may impact retail sales and leisure travel and hotels may see a shift in demand as consumers reduce unnecessary travel or look for lower-cost options.
Midscale and economy hotels could benefit from this shift as travelers look for more ways to save.