Piper sees ‘incremental burden’ to spending after student debt ruling

Piper Sandler analyst Kevin Barker believes the Supreme Court ruling the Biden Administration does not have the right to forgive student debt will “present an incremental burden” to spending and credit performance for consumer finance companies, particularly for borrowers in the 25-35 year old age cohort. However, due to the 12-month “on-ramp” period announced by the administration and implementation of income-based repayment programs, Piper does not expect a spike in consumer debt defaults. The one-year grace period should reduce the potential increase in consumer credit defaults on other products, such as cards, auto loans or personal loans, the analyst tells investors in a research note. With that said, the firm believes the headwinds on spending likely will remain as borrowers adjust their lifestyles to ensure they make payments in the future.