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The expiration of the suspension on student loan payments in the United States is poised to pose a new challenge to the struggling American economy, which is already grappling with high inflation and interest rates. The Supreme Court recently struck down a Biden administration plan that aimed to provide relief by canceling up to $20,000 in federal student loans for 43 million borrowers. As loan payments resume, many individuals will have to divert hundreds of dollars each month towards repayments, potentially impacting industries such as e-commerce, bars and restaurants, and major retailers. While the overall effect on the $26 trillion U.S. economy may not be significant, the shift in spending patterns could introduce further uncertainty amid existing concerns over inflation, interest rates, and the possibility of a future recession. Economists estimate that the economic impact could amount to around one-third of a percentage point of the gross domestic product (GDP), equivalent to approximately $85 billion to $90 billion per year. However, they do not believe it will be a game-changer at the macro level. As government pandemic relief programs, including the student loan moratorium, come to an end, they add to the challenges faced by the economy. Analysts predict that the resumption of loan payments could reduce consumer spending by $14 billion per month, with online commerce, mail-order companies, restaurants, and bars expected to bear the brunt. On the other hand, discount retailers might benefit as financially constrained consumers seek affordable options. The end of the student loan moratorium is expected to have a modest negative impact on consumer spending growth, shaving off 0.2% this year, according to some economists. The American economy has shown resilience despite the COVID-19 pandemic and subsequent challenges, but concerns remain regarding the impact of Federal Reserve rate hikes and government cutbacks, including the end of the student loan payment moratorium.
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