Student Loans: Small Businesses Aim To Help Borrowers Save Money in These 3 Ways
Written by
Vance Cariaga
Edited by
Nicholas Morine
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The October resumption of federal student loan payments following a three-and-a-half year pause has added even more financial stress to millions of Americans who have already been hit with high consumer prices and rising interest rates. This means small and mid-sized businesses (SMBs) must adjust their sales models to keep from losing customers — and many plan to offer more perks, according to a new report from Capterra, a provider of business software solutions.
A survey of 500 SMBs that Capterra conducted in October 2023 found that 83% are adjusting their sales strategies to “better support affected consumers.” About three-quarters (76%) believe the resumption of student loan repayments will push the economy towards a recession in the upcoming year. Six in 10 are “operating under the assumption” that student loans will not be partially or fully forgiven in the future.
Businesses Remain Optimistic Despite Challenges
These challenges aside, many businesses remain optimistic about their prospects. Nearly half (46%) anticipate an increase in revenue in 2024 — largely by raising prices. Only 5% of businesses are considering dropping their prices in response to the loan repayments.
Fewer than one-fifth (19%) of SMBs expect loan repayments to negatively impact their revenue. Many of these businesses plan to overcome the problem by setting tighter budgets, reducing overhead costs or finding ways to streamline operations.
“With high interest rates, inflation and other economic headwinds, affected consumers will now have to allocate a portion of their already squeezed budget toward student loan repayments,” Max Lillard, senior finance analyst at Capterra, said in a press release.
“While it’s unclear how payment resumptions will impact the economy in the future, many businesses plan to make internal and external operational changes to cater to consumers burdened by debt.”
Hiking Prices Too Much, Too Fast Could Be Dangerous
Small businesses must also be careful about how (and how much) they raise prices to account for the potential loss of business from student loan borrowers. As Capterra noted, rapid price increases in an already stressed economic environment “could backfire,” making it “crucial” for businesses to weigh the short-term gains of price hikes against potential long-term consumer attrition.
More than one-third of SMBs surveyed by Capterra plan to go in the other direction by offering perks to customers to keep their business. Here are three ways small businesses aim to help federal student loan borrowers save money:
- Offer more flexible options on returns and refunds.
- Offer more buy now, pay later financing plans.
- Offer more targeted discounts.
These kinds of options will likely be welcomed by student loan borrowers, many of whom are considering drastic measures to deal with the resumption of payments. More than half (54%) say they will contribute less to their retirement savings due to the resumption of payments, according to a recent survey of 1,000 U.S. adults conducted by FinanceBuzz.
Meanwhile, a rising number of borrowers are even turning to bankruptcy as a solution, according to a report from the U.S. Department of Justice. The Justice Department itself overhauled the bankruptcy process to make it easier for eligible borrowers to have their federal student loans discharged.
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