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Tag: debt

  • China laments ‘garbage time of history’ as economy comes off peak and growth model hits dead end, expert says

    China laments ‘garbage time of history’ as economy comes off peak and growth model hits dead end, expert says

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    People in China are so discouraged about the economic outlook that many have taken to social media to call it the “garbage time of history,” referring to the end of NBA games when the result is settled and players go through the motions until time runs out.

    Use of the phrase earned rebukes from state-run media over the summer, but it tapped into a deepening gloom that has spread to Wall Street as fresh data point to worsening weakness in top economic drivers. Bank of America recently cut its 2024 growth forecast to 4.8% from 5% and sees further slowing in the next two years to 4.5%.

    In an article for the China Leadership Monitor last weekend, Rhodium Group partner Logan Wright said that while China is still growing faster many other countries, its global influence probably peaked in 2021.

    That’s when it reached 18.3% of world GDP, before dipping to 16.9% in 2023. Meanwhile, the U.S. share is sitting at about 25%.

    The problem isn’t just cyclical. Wright said “the primary reason that China’s economic slowdown is structural in nature is one that Beijing acknowledges: the credit and investment-led growth model has reached a dead end.”

    All that capital fed massive property construction and infrastructure development. But noting has replaced them as growth drivers, and China’s teetering financial system is unlikely to give rise to any new ones, he wrote.

    Credit expansion will slow, dragging down investment growth and the economy’s long-term prospects, he said. Meanwhile, the political leadership’s fear of letting defaults, bankruptcies and unemployment rise is preventing the financial system from channeling capital to more productive sectors of the economy.

    “The financial system itself is now constraining China’s economic growth rather than facilitating it,” Wright explained. “In addition to demographics and the changing external environment, financial constraints are the primary reason why China’s economic slowdown is structural in nature and why China’s economy is likely to grow at rates below potential over the next decade.”

    To be sure, Beijing has known its old growth model couldn’t last and has promoted advanced manufacturing in emerging sectors like EVs and green energy as alternatives. But those aren’t big enough to offset declining property or infrastructure construction, he said.

    China’s leadership has also identified the need to rebalance the economy toward more consumption instead of investment. But that’s hampered by income inequality that requires an overhaul of fiscal policy to prioritize transfer payments that boost household spending.

    Given the obstacles, what’s likely to happen is that consumption growth will continue to decline gradually and weigh on future economic growth, Wright predicted.

    President Xi Jinping and China’s other leaders may not fully grasp the severity of the situation, as the official economic statistics they digest look increasingly dubious. At the same time, they also appear fixated on overtaking the U.S. as the world’s top economy.

    But if Xi and company can change their worldview, it could help the Chinese economy, Wright said. For example, export-led growth that relies on taking global market share sparks trade barriers. By contrast, focusing more on domestic consumption could reduce trade conflicts.

    Still, he’s not convinced it will happen.

    “China’s economy peaking in global influence also offers Beijing a new opportunity to realistically redefine its goals and to become less confrontational with the rest of the world’s economic and political interests,” he said. “But we are under no illusions that such a redefinition is probable.”

    The warning comes as investors have also been jolted recently by red flags about China’s economy.

    PDD Holdings, the parent company of e-commerce giant Temu, stunned Wall Street last month with weak quarterly results and a warning that intense competition will dampen future profits. Shares sank more than 30%, wiping out $50 billion in PDD’s market value.

    That was the latest warning sign that the world’s second-largest economy could be headed for a downward spiral caused by overproduction and Beijing’s industrial planning.

    “Simply put, in many crucial economic sectors, China is producing far more output than it, or foreign markets, can sustainably absorb,” wrote Zongyuan Zoe Liu, a China scholar at the Council on Foreign Relations, in Foreign Affairs magazine before the PDD reported earnings. “As a result, the Chinese economy runs the risk of getting caught in a doom loop of falling prices, insolvency, factory closures, and, ultimately, job losses.”

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  • U.S. debt is so massive, interest costs alone are now $3 billion a day

    U.S. debt is so massive, interest costs alone are now $3 billion a day

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    With U.S. debt now at $35.3 trillion, the cost of paying the interest on all that borrowing has soared recently and now averages out to $3 billion a day, according to Apollo chief economist Torsten Sløk.

    And that includes Saturdays and Sundays, he pointed out in a note on Tuesday.

    The daily interest expense has doubled since 2020 and is up from $2 trillion about two years ago. That’s when the Federal Reserve began its campaign of aggressive rate hikes to rein in inflation.

    In the process, that made servicing U.S. debt more costly as Treasury bonds paid out higher yields. But with the Fed now poised to start cutting rates later this month, the reverse can happen.

    “If the Fed cuts interest rates by 1%-point and the entire yield curve declines by 1%-point, then daily interest expenses will decline from $3 billion per day to $2.5 billion per day,” Sløk estimated.

    Apollo

    Meanwhile, the federal government closes out its fiscal year at the end of this month, and the year-to-date cost of paying interest on U.S. debt was already at $1 trillion months ago.

    But even if Fed rate cuts lighten the burden on interest payments, the next president is expected to worsen budget deficits, adding to the pile of total debt and offsetting some of the benefit of lower rates.

    In fact, a recent analysis from the Penn Wharton Budget Model found that the deficit will expand under either Donald Trump or Kamala Harris.

    But there’s a big difference between the two.

    Under Trump’s tax and spending proposals, primary deficits would increase by $5.8 trillion over the next 10 years on a conventional basis and by $4.1 trillion on a dynamic basis that includes the economic effects of the fiscal policy.

    Under a Harris administration, primary deficits would increase by $1.2 trillion over the next 10 years on a conventional basis and by $2 trillion on a dynamic basis.

    Still, JPMorgan analysts called the outlook unsustainable, regardless of who wins the presidential election, while acknowledging the prospect of bigger deficits with Trump.

    “Irrespective of the election outcome, the trend since the pandemic has been profligate fiscal policy that is absorbing substantial amounts of capital and is incentivizing additional private investment,” the bank said. “At the same time, the en masse retirement of baby boomers is shifting a substantial share of the population from a high-savings period in life to a low-savings period, depressing the supply of capital.”

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  • Objections filed as Steward pushes for sale of hospitals

    Objections filed as Steward pushes for sale of hospitals

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    BOSTON — As Steward Health Care prepares to make the case in federal court Wednesday that the deals it reached to sell four Massachusetts hospital facilities should be quickly approved, a number of others would like to have a word — including key lenders for the bankrupt company, the Archdiocese of Boston, and the Internal Revenue Service.

    The blur of activity includes ongoing negotiations between Steward and Massachusetts state government over a second, and larger, infusion of public funding that the company says is required to keep its hospitals here open until the sales close, possibly on Sept. 30.

    Massachusetts aided Steward with $30 million to stay afloat in August and now is poised to provide the company another $42 million in payments and advances by the end of this week, according to a court filing late Monday.

    An array of objections have been lodged in U.S. Bankruptcy Court since Steward announced the hospital sales. A sale hearing is scheduled for 11 a.m. Wednesday, when Judge Christopher Lopez will weigh whether the deals are the best possible way for the company to wind down operations and maximize the value the assets return for its lenders and creditors. Steward says they are and should be approved.

    The court is likely to consider an objection filed by the “first in, last out” or FILO lenders that have pumped hundreds of millions of dollars into Steward as the company headed for bankruptcy. Those lenders said they “cannot possibly consent to the proposed sales of the Massachusetts Hospitals in their current form, and they do not.”

    “The Debtors’ sale process has resulted in bids for the Massachusetts Hospitals for an aggregate purchase price of $343 million, subject to certain adjustments … However, this figure is misleading as the entirety of the Purchase Price will be allocated towards the real property and therefore flow to benefit the purported landlord (MPT and Macquarie) and more specifically will flow to the purported landlord’s secured lender,” the FILO lenders wrote in the objection.

    The objection from the IRS relates to a section of each asset purchase agreement that says Steward has filed all of its tax returns. The federal government says that isn’t actually the case, echoing the way state government was repeatedly frustrated by Steward’s failure to file financial disclosures.

    “The United States states that either the terms of the respective Asset Purchase Agreements should be revised to correctly reflect that certain required federal tax returns for certain of the Seller Debtors have not been filed with the IRS and that the applicable Seller Debtor has a legal obligation to file such tax return,” or the court should require Steward to file the returns in question before the transactions close, the U.S. Department of Justice wrote on behalf of the IRS.

    The limited objection from the Archdiocese of Boston stems back to the history of many Steward hospitals as part of the Caritas Christi network. The church said its sale of the hospitals to Steward in 2010 was the best option “that would allow the Hospitals to continue to operate as Catholic health care facilities.”

    An agreement between the archdiocese and Steward requires the company to return any and all religious items and remove “all symbols of Catholic identity (e.g. interior signage, trade and service marks associated with Catholic identity in both paper and electronic form) and cease using a list of Catholic-related names.

    The church said it would object to the hospital sales “to the extent that the Debtors seek to transfer the Restricted Names or the Religious Items or authorize the buyers to continue to use symbols of Catholic identity,” but added that it appears no such transfer is contemplated. That suggests that there will be new names for St. Elizabeth’s Medical Center, the Holy Family hospitals, St. Anne’s Hospital and Good Samaritan Medical Center, since the church says Steward “acknowledged and agreed that the … names were ‘integrally related’ to the Hospitals’ Catholic identity.”

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    By Colin A. Young | State House News Service

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  • More Americans Living Paycheck to Paycheck Despite Increased Budgeting

    More Americans Living Paycheck to Paycheck Despite Increased Budgeting

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    More Americans are living paycheck to paycheck despite increased budgeting, according to Debt.com’s 2024 budgeting survey of 1,000 Americans, which showed a mixed financial picture.

    While more people are budgeting and finding it beneficial to stay out of debt, the number of individuals living paycheck to paycheck has risen 10% over the past two years.

    In 2022 and 2023, 50% reported living paycheck to paycheck; this year that number climbed to 60%. Meanwhile, 90% of respondents say they budget, compared to 70% when the survey was first conducted seven years ago.

    “Debt.com’s newest survey indicates that while budgeting is becoming more common and beneficial, it hasn’t completely shielded Americans from financial hardship,” said Howard Dvorkin, CPA and Debt.com chairman.

    One bright spot is the percentage of people who say budgeting has helped them get out of or stay out of debt, increased to 89% this year from 73% in 2018. Millennials lead the way, with 92% reporting that budgeting has kept them out of debt, followed by 90% of Gen X, 86% of Baby Boomers, and 83% of Gen Z.

    The Debt.com survey also highlights the reasons people began budgeting:

    • 38% – Increasing wealth and savings
    • 21% – Tackling debt
    • 17% – Inflation and cost of living
    • 15% – Saving for retirement
    • 6% – Job loss
    • 2% – Divorce or loss of a spouse

    “The rising number of people living paycheck to paycheck indicates that economic factors may be driving the need for individuals to fine-tune their budgeting strategies,” continued Dvorkin.

    Of those who say they budget, 39% say their whole household works to stay on budget. The survey also shows that, overall men (94%) are budgeting more than women (87%). The top reason women cited for not budgeting was that they “don’t have much income,” while men primarily said it’s “too time-consuming.”

    Debt.com is a consumer website where people can find help with credit card debt, student loan debt, tax debt, credit repair, bankruptcy, and more. Debt.com works with vetted and certified providers that give the best advice and solutions for consumers “when life happens.”

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  • What happens if you don’t use your credit card? – MoneySense

    What happens if you don’t use your credit card? – MoneySense

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    If you find that you no longer need the credit, review any potential closure fees before deciding to cancel the card, too. Instead, you could look into downgrading the card, transferring balances, or using the card at least once a year for a small purchase to keep the account active.

    The impact of dormant cards on your credit rating

    Letting a credit card go dormant can impact your credit score in a few ways. As noted above as a con, if you don’t use a card for a long time, your credit issuer might close the account, which reduces your total available credit limit. For example, if your total credit limit drops from $10,000 to $8,000 with the account closure but your spending remains at $2,000, your utilization ratio rises from 20% to 25%. A higher ratio can negatively affect your credit score because it suggests you’re using more of your available credit.

    Having a mix of different credit types—such as credit cards, student loans, mortgages and car loans—helps maintain a healthy credit score. If a card is closed, you lose some of this diversity, which can also impact your score.

    Consistent on-time payments are crucial for maintaining good credit. Even if a card is dormant, missing payments can damage your score. To avoid this, pay more than the minimum payments on your credit cards and make all payments on time, every time. 

    It is important to review your credit report and score at least once a year to make sure there are no errors. You can obtain your credit report and score through Canada’s two credit bureaus, Equifax and TransUnion, a third-party service, or your bank’s website or mobile app. Even without any errors, regularly checking your report can help you better understand how your financial habits can affect your score and helps you see ways to improve it and manage debt better.

    Should you ever stop using your credit card?

    If you’re worried about letting your credit card go dormant, there are a few alternatives. Consider transferring balances from other credit cards or look at downgrading and switching to a no-fee version of the same card. Both of these options keep your account open and your credit utilization ratio low.

    You can also keep the card active by using it occasionally for small purchases, setting up a small recurring charge on it, or making it your go-to card for a regular expense, like buying gas. This helps keep your account in good standing without much hassle.

    How many credit cards is too many?

    There isn’t a set rule for how many credit cards Canadians should have in their wallets. The number of credit cards that is right for you depends on what you can afford to spend and pay back on time. Remember, it’s not just about the number of cards you have, but how responsibly you use them. 

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  • Biden Administration Borrowed $5 Billion Per Day in Fiscal Year 2024

    Biden Administration Borrowed $5 Billion Per Day in Fiscal Year 2024

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    Daniel Schwen, CC BY-SA 4.0, via Wikimedia Commons

    By Tom Gantert (The Center Square)

    So far in the fiscal year 2024, the federal government has had to borrow about $5 billion every day.

    The Congressional Budget Office said Thursday the federal budget deficit was $1.5 trillion for the first 10 months of fiscal year 2024, which covers October through July.

    The CBO stated that the $1.5 trillion deficit for the first 10 months of FY 2024 was $103 billion less than the deficit recorded during the same period last fiscal year.

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    The federal budgeting agency projects the deficit for 2024 will be $2.0 trillion. The deficit for fiscal year 2023 was $1.7 trillion. But the CBO says the differences in the deficits those years could be attributable to budgeting “timing shifts”.

    “We’re nearly at the end of fiscal year 2024, and while most of America is focused on the momentum in the race for the White House, beneath the surface our nation’s fiscal health has continued to worsen,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, in a media release. “We’ve just surpassed $35 trillion in gross debt, and today’s CBO projections estimate we’ve borrowed another $242 billion in July, or $5 billion each day this fiscal year. Our fiscal trajectory cannot be left on autopilot – the stakes are far too high and the consequences far too steep to leave our national debt climbing in perpetuity.”

    The Peter G. Peterson Foundation, which was founded by Peter Peterson, the former secretary of commerce for President Richard Nixon, tracks the national debt at $35.08 trillion, or $104,193 for every person in America, as of Aug. 8.

    “Historically, our largest deficits were caused by increased spending around national emergencies like major wars or the Great Depression,” the foundation stated on its website. “Today, our deficits are caused mainly by predictable structural factors: our aging baby-boom generation, rising healthcare costs, and a tax system that does not bring in enough money to pay for what the government has promised its citizens.”

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    The think tank Truth in Accounting states the real national debt is closer to $156.8 trillion if unfunded Social Security and Medicare promises were included.

    Syndicated with permission from The Center Square.

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    The Center Square

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  • Steward’s creditors accused of ‘brinkmanship’

    Steward’s creditors accused of ‘brinkmanship’

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    BOSTON — The Healey administration is lashing out at Steward Health Care System’s creditors for seeking to block $30 million in state funding to help transition the bankrupt company’s hospitals to new owners.

    In a new filing in U.S. Bankruptcy Court, Assistant Attorney General Andrew Troop accuses a group representing creditors seeking to collect $9 billion in debt from Steward of engaging in “brinksmanship” in an effort “to wring out more value from qualified bidders or the commonwealth to salvage their own bad financial, investment or lending decisions.”

    “Many of these creditors seem to have lost sight of the importance of providing safe healthcare over the long term, and instead seem intent on saddling bidders with potentially critical levels of debt or obligations, which will only make this crisis a recurring one,” Troop wrote in the seven-page statement.

    While the state is “unable” to stop Steward from closing the two hospitals, Troop said it still has “significant police powers” to intervene in the federal bankruptcy process if it “does not result in a clear path to the sale of the hospitals.”

    The fiery statement comes as a federal judge in Texas weighs a request from a group representing Steward’s myriad creditors to reject Gov. Maura Healey’s plan to devote $30 million in repurposed Medicaid funding to help transition the sale of six of Steward’s hospitals as part of the company’s bankruptcy proceedings.

    Steward plans to put its 31 U.S. hospitals – including Holy Family’s locations in Methuen and Haverhill – up for sale to pay down $9 billion in outstanding liabilities owed to creditors. The company filed for federal bankruptcy protections in May.

    Steward said it was not able to find buyers for Carney Hospital in Dorchester and Nashoba Valley Medical Center in Ayer and announced plans to shut down the facilities in the next 30 days.

    U.S. Bankruptcy Judge Christopher Lopez, who is overseeing the case, approved the request to close the hospitals following a hearing Wednesday in a Texas courtroom.

    Bids on Steward’s Massachusetts hospitals and other states were due last week, but the company has not disclosed prospective buyers. A hearing on the sales was scheduled for Thursday, but the company asked the federal judge presiding over the case to postpone the proceedings until Aug. 13, without citing a reason.

    Last week, Healey officials announced plans to provide $30 million in Medicaid funding to help ensure a “smooth transition” to new ownership for the company’s six remaining hospitals. Healey told reporters earlier this week that “not a dime” of the money will go to Steward or its management team.

    But in a court filing this week, a committee representing Steward’s creditors asked Lopez to block the move, arguing that the transition funding would come “at the expense of the rest of debtors, their estates and their creditors.”

    On Wednesday, Lopez approved a request by Steward and others to reject a master lease for all the hospital properties, saying the move “is in the best interests of the Debtors, their respective estates, creditors, and all parties in interest.”

    The Attorney General’s Office sided with Steward on the lease issue and has accused the hospitals’ landlords – Medical Properties Trust and Macquarie Asset Management – of trying to block the move “to extract concessions from the Steward estate and their mortgagee.

    “These hospitals – while each in name a lessee – have been forced to pay the costs typically associated with property ownership, including real estate taxes, maintenance, and insurance,” Troop said in the latest court filing.

    Steward’s landlords objected to the request to reject the master lease, arguing in court filings that federal law prohibits the company from stopping rent payments “when their express intention is to continue conducting business in the landlords’ property pending a proposed sale.”

    “If a debtor were permitted to reject a lease and stop paying rent, while continuing to conduct business in the landlord’s property, every debtor would do that,” lawyers for the two property owners wrote in a legal filing. “But of course that is not allowed.”

    During the hearing Wednesday, Lopez also heard arguments for approving the Healey administration’s request to use the $30 million for transition costs, but it was not clear when he would issue his ruling on the funding.

    Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites. Email him at cwade@cnhinews.com.

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    By Christian M. Wade | Statehouse Reporter

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  • Steward’s creditors accused of ‘brinkmanship’

    Steward’s creditors accused of ‘brinkmanship’

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    BOSTON — The Healey administration is lashing out at Steward Health Care System’s creditors for seeking to block $30 million in state funding to help transition the bankrupt company’s hospitals to new owners.

    In a new filing in U.S. Bankruptcy Court, Assistant Attorney General Andrew Troop accuses a group representing creditors seeking to collect $9 billion in debt from Steward of engaging in “brinksmanship” in an effort “to wring out more value from qualified bidders or the commonwealth to salvage their own bad financial, investment or lending decisions.”

    “Many of these creditors seem to have lost sight of the importance of providing safe healthcare over the long term, and instead seem intent on saddling bidders with potentially critical levels of debt or obligations, which will only make this crisis a recurring one,” Troop wrote in the seven-page statement.

    While the state is “unable” to stop Steward from closing the two hospitals, Troop said it still has “significant police powers” to intervene in the federal bankruptcy process if it “does not result in a clear path to the sale of the hospitals.”

    The fiery statement comes as a federal judge in Texas weighs a request from a group representing Steward’s myriad creditors to reject Gov. Maura Healey’s plan to devote $30 million in repurposed Medicaid funds to help transition the sale of six of Steward’s hospitals as part of the company’s bankruptcy proceedings.

    Steward plans to put its 31 U.S. hospitals — including Holy Family’s locations in Methuen and Haverhill — up for sale to pay down $9 billion in outstanding liabilities owed to creditors. The company filed for federal bankruptcy protections in May.

    Steward said it wasn’t able to find buyers for Carney Hospital in Dorchester and Nashoba Valley Medical Center in Ayer and announced plans to shut down the facilities in the next 30 days.

    U.S. Bankruptcy Judge Christopher Lopez, who is overseeing the case, approved the request to close the hospitals following a Wednesday hearing in a Texas courtroom.

    Bids on Steward’s Massachusetts hospitals and other states were due last week, but the company hasn’t disclosed prospective buyers. A hearing on the sales was scheduled for Thursday, but the company asked the federal judge presiding over the case to postpone the proceedings until Aug. 13, without citing a reason.

    Last week, Healey officials announced plans to provide $30 million in Medicaid funds to help ensure a “smooth transition” to new ownership for the company’s six remaining hospitals. Healey told reporters earlier this week that “not a dime” of the funds will go to Steward or its management team.

    But in a court filing this week, a committee representing Steward’s creditors asked Lopez to block the move, arguing that the transition funding would come “at the expense of the rest of debtors, their estates and their creditors.”

    On Wednesday, Lopez approved a request by Steward and others to reject a master lease for all the hospital properties, saying the move “is in the best interests of the Debtors, their respective estates, creditors, and all parties in interest.”

    The Attorney General’s office sided with Steward on the lease issue and has accused the hospitals’ landlords — Medical Properties Trust and Macquarie Asset Management — of trying to block the move “to extract concessions from the Steward estate and their mortgagee.

    “These hospitals – while each in name a lessee – have been forced to pay the costs typically associated with property ownership, including real estate taxes, maintenance, and insurance,” Troop said in the latest court filing.

    Steward’s landlords objected to the request to reject the master lease, arguing in court filings that federal law prohibits the company from stopping rent payments “when their express intention is to continue conducting business in the landlords’ property pending a proposed sale.”

    “If a debtor were permitted to reject a lease and stop paying rent, while continuing to conduct business in the landlord’s property, every debtor would do that,” lawyers for the two property owners wrote in a legal filing. “But of course that is not allowed.”

    During Wednesday’s hearing, Lopez also heard arguments for approving the Healey administration’s request to use the $30 million for transition costs, but it wasn’t clear when he would issue his ruling on the funding.

    Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites. Email him at cwade@cnhinews.com.

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    By Christian M. Wade | Statehouse Reporter

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  • Biden administration to notify 25M student loan borrowers of debt relief options

    Biden administration to notify 25M student loan borrowers of debt relief options

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    WASHINGTON — The Department of Education will send an email to Americans with student debt on Wednesday, laying out options for how roughly 25 million could have some, or all, of their debt canceled this fall.

    The email is the first step of the Biden-Harris administration’s proposed rule announced in April – and still being finalized – for narrower, targeted debt relief.

    The proposed rule has been in the works as a plan B ever since President Joe Biden’s initial effort to cancel some or all debt for 43 million people was overturned by the Supreme Court last summer.

    If it’s implemented as drafted, and survives the expected Republican-led lawsuits, it could give some amount of debt relief to 25 million people, on top of the nearly 4.8 million people that have already had their debts canceled under Biden’s tenure.

    Education Secretary Miguel Cardona will outline in the email the pathways for debt relief — most of which are targeting people with runaway interest or who have been paying their debt for over two decades — and inform borrowers that they have until August 30 to inform their servicers if they’d like to opt-out.

    The Education Department “is in the process of finalizing who will be eligible for student debt relief, but we want to make you aware of this potential relief,” Cardona writes in the email.

    Biden, in a statement on Wednesday, said the goal is to notify borrowers of the upcoming debt relief programs in advance, so they can “benefit swiftly once the rules are final.” Moving quickly to get relief out the door is sure to be important to the program’s success, given the barrage of lawsuits from Republicans on any debt relief or student loan system reform Biden has attempted so far.

    “Despite attempts led by Republican elected officials to block our efforts, we won’t stop fighting to provide relief to student loan borrowers, fix the broken student loan system, and help borrowers get out from under the burden of student debt,” Biden said.

    Biden’s hallmark reform to student debt repayment, the SAVE Plan, was put on hold by a court earlier this month after Republicans argued it was overstepping the administration’s authority. The plan has been touted as the most affordable loan repayment plan for borrowers, tying monthly payments to borrowers’ incomes and allowing debt relief after 10 years for people who took out small initial loan balances.

    Here is who the latest debt relief plan would apply to, under this new plan.

    The largest group will be people who have runaway interest, which is more than half of all borrowers. Roughly 25 million people owe a larger debt now than when they initially took out their loans due to ballooning interest. The new rule would not cancel their loans entirely, but rather reduce or cancel the interest that’s built up, according to a draft rule of the plan.

    Some people would get up to $20,000 of interest canceled, while those who make below a certain income — $120,000 as a single person or $240,000 as a married couple — will get their entire runaway interest canceled.

    The Department of Education estimated that over 90% of people, or roughly 23 million, will fall into the second bucket and be fully reset back to their initial loan amount.

    The second largest group will be people who have been paying down their loans for 20 years or more, but still haven’t paid it off. This could apply to 2.6 million borrowers, the Department of Education estimated. People would be eligible if they have undergraduate loans they’ve been paying since or before July 1, 2005, or if they have graduate school loans they’ve been paying since or before July 1, 2000.

    The rule will also provide debt relief to a few hundred thousand people who already qualify under programs like Public Service Loan Forgiveness but have never applied, and to those who paid for a degree from a school that didn’t provide students with the financial security it advertised.
    A vaster component of the rule, which would evaluate borrower “hardship” as a qualifier for debt relief, is also still in the works but not likely on the same timeline.

    Copyright © 2024 ABC News Internet Ventures.

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  • How Nonprofit Debt Consolidation Works | Bankrate

    How Nonprofit Debt Consolidation Works | Bankrate

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    Key takeaways

    • Nonprofit debt consolidation can make debt payments more manageable by reducing the number of bills you need to pay.
    • Unlike traditional debt consolidation, where borrowers pay off existing debts with a new loan, nonprofit debt consolidation relies on a debt management plan that works with your existing debts.
    • You may want to try a nonprofit service before considering a for-profit company.

    If you’re one of the almost half of Americans who carry a credit card balance every month, you might struggle to juggle multiple debt payments to numerous creditors. You have to remember all the different due dates and make sure the money is available when you need to pay each bill.

    Debt consolidation can help by combining two or more debts into a single payment with a due date that works for you. Nonprofit debt consolidation may be particularly useful for borrowers who are taking care to protect or improve their credit scores.

    What is nonprofit debt consolidation?

    Unlike traditional debt consolidation, nonprofit debt consolidation does not require a new loan to pay off your other debts.

    Instead, a nonprofit debt consolidation service works with your creditors to create a debt management plan (DMP). The DMP allows you to make one payment to the nonprofit consolidation services each month. The service will distribute your payment to the individual creditors for you.

    “Nonprofit debt consolidation can be a good option for those feeling overwhelmed by multiple payments with different due dates to remember,” says Katie Ross, executive vice president for nonprofit American Consumer Credit Counseling. “With debt consolidation, you make one monthly payment on the day of the month that works best for you.”

    It’s important to note that “nonprofit” doesn’t necessarily mean the service is free for borrowers. It simply means that the service does not turn a profit for owners.

    However, much of the nonprofit debt relief services funding comes from government programs, grants and donations. As a result, these organizations can offer much lower fees for their service than a for-profit company that relies on customers to turn a profit. Sometimes, nonprofit debt relief organizations may have enough outside funding to offer their services free to borrowers.

    How nonprofit debt consolidation works

    When you hire a nonprofit debt consolidation company, a financial counselor will contact your creditors to negotiate more favorable terms on your debts.

    The counselor might be able to get late fees waived or even lower your interest rate. A lower interest rate reduces the total amount you’ll have to pay on the debt, which can mean a lower monthly payment.

    The counselor will then create a DMP based on your budget and schedule. Tell your financial counselor if you are struggling to make the current payments on your debts. They may be able to negotiate lower monthly payments either through lower interest rates or by extending the terms of the loans. Just remember that extending the loan term may mean paying more in interest expenses over the long haul.

    You should also tell your financial counselor which payment date works best for you. For example, if you get paid on the 1st, they might schedule the payment for the 4th, when you will likely have the funds in your account.

    Your counselor will then present the proposed debt management plan to your creditors for approval. Nonprofit debt consolidation only works if creditors agree with the proposed arrangement.

    Types of debt eligible for nonprofit debt consolidation

    Nonprofit debt management services typically only apply to unsecured debt.

    Credit card debt

    This is the most common type of debt in debt management plans. Americans carry a lot of credit card debt. With credit card interest rates being so high, your credit counselor may have more room to negotiate the rate down. A lower rate could reduce your monthly payment or even help you pay off the balance faster.

    Credit card companies may require you to close active accounts before they will approve a debt management plan. You would not be able to use that card for future purchases, and it may result in a temporary decrease in your credit score.

    The average age of credit and total available credit are two main factors in calculating your credit score. Closing a long-open account affects both categories.

    Medical debt

    Medical debt comes with more consumer protections than credit card debt, so a nonprofit debt management counselor may have more options for negotiating this debt, such as social service referrals. In some states, medical debt forgiveness may be an option.

    Student loans

    Student loans may or may not be eligible for nonprofit debt consolidation, often depending on if they are federal or private. However, there may be additional options to help ease the student loan burden.

    According to Ross, “These options may include loan cancellation, consolidation or income-driven repayment plans. The options will vary depending on whether the client has federal or private student loans, as federal student loans have different types of repayment plans.”

    Debts that are ineligible for nonprofit consolidation

    Debts that are secured by collateral are typically excluded from debt consolidation services.

    Home loans

    Home mortgage loans are secured by the property being mortgaged. This means the lender could foreclose on the home if the borrower fails to repay the loan. Home loans are not eligible for nonprofit debt consolidation plans as a secured debt.

    Auto loans

    Auto loans are secured by the vehicle. If a borrower fails to repay the loan, the lender could repossess the vehicle. Using the automobile as collateral disqualifies auto loans from nonprofit debt consolidation.

    Nonprofit debt consolidation vs. for-profit debt relief

    Nonprofit debt consolidation and for-profit debt consolidation have several important differences.

    The financial objectives of the companies

    Nonprofit credit counseling agencies are not focused on turning a profit. Any profits must be funneled back into activities that support the organization. No individual shareholders are looking to benefit financially from the organization’s profitability.

    By contrast, for-profit debt relief companies aim to make money from their services.

    How the organizations are funded

    Nonprofits receive financial support from other sources, such as grants, government programs and charitable donations, so their services are inexpensive or free to borrowers.

    For-profits are funded by the consumers using the service. This means for-profit companies must charge customers more than nonprofit organizations.

    When the organizations pay creditors

    Nonprofit debt consolidation services can begin making payments to creditors on your behalf as soon as the creditors approve your DMP. As long as payments are up to date on your accounts, the nonprofit debt consolidation service can take over with no interruption to your payments. This means no late fees or penalties from the creditors.

    For-profit debt relief companies, on the other hand, often require that accounts go delinquent before they begin negotiations. They want the creditor to be concerned that the borrower may default on the loan completely. That gives the debt counselor more leverage in negotiations. While this strategy can potentially result in some level of debt forgiveness, it can also severely impact your credit score and finances.

    “Not paying your creditors will result in collections, additional late fees and possibly legal action,” says Ross.

    Additionally, there is no guarantee that your creditors will accept the proposed settlement, which would mean risking your credit score for nothing.

    Ongoing support

    Nonprofit debt consolidation agencies often provide free educational resources to help with financial tasks like budgeting, credit repair or retirement planning.

    For-profit debt settlement companies may offer some free resources for ongoing support but often charge for premium versions of these tools.

    Pros and cons of nonprofit debt consolidation

    The benefits of nonprofit debt consolidation include:

    • Less impact on your credit score compared to a for-profit debt relief service
    • Lower cost than for-profit debt relief
    • More manageable payment schedules
    • No need to apply for a debt consolidation loan
    • Potentially lower interest rates
    • Potentially lower monthly payments

    There are also a few possible downsides of nonprofit debt consolidation, including:

    • A temporary dip in your credit score
    • Not available for secured loans
    • The requirement to close accounts

    How to choose a nonprofit debt consolidation service

    When selecting a nonprofit debt relief company, look for one accredited by an independent organization.

    Companies that join the National Foundation for Credit Counseling (NFCC), for example, must be accredited by the Council on Accreditation (COA), an independent organization that accredits more than 1,600 social service organizations in the United States and Canada. Financial counselors with the NFCC have been trained and certified.

    You should also check online reviews to see if customers are generally satisfied with the service. Check reputable review sites like the Better Business Bureau, TrustPilot and Consumer Affairs.

    The bottom line

    Nonprofit debt consolidation is a legitimate, affordable way to manage debt by creating a more manageable repayment structure. Working with a nonprofit debt consolidation service can lower your interest rates, reduce your monthly payments and save your credit score from taking a major hit.

    Find a reputable nonprofit debt consolidation service by searching for accredited debt counselors through the National Foundation for Credit Counseling (NFCC).

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  • Comparing buy now, pay later programs: Are installment plans a budget win or finance fail? – MoneySense

    Comparing buy now, pay later programs: Are installment plans a budget win or finance fail? – MoneySense

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    Some BNPL providers report your payment history to credit bureaus, which can positively affect your credit score if you make the payments on time. In addition, many BNPL providers only run a soft inquiry on your credit report to determine eligibility. That said, it’s possible that a credit check isn’t done at all. So, in this case, your credit report and credit score won’t be impacted by simply applying for BNPL. 

    There are some potential downsides. BNPL loans often require repayment within a short period, especially for smaller purchases, which might not contribute significantly to building your credit history. In that case, a credit card would be a better option. In addition, not all providers report to credit bureaus, which can create what deHaan calls “phantom debt.” When your credit score goes down, credit card companies can see this and won’t offer or approve you for another card, but that’s not the case with BNPL. This can cause consumers to take on more debt than they can handle. 

    DeHaan explained how it works: “So, I open a BNPL account with one provider, I max it out, I can’t pay it off. I go to the next one, I do the same thing… And before I know it, I’ve got three or four maxed-out credit lines, and the reason I can keep getting them is because there’s no reporting about each other’s maxed-out limits.” 

    Before signing up for any BNPL service, ensure you can comfortably repay your purchases in full. While BNPL can potentially boost your credit score through timely payments, it can also negatively impact your score if you miss any payments, leading to additional debt from late fees and interest charges.

    What’s in it for retailers?

    BNPL options benefit retailers in several ways. It can increase sales by allowing customers to spread out payments, encouraging them to spend more with larger purchases. In addition, BNPL providers typically handle the financial transactions and assume the risk of non-payment, so there’s no risk to the retailers themselves.

    What does a credit counsellor think about buy now, pay later?

    While the convenience of BNPL can be tempting, it’s important for consumers to read and understand the terms and conditions that come with installment plans. If you’re not careful, BNPL may deter you from achieving your financial goals. Like all loans, these plans aren’t without risks. Here are a few to know about.

    BNPL can lead to overspending

    For some, installment plans can encourage impulse spending. Deferred payments are an extremely popular option for many Canadians feeling the pinch of inflation and lifestyle creep. Being able to buy something that was previously unobtainable may tempt you to spend more than you can afford. 

    “When credit is cheap and easy, some might get themselves into trouble by spending beyond their means. With BNPL, many of the users tend to be the most vulnerable [financially], and they might not yet have a credit score,” deHaan said. 

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    Doris Asiedu

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  • Heavily indebted countries can look just fine until suddenly they don’t, finance watchdog warns—’That is how markets work’

    Heavily indebted countries can look just fine until suddenly they don’t, finance watchdog warns—’That is how markets work’

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    Indebted countries are vulnerable to a precipitous loss of confidence even though that risk is barely acknowledged in bond markets, the Bank for International Settlements warned. 

    The Basel-based institution said in its annual economic report released on Sunday that countries whose bloated fiscal positions are further stretched by higher interest rates should prioritize fiscal repair. Claudio Borio, head of the BIS’s monetary and economic department, said they must act “with urgency.”

    “We know from experience that things look sustainable until suddenly they no longer do,” he told reporters. “That is how markets work.”

    While the need to fix public finances has been a recurring theme for the BIS, the remarks coincide with heightened scrutiny on indebted economies. Worries about France this month prompted investors to demand the highest premium on its bonds since 2012. 

    The Basel officials didn’t specify any country in particular, but they did feature a chart looking at the debt and market pricing of some of the world’s biggest borrowers, including Japan, Italy, the US, France, Spain and the UK.

    In order to stabilize finances, advanced economies can this year run deficits no larger than 1% of gross domestic product, down from 1.6% last year, the BIS said. That’s a fraction of the current US deficit, which the International Monetary Fund described last week as “much too large.”

    “Though financial market pricing points to only a small likelihood of public finance stress at present, confidence could quickly crumble if economic momentum weakens and an urgent need for public spending arises on both structural and cyclical fronts,” the BIS said. “Government bond markets would be hit first, but the strains could spread more broadly.”

    Inflation is subsiding however, BIS officials acknowledge. The world is currently set for a “smooth landing,” General Manager Agustin Carstens said.

    Services still pose a risk to that outlook, with prices in that area out of step with pre-pandemic trends, the report said. In addition, increases in the cost of commodities due to geopolitical tensions could reignite inflation. 

    Given these pressure points, officials highlighted that central banks should be cautious about cutting rates too soon. That could prove costly to their reputations if such policy needs to be reversed amid a flare-up of inflation again, the report said. 

    Policymakers already did their fair share to contribute to that problem, the BIS suggested, repeating its accusation that “with the benefit of hindsight,” pandemic-era stimulus probably raised the risks of second-round effects.

    While central banks shouldn’t ease too soon, governments also have a part to play with too-loose fiscal policy, officials said. Instead, they should widen tax bases and deliver structural reforms to meet future challenges including demographic shifts and climate change.

    “Our main message is that central banks alone cannot deliver a durable increase in economic growth and prosperity,” Borio said. “Laying the foundation for a brighter economic future also requires actions from other policymakers, especially governments.”

    Subscribe to the Fortune Next to Lead newsletter to get weekly strategies on how to make it to the corner office. Sign up for free.

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    Bastian Benrath, Bloomberg

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  • Amid election nerves French city traders rush to secure funding as they foresee the worst blow to bonds

    Amid election nerves French city traders rush to secure funding as they foresee the worst blow to bonds

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    The worst bond rout since the sovereign debt crisis. Companies rushing to lock in funding before a potential capital drought. An almost $200 billion hit to stocks.

    French President Emmanuel Macron’s decision earlier this month to meet the far-right’s gains across Europe with a snap poll at home has upended markets across the region, triggering a sharp repricing that’s put billions of euros in flux.

    On Sunday, investors will find out if the selloff has room to run. 

    The stakes are high. France’s fiscal probity is in doubt with investors shorting the nation’s bonds even before Macron’s surprise decision, and the region’s allure as a stable and relatively volatility-free alternative to US markets has taken a blow.

    David Zahn, head of European fixed income at Franklin Templeton, summed it up: The French spread over German bonds could “easily” blow through 100 basis points from around 80 now — unthinkable less than a month ago.

    “There is nothing to win in this market,” said Stephane Deo, a senior portfolio manager at Eleva Capital SAS, who has cut all his fund’s exposure to France. 

    Traders are going into the parliamentary election at the weekend holding the most futures contracts on French bonds in at least a year, a sign they’re betting yields will go higher. Stock pickers are hedging losses with the most put options tied to Europe’s main blue-chip benchmark in two years. And currency traders are piling into derivatives that shield them from a drop in the euro at the fastest pace in 15 months.

    The main fear for markets of all stripes is that the new French government drives the country deeper into debt. France’s deficit already exceeds what’s allowed under European Union rules and a strong showing by either the right or the left would be viewed as increasing the chances that the government loosens the purse strings further. 

    S&P Global Ratings downgraded the country’s credit score at the end of May and the International Monetary Fund predicts its deficit will remain well above the EU’s 3% limit for years to come. 

    Pain for bonds can translate into pain for banks if they’re eventually forced to swoop in and buy up the notes should foreigners head for the exits. With French lenders already leading losses among euro-area banks in June, at that point the contagion could spiral beyond France’s borders, driving up borrowing costs in the EU’s weaker members.

    Memories of the region’s debt crisis are on investors’ minds, an Allianz Global Investors portfolio manager said recently, and ripples from France could once more bring the entire euro project into question.

    The last time Le Pen’s far-right party came close to clinching power was in the 2017 presidential election, promising voters a referendum on whether the country should leave the euro. While she’s tempered her stance since, her party’s policies have investors on edge.

    ‘Frexit’ Risk

    A gauge based on credit default swaps that indicates the likelihood of France leaving the EU has almost doubled since the European elections to near the highest since 2017. 

    The issue is “whether people want to go down the path of ruminating about redenomination,” said Erik Weisman, portfolio manager and chief economist at MFS Investment Management. “I think that would be unwarranted almost regardless of the outcome. But the market may have other ideas.”

    Political ructions in France are already casting a shadow over the broader region. 

    Weakness in French sovereign bonds has spilled over to Italy — Europe’s original poster child for fiscal profligacy. There, the spread to Germany has widened to the highest since February. 

    In credit markets, the risk premium French companies pay to borrow compared to their euro-area peers has jumped to the highest since the run-up to the 2017 election. Before the snap vote was called, that cost had been consistently lower.

    And trades in derivative markets that pay out if euro-area bank stocks decline have hit the highest since 2016.

    Banks are seen as vulnerable to concern about a nation’s political future through their holdings of government debt and their exposure to weak economic decisions. While sovereign bonds accounted for just 2.4% of French banks’ total assets as of the first quarter, that number could creep up if lenders step in to buy as foreign investors flee.

    ‘Existential Issue’

    “Market access is an existential issue for banks,” said Gordon Shannon, portfolio manager at TwentyFour Asset Management. “Periods of market stress curtail the ability to raise fresh capital.”

    To be sure, volatility triggered by elections can dissipate fast, and investors predict Le Pen’s party — if it does win the most seats — will tread carefully to boost her chances for the 2027 presidential vote. France’s CAC 40 stock benchmark has done well after most legislative elections in the past 30 years.

    Surveys indicate it’s unlikely any one party will have an absolute majority after the voting, and Former French President Francois Hollande indicated this week that he’d be ready to build a new coalition to govern if elections deliver a hung parliament.

    Karen Ward, chief market strategist for EMEA at J.P. Morgan Asset Management, sees the weakness in French banks as a buying opportunity. The next French government will be mindful of the chaos triggered by unfunded tax cuts proposed by UK prime minister Liz Truss in 2022.

    “In a couple of months’ time we will not be talking about French politics at all,” she said. “This is not 2011-2012, none of these more populous parties are advocating leaving the euro. This is about migration, which is a thread we are seeing in politics across the west.”

    Yet the sense of angst is palpable. The spike in political risk has prompted several portfolio managers to abandon the practice of buying European bonds in anticipation of a catch-up with valuations in US debt.

    That chimes with the shift in equity-market sentiment, where uncertainty before Sunday’s vote has derailed the bull case for Europe, pushing investors to trim exposure and rebalance their positioning toward US assets. 

    And rates traders are expecting the nation’s borrowing costs to remain high for the foreseeable future.

    “The French spread won’t go back to its pre-election level anytime soon,” said Sonia Renoult, a rates strategist at ABN Amro. “The question is how quickly it pulls back and whether the bond market or institutions need to force it to do so.”

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    Alice Gledhill, Michael Msika, Tasos Vossos, Bloomberg

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  • Canadian consumer debt: How we’re paying for our credit cards – MoneySense

    Canadian consumer debt: How we’re paying for our credit cards – MoneySense

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    What is causing debt for Canadians?

    Matthew Fabian, director of financial services research at TransUnion Canada, said many household incomes are not keeping up with inflation and higher interest rates, leaving them to rely on credit.

    “Consumers that have had significant increases in their mortgage payment have made that deliberate trade-off to pay less on their credit card and in some cases, they’re missing their payment,” Fabian said in an interview. “We’ve seen a higher delinquency rate in credit cards for those consumers that have mortgages than traditional credit card consumers.”

    How much debt do Canadians have?

    Total consumer debt in Canada was $2.38 trillion in the first quarter, compared with $2.32 trillion in the same quarter last year, and down only slightly from a record $2.4 trillion in the fourth quarter. The report said 31.8 million Canadians had one or more credit products in the first quarter, up 3.75% year-over-year. The jump was mainly driven by newcomers and gen Z signing up for their first credit products. The report showed there was a 30% surge in outstanding credit card balances for the gen Z cohort compared with the previous year.

    “The younger generation (is) only getting access to credit for the very first time in their life,” said Fabian. “They’re still learning how to use it, they’re still learning what it means to pay your monthly obligations.”

    Meanwhile, millennials held the largest portion of debt in the country—about 38% of all debt—likely due to higher credit needs as they grow older, according to the report. “They’re in the life stage where they’re probably having children, getting houses and have auto loans,” Fabian said. “The structure of the debt is shifted where 10 years ago, the majority of them would have had credit cards and car loans.” (Read: “How much debt is normal in Canada? We break it down by age”)

    Are mortgages in Canada at risk for defaults

    Fabian said he isn’t overly concerned about households falling behind on their mortgage payments because of the strict screening process established by the banking watchdog to qualify for a mortgage. He also said cash-strapped consumers will typically pay their mortgage first at the expense of other credit products like their auto loan or credit card. 

    Even though there are concerns about missed payments among the vulnerable population, Fabian said, “We’re still seeing pretty decent resiliency in the Canadian consumer base, especially when you look at how quickly it’s grown with gen Z and the volume of credit participation.”

    He added interest rate cuts, which are anticipated as early as June, can lessen the burden on households over time. “Our expectation is that the market will start to correct back to normal,” Fabian said.

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    The Canadian Press

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  • Why young people keep getting caught in debt traps and how to break the cycle – MoneySense

    Why young people keep getting caught in debt traps and how to break the cycle – MoneySense

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    “They may see a slight increase in their income, and they think, ‘Oh, I just kind of hit the lottery, and now I’m going to spend like crazy,’” Schwartz said. “And it’s tough to change those behaviours after it’s been ingrained for a long period of time.”

    To prevent this from happening, track spending diligently—you can download apps for this purpose—and delay milestones such as moving out or getting a car if you can, Schwartz said. Build up an emergency fund in case you lose your income or suffer a financial setback, to avoid falling into serious debt.

    “If you have the opportunity when you’re young, when you’re not spending as much on rent, you’re not spending as much on food, if you can cut back on how much you’re socializing—that’s a great place to start to build up that reserve fund,” Schwartz said.

    Live within your monthly cash flow—using your debit card or cash—and develop a short-term austerity plan to make big strides on debt repayment, Terrio said.

    When to focus on debt repayment

    Summer months are tough for austerity because you want to socialize, he pointed out, but January through March are a good time to adhere to a severe budget. Up to 40% of your non-rent income should go to debt, Terrio said, noting short-term austerity is tolerable because it’s over quickly.

    Ultimately, the aim is to reach the tipping point when at least half of your debt payment is going to the principal—and the portion going to interest starts to slide. Never use an instalment loan, he added.

    “All these 36 to 48% interest loans that are $10,000—if you get one of those, you’re done,” Terrio said. “You’re never, ever getting out.”

    Once you’re free of debt, stay that way. Keep your credit limit low and turn down offers to increase it, Terrio said. If you move debt to a line of credit, stop using your credit card.

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    The Canadian Press

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  • “My take on debt has changed over time”: Eva Wong on saving and investing – MoneySense

    “My take on debt has changed over time”: Eva Wong on saving and investing – MoneySense

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    What was the biggest money lesson you learned as an adult? 

    The biggest money lesson I’ve learned as an adult, I learned at Borrowell and through our members. What I’ve learned from interviewing some of them is that a lot of people who struggle with money are actually very good at managing money, but they don’t have enough income. 

    I probably had prejudices before, thinking that people who struggle with money just aren’t managing their money well. But what I’ve found is that when you live on a very narrow margin, you actually have to be very good at managing your money. If you’re like me, making a salary that covers my expenses, I don’t have to be good at managing my grocery bill, or worry about my car breaking down, because I know I have enough money to pay for it. I don’t have to be that good with my money because I have an income that’s higher than my expenses.

    But for people who are living paycheque-to-paycheque, a lot of them are very good at managing their money because they have to be. It was good for me to learn that, because it can be easy to say that someone has a spending problem but, for a lot of people, they actually have an income problem, and it doesn’t mean that they’re not diligent with managing their money. That’s why it’s important to have good credit, so that people can access funds if there is an emergency, because they often don’t have savings to fall back on.

    What’s the best money advice you’ve ever received?

    To start from a young age the habit of saving at least 10% from your earned money. 

    What’s the worst money advice you’ve ever received?

    Having an emergency fund when you have outstanding debt, and if you have access to a line of credit, doesn’t make sense. So, the worst money advice is putting a significant amount of money into an emergency fund of cash that just sits there.

    If you have a line of credit you could draw from in case of emergency, I would use the [emergency fund] money to pay off debt. If you have debt, that’s a guaranteed interest cost, as opposed to just paying interest when you use your line of credit. Later, when you’ve paid your debt, you can start an emergency fund or invest your money. But pay off your debt first. 

    Would you rather receive a large sum of money all at once or a smaller amount regularly for life? 

    I’d rather receive a lump sum all at once. It gives you more flexibility to do something impactful and meaningful with it. I feel like having a smaller amount every week or month is more like a safety net and more of a safe answer. 

    What do you think is the most underrated financial tip?

    Paying off debts, especially the ones with high interest, like credit card debt, is underrated. A lot of people get caught up in thinking they have to contribute to an RRSP, or they have to save, or they need an emergency fund, but if you’re carrying a balance on a credit card and paying 20% interest, I think the better financial choice is to pay off debt. 

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    MoneySense Editors

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  • Biden takes another stab at forgiving student loan debt. Here’s how to know if you qualify for his latest $7.4 billion package

    Biden takes another stab at forgiving student loan debt. Here’s how to know if you qualify for his latest $7.4 billion package

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    The White House has announced a new $7.4 billion  round of student loan cancellations, relieving nearly 277,000 borrowers of their debt. The latest attempt to chip away at the amount owed for education means President Joe Biden has now erased a grand total of $153 billion in debt, impacting 4.3 million people.

    This round of student loan forgiveness will largely help borrowers who are enrolled in federal loan forgiveness programs including the Saving on a Valuable Education (SAVE) Plan, which offers lower monthly payments based on income, and income-driven repayment plans, which are based on a percentage of a borrower’s monthly discretionary income. People who qualify for the newest loan cancellations will start receiving emails on Friday.

    Of the $7.4 billion forgiveness round, $3.6 billion will go to 207,000 borrowers enrolled in the SAVE plan and $3.5 billion is saved for 65,800 people registered in income-driven repayment plans. That leaves about $300 million for 4,600 people enrolled in the Public Service Loan Forgiveness program who will also receive debt forgiveness. 

    The SAVE plan differs from other income-based loan plans in that it typically leads to lower monthly payments and it’s meant to limit loan balance growth, which can happen under other income-based plans due to unpaid interest. Under the SAVE Plan, “any remaining accrued interest will be covered by the government, so your principal balance won’t increase,” according to the Federal Student Aid. 

    Biden has continued student loan forgiveness in rounds after the Supreme Court last summer blocked his grand plan that would have wiped out $400 billion in student loans. It would have forgiven up to $20,000 in federal student loan debt for tens of millions of borrowers. The plan was supported by high-profile Democrats in Congress, including Elizabeth Warren and Chuck Schumer— and they even pushed for more dramatic cancellation plans. But it was controversial since it was first announced in August 2022. The plan spurred several legal challenges, with two related cases making it to the nation’s highest court, arguing that Biden didn’t have the authority to forgive debt without approval from Congress. The original plan was ultimately blocked in a 6-to-3 decision in June 2023.

    But last week, Biden unveiled his backup plan to bring the total number of people with canceled debts to 30 million since the administration’s efforts began three years ago. 

    How rampant is student loan debt?

    Currently, more than 43.2 million Americans have federal student loan debt, totaling more than $1.6 trillion, according to Education Data Initiative, a higher education research group, with the average borrower owing $37,000. Income-driven replacement plans, including the SAVE Plan, have provided $49.2 billion in debt relief to more than 996,000 borrowers. 

    The issue of student loan debt is only set to get worse as the price of higher education continues to rise. The average price of tuition at a public four-year college is 23 times higher than in 1963, according to an Education Data Initiative report. 

    And as higher education costs rise, so too does Biden’s commitments to reducing borrowers’ accumulating debt. He extended a pause on student loan payments for three years between March 2020 until September 2023; in November 2021, he canceled $11 billion in student loans, and last December, he announced a $4.8 billion student debt relief package for more than 80,300 people. 

    More recently, while at a campaign stop on April 8 in Madison, Biden unveiled a new plan to help 25 million borrowers lower their debt, with an offer to send at least $5,000 in relief to 10 million borrowers. He’s also proposed making community college free so “more Americans can access the promise of higher education.” 

    The “current student loan system and repayment programs don’t reach all borrowers, and for many Americans student loans continue to be a barrier,” Biden said in an April 8 statement. 

    Subscribe to the CFO Daily newsletter to keep up with the trends, issues, and executives shaping corporate finance. Sign up for free.

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    Sunny Nagpaul

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  • No hay un programa que borra la deuda de hispanos

    No hay un programa que borra la deuda de hispanos

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    Publicaciones en Facebook ofrecen a hispanos borrar sus deudas con un supuesto programa para luchar “contra la recesión”, pero este programa no es real, ni tampoco los videos que lo promueven. 

    “A todos los hispanoamericanos se les borraran sus deudas hasta este sábado 6 de abril he aquí… porque quieren luchar contra la recesión que se avecina”, dice el video en Facebook del 1 de abril.  “Así que es mejor que presente la solicitud mientras todavía ofrecen esto al público”. 

    La publicación muestra a la presentadora de Univision, Karina Banda, supuestamente dando la noticia del programa de deudas. Pero el video alteró la voz de Banda. El video también presenta imágenes de personas con billetes, tarjetas de crédito y gente celebrando. 

    Lo que promociona el video suena práctico e interesante, pero el video fue editado y ofrece información falsa. 

    La publicación fue marcada como parte del esfuerzo de Meta para combatir las noticias falsas y la desinformación en su plataforma. (Lea más sobre nuestra colaboración con Meta, propietaria de Facebook e Instagram).

    PolitiFact no encontró ningún anuncio oficial del gobierno federal de Estados Unidos, ni artículos de medios verídicos que hablaran de tal programa de alivio de deudas. 

    Hicimos una búsqueda de imagen inversa y encontramos el video original de Banda en la página de Instagram del programa de Univision Desiguales. En ese video ella tiene el mismo vestido y se ve el mismo fondo que en el video en Facebook, pero ella no habló sobre cómo borrar deudas, sino de los temas de opinión que iban a discutir en su programa el 7 de marzo. 

    También notamos que los movimientos de labios de Banda en el video en Facebook no coinciden con lo que ella supuestamente dice. 

    Aunque Banda trabaja en Univision, la publicación en Facebook usa imágenes falsas de CNN para decir que esa cadena de televisión reportó sobre el alivio de deudas. PolitiFact hizo una búsqueda de imagen inversa de la imágenes de CNN en la cual una mujer supuestamente hablaba sobre el programa de deudas para hispanos y no encontramos nada sobre el tema. 

    No es la primera vez que verificamos publicaciones que prometen saldar la deuda a los hispanos en los Estados Unidos. Otros videos que hemos verificado repiten la afirmación pero con fechas diferentes.

    Otras publicaciones en Facebook — que desmentimos en el pasado — mostraban al presentador de Univision Jorge Ramos, supuestamente diciendo lo mismo sobre el alivio de deudas. Pero el video de Ramos también fue editado y mezclaba una parte de un noticiero real con rótulos falsos y una voz manipulada.

    (Captura de pantalla de la publicación en Facebook).

    Las publicaciones urgían a los usuarios a aplicar al programa de borrar deudas, ya que supuestamente estaba disponible por poco tiempo, pero expertos han advertido sobre este tipo de tácticas engañosas.

    “Nunca hay ninguna emergencia en internet que no pueda esperar un día”, dijo previamente Melissa deCardi Hladek, una profesora asistente en el Johns Hopkins School of Nursing. 

    Existen compañías privadas que asisten con el alivio de deudas, pero es ilegal que te cobren antes de ayudarte, y no pueden garantizar eliminar tus deudas, según la Comisión Federal de Comercio (FTC, por sus siglas en inglés).

    Nuestro veredicto

    Una publicación en Facebook dice, “A todos los hispanoamericanos se les borraran sus deudas…porque quieren luchar contra la recesión que se avecina”.

    PolitiFact no encontró programas oficiales del gobierno federal que ofrezcan tal servicio a hispanos en Estados Unidos. 

    La voz de Banda fue alterada para aparentar que ella habló sobre este supuesto programa;  sus movimientos de labios no concuerdan con lo que decía el video. 

    Calificamos esta declaración como Falsa.

    Marta Campabadal Graus, reportera de PolitiFact, contribuyó a este reportaje.

    Lee más reportes de PolitiFact en Español aquí.

    Debido a limitaciones técnicas, partes de nuestra página web aparecen en inglés. Estamos trabajando en mejorar la presentación.

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  • Jorge Ramos no reportó sobre supuesta ley que liquida deudas

    Jorge Ramos no reportó sobre supuesta ley que liquida deudas

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    ¿Es cierto que el periodista de Univision Jorge Ramos reportó sobre un perdón de deudas de tarjetas de crédito? No, Ramos no dijo eso, ese video fue manipulado.

    El video en Facebook muestra a Ramos supuestamente diciendo: “La nueva ley de empoderamiento económico elimina entre $15,000 y $100,000 de deuda de tarjeta de crédito para todos los estadounidenses hispanos”.

    La publicación fue marcada como parte del esfuerzo de Meta para combatir las noticias falsas y la desinformación en su plataforma. (Lea más sobre nuestra colaboración con Meta, propietaria de Facebook e Instagram).

    Otras publicaciones similares con la imagen Ramos también prometen borrar deudas a los hispanoamericanos. 

    Pero estas afirmaciones son falsas. No hay ninguna “ley de empoderamiento económico” que elimine deudas.

    El video mezcla la imagen de Ramos extraída de “Al Punto“, el programa semanal que él presenta en Univision, junto con rótulos falsos y una voz manipulada. 

    Asimismo, el video muestra imágenes de la congresista demócrata Alexandria Ocasio-Cortez, y cartas que supuestamente reciben los peticionarios de los beneficios de la ley con mensajes de “aprobado”. 

    La voz de fondo que suena como la de Ramos dice, “adjuntaré el sitio web a continuación. Responde dos preguntas y eliminarán tu deuda. El programa termina esta semana, el 9 de marzo”. Pero no hay ningún enlace a una página web.  

    “Al Punto” publicó un reportaje en noviembre de 2023 diciendo que la voz de Ramos “fue clonada con inteligencia artificial para darle credibilidad a un supuesto servicio de alivio de deudas”.

    Ramos en mayo de 2023 alertó en X sobre el uso de su nombre e imagen en falsos comerciales; él también publicó algo similar en su página web.

    Existen compañías privadas que asisten con el alivio de deudas, pero es ilegal que te cobren antes de ayudarte, y no pueden garantizar eliminar tus deudas, según la Comisión Federal de Comercio (FTC, por sus siglas en inglés). 

    Calificamos la publicación que usa la imagen de Ramos para decir que una nueva ley elimina entre $15,000 y $100,000 de deuda de tarjeta de crédito para los hispanos como Falsa.

    Lee más:

    El tan solo ganar menos de $50,000 al año no garantiza seguro de salud gratuito

    Orden ejecutiva de Biden no proporciona cuidado de salud gratuito a los hispanos en EE.UU.

    No, no hay ninguna ley que elimine hasta $15,000 de deuda a los estadounidenses

    Lee más reportes de PolitiFact en Español aquí.

    Debido a limitaciones técnicas, partes de nuestra página web aparecen en inglés. Estamos trabajando en mejorar la presentación.

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