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Tag: Student Loans

  • What to know about the Supreme Court arguments over Trump’s tariffs

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    Three lower courts have ruled President Donald Trump’s use of emergency powers to impose worldwide tariffs to be illegal. Now the Supreme Court, with three justices Trump appointed and generally favorable to muscular presidential power, will have the final word.In roughly two dozen emergency appeals, the justices have largely gone along with Trump in temporarily allowing parts of his aggressive second-term agenda to take effect while lawsuits play out.But the case being argued Wednesday is the first in which the court will render a final decision on a Trump policy. The stakes are enormous, both politically and financially.The Republican president has made tariffs a central piece of his economic and foreign policy and has said it would be a “disaster” if the Supreme Court rules against him.Here are some things to know about the tariffs arguments at the Supreme Court:Tariffs are taxes on importsThey are paid by companies that import finished products or parts, and the added cost can be passed on to consumers.Through September, the government has reported collecting $195 billion in revenue generated from the tariffs.The Constitution gives Congress the power to impose tariffs, but Trump has claimed extraordinary power to act without congressional approval by declaring national emergencies under the 1977 International Emergency Economic Powers Act.In February, he invoked the law to impose tariffs on Canada, Mexico and China, saying that the illegal flow of immigrants and drugs across the U.S. border amounted to a national emergency and that the three countries needed to do more to stop it.In April, he imposed worldwide tariffs after declaring the United States’ longstanding trade deficits “a national emergency.”Libertarian-backed businesses and states challenged the tariffs in federal courtChallengers to Trump’s actions won rulings from a specialized trade court, a district judge in Washington and a business-focused appeals court, also in the nation’s capital.Those courts found that Trump could not justify tariffs under the emergency powers law, which doesn’t mention them. But they left the tariffs in place in the meantime.The appeals court relied on major questions, a legal doctrine devised by the Supreme Court that requires Congress to speak clearly on issues of “vast economic and political significance.”The major questions doctrine doomed several Biden policiesConservative majorities struck down three of then-President Joe Biden’s initiatives related to the coronavirus pandemic. The court ended the Democrat’s pause on evictions, blocked a vaccine mandate for large businesses and prevented student loan forgiveness that would have totaled $500 billion over 10 years.In comparison, the stakes in the tariff case are much higher. The taxes are estimated to generate $3 trillion over 10 years.The challengers in the tariffs case have cited writings by the three Trump appointees, Justices Amy Coney Barrett, Neil Gorsuch and Brett Kavanaugh, in calling on the court to apply similar limitations on a signal Trump policy.Barrett described a babysitter taking children on roller coasters and spending a night in a hotel based on a parent’s encouragement to “make sure the kids have fun.”“In the normal course, permission to spend money on fun authorizes a babysitter to take children to the local ice cream parlor or movie theater, not on a multiday excursion to an out-of-town amusement park,” Barrett wrote in the student loans case. “If a parent were willing to greenlight a trip that big, we would expect much more clarity than a general instruction to ‘make sure the kids have fun.’”Kavanaugh, though, has suggested the court should not apply the same limiting standard to foreign policy and national security issues.A dissenting appellate judge also wrote that Congress purposely gave presidents more latitude to act through the emergency powers law.Some of the businesses that sued also are raising a separate legal argument in an appeal to conservative justices, saying that Congress could not constitutionally delegate its taxing power to the president.The nondelegation principle has not been used in 90 years, since the Supreme Court struck down some New Deal legislation.But Gorsuch authored a dissent in June that would have found the Federal Communications Commission’s universal service fee an unconstitutional delegation. Justices Samuel Alito and Clarence Thomas joined the dissent.“What happens when Congress, weary of the hard business of legislating and facing strong incentives to pass the buck, cedes its lawmaking power, clearly and unmistakably, to an executive that craves it?” Gorsuch wrote.The justices could act more quickly than usual in issuing a decisionThe court only agreed to hear the case in September, scheduling arguments less than two months later. The quick turnaround, at least by Supreme Court standards, suggests that the court will try to act fast.High-profile cases can take half a year or more to resolve, often because the majority and dissenting opinions go through rounds of revision.But the court can act quickly when deadline pressure dictates. Most recently, the court ruled a week after hearing arguments in the TikTok case, unanimously upholding a law requiring the popular social media app to be banned unless it was sold by its Chinese parent company. Trump has intervened several times to keep the law from taking effect while negotiations continue with China.

    WASHINGTON —

    Three lower courts have ruled President Donald Trump’s use of emergency powers to impose worldwide tariffs to be illegal. Now the Supreme Court, with three justices Trump appointed and generally favorable to muscular presidential power, will have the final word.

    In roughly two dozen emergency appeals, the justices have largely gone along with Trump in temporarily allowing parts of his aggressive second-term agenda to take effect while lawsuits play out.

    But the case being argued Wednesday is the first in which the court will render a final decision on a Trump policy. The stakes are enormous, both politically and financially.

    The Republican president has made tariffs a central piece of his economic and foreign policy and has said it would be a “disaster” if the Supreme Court rules against him.

    Here are some things to know about the tariffs arguments at the Supreme Court:

    Tariffs are taxes on imports

    They are paid by companies that import finished products or parts, and the added cost can be passed on to consumers.

    Through September, the government has reported collecting $195 billion in revenue generated from the tariffs.

    The Constitution gives Congress the power to impose tariffs, but Trump has claimed extraordinary power to act without congressional approval by declaring national emergencies under the 1977 International Emergency Economic Powers Act.

    In February, he invoked the law to impose tariffs on Canada, Mexico and China, saying that the illegal flow of immigrants and drugs across the U.S. border amounted to a national emergency and that the three countries needed to do more to stop it.

    In April, he imposed worldwide tariffs after declaring the United States’ longstanding trade deficits “a national emergency.”

    Libertarian-backed businesses and states challenged the tariffs in federal court

    Challengers to Trump’s actions won rulings from a specialized trade court, a district judge in Washington and a business-focused appeals court, also in the nation’s capital.

    Those courts found that Trump could not justify tariffs under the emergency powers law, which doesn’t mention them. But they left the tariffs in place in the meantime.

    The appeals court relied on major questions, a legal doctrine devised by the Supreme Court that requires Congress to speak clearly on issues of “vast economic and political significance.”

    The major questions doctrine doomed several Biden policies

    Conservative majorities struck down three of then-President Joe Biden’s initiatives related to the coronavirus pandemic. The court ended the Democrat’s pause on evictions, blocked a vaccine mandate for large businesses and prevented student loan forgiveness that would have totaled $500 billion over 10 years.

    In comparison, the stakes in the tariff case are much higher. The taxes are estimated to generate $3 trillion over 10 years.

    The challengers in the tariffs case have cited writings by the three Trump appointees, Justices Amy Coney Barrett, Neil Gorsuch and Brett Kavanaugh, in calling on the court to apply similar limitations on a signal Trump policy.

    Barrett described a babysitter taking children on roller coasters and spending a night in a hotel based on a parent’s encouragement to “make sure the kids have fun.”

    “In the normal course, permission to spend money on fun authorizes a babysitter to take children to the local ice cream parlor or movie theater, not on a multiday excursion to an out-of-town amusement park,” Barrett wrote in the student loans case. “If a parent were willing to greenlight a trip that big, we would expect much more clarity than a general instruction to ‘make sure the kids have fun.’”

    Kavanaugh, though, has suggested the court should not apply the same limiting standard to foreign policy and national security issues.

    A dissenting appellate judge also wrote that Congress purposely gave presidents more latitude to act through the emergency powers law.

    Some of the businesses that sued also are raising a separate legal argument in an appeal to conservative justices, saying that Congress could not constitutionally delegate its taxing power to the president.

    The nondelegation principle has not been used in 90 years, since the Supreme Court struck down some New Deal legislation.

    But Gorsuch authored a dissent in June that would have found the Federal Communications Commission’s universal service fee an unconstitutional delegation. Justices Samuel Alito and Clarence Thomas joined the dissent.

    “What happens when Congress, weary of the hard business of legislating and facing strong incentives to pass the buck, cedes its lawmaking power, clearly and unmistakably, to an executive that craves it?” Gorsuch wrote.

    The justices could act more quickly than usual in issuing a decision

    The court only agreed to hear the case in September, scheduling arguments less than two months later. The quick turnaround, at least by Supreme Court standards, suggests that the court will try to act fast.

    High-profile cases can take half a year or more to resolve, often because the majority and dissenting opinions go through rounds of revision.

    But the court can act quickly when deadline pressure dictates. Most recently, the court ruled a week after hearing arguments in the TikTok case, unanimously upholding a law requiring the popular social media app to be banned unless it was sold by its Chinese parent company. Trump has intervened several times to keep the law from taking effect while negotiations continue with China.

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  • States and cities challenge Trump policy overhauling public service loan forgiveness

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    By COLLIN BINKLEY, Associated Press

    WASHINGTON (AP) — More than 20 Democrat-led states are challenging a new Trump administration policy designed to block nonprofit and government workers from a student loan cancellation program if federal officials determine their employer has a “substantial illegal purpose.”

    The policy is aimed primarily at organizations that work with immigrants and transgender youth.

    In the lawsuit filed Monday in Massachusetts, the states argue the Trump administration overstepped its authority when it added new eligibility rules for the Public Service Loan Forgiveness program. The overhaul will worsen job shortages and create instability in state workforces, the suit said.

    The legal challenge is being led by New York, Massachusetts, California and Colorado. New York Attorney General Letitia James said the rule is “a political loyalty test disguised as a regulation,” adding that it’s “unjust and unlawful to cut off loan forgiveness for hardworking Americans based on ideology.”

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  • CU’s Colorado Springs campus thought it could avoid Trump’s education crackdown. Here’s what happened

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    By BYRON TAU, The Associated Press

    COLORADO SPRINGS — Administrators at the University of Colorado’s campus in Colorado Springs thought they stood a solid chance of dodging the Trump administration’s offensive on higher education.

    Located on a picturesque bluff with a stunning view of Pikes Peak, the school is far removed from the Ivy League colleges that have drawn President Donald Trump’s ire. Most of its students are commuters, getting degrees while holding down full-time jobs. Students and faculty alike describe the university, which is in a conservative part of a blue state, as politically subdued, if not apolitical.

    That optimism was misplaced.

    An Associated Press review of thousands of pages of emails from school officials, as well as interviews with students and professors, reveals that school leaders, teachers and students soon found themselves in the Republican administration’s crosshairs, forcing them to navigate what they described as an unprecedented and haphazard degree of change.

    Whether Washington has downsized government departments, clawed back or launched investigations into diversity programs or campus antisemitism, the University of Colorado-Colorado Springs has confronted many of the same challenges as elite universities across the nation.

    The school lost three major federal grants and found itself under investigation by Trump’s Education Department. In the hopes of avoiding that scrutiny, the university renamed websites and job titles, all while dealing with pressure from students, faculty and staff who wanted the school to take a more combative stance.

    “Uncertainty is compounding,” the school’s chancellor told faculty at a February meeting, according to minutes of the session. “And the speed of which orders are coming has been a bit of a shock.”

    The college declined to make any administrators available to be interviewed. A spokesman asked the AP to make clear that any professors or students interviewed in this story were speaking for themselves and not the institution. Several faculty members also asked for anonymity, either because they did not have tenure or they did not want to call unnecessary attention to themselves and their scholarship in the current political environment.

    “Like our colleagues across higher education, we’ve spent considerable time working to understand the new directives from the federal government,” the chancellor, Jennifer Sobanet, said in a statement provided to the AP.

    Students said they have been able to sense the stress being felt by school administrators and professors.

    “We have administrators that are feeling pressure, because we want to maintain our funding here. It’s been tense,” said Ava Knox, a rising junior who covers the university administration for the school newspaper.

    Faculty, she added, “want to be very careful about how they’re conducting their research and about how they’re addressing the student population. They are also beholden to this new set of kind of ever-changing guidelines and stipulations by the federal government.”

    A White House spokesperson did not respond to a request for comment.

    Misplaced optimism

    Shortly after Trump won a second term in November, UCCS leaders were trying to gather information on the Republican’s plans. In December, Sobanet met the newly elected Republican congressman who represented the school’s district, a conservative one that Trump won with 53% of the vote. In her meeting notes obtained by the AP, the chancellor sketched out a scenario in which the college might avoid the drastic cuts and havoc under the incoming administration.

    “Research dollars –- hard to pull back grant dollars but Trump tried to pull back some last time. The money goes through Congress,” Sobanet wrote in notes prepared for the meeting. “Grant money will likely stay but just change how they are worded and what it will fund.”

    Sobanet also observed that dismantling the federal Education Department would require congressional authorization. That was unlikely, she suggested, given the U.S. Senate’s composition.

    Like many others, she did not fully anticipate how aggressively Trump would seek to transform the federal government.

    Conservatives’ desire to revamp higher education began well before Trump took office.

    They have long complained that universities have become bastions of liberal indoctrination and raucous protests. In 2023, Republicans in Congress had a contentious hearing with several Ivy League university leaders. Shortly after, the presidents of Harvard and the University of Pennsylvania resigned. During the presidential campaign last fall, Trump criticized campus protests about Gaza, as well as what he said was a liberal bias in classrooms.

    His new administration opened investigations into alleged antisemitism at several universities. It froze more than $400 million in research grants and contracts at Columbia, along with more than $2.6 billion at Harvard. Columbia reached an agreement last month to pay $220 million to resolve the investigation.

    When Harvard filed a lawsuit challenging Trump’s actions, his administration tried to block the school from enrolling international students. The Trump administration has also threatened to revoke Harvard’s tax-exempt status.

    Northwestern University, Penn, Princeton and Cornell have seen big chunks of funding cut over how they dealt with protests about Israel’s war in Gaza or over the schools’ support for transgender athletes.

    Trump’s decision to target the wealthiest, most prestigious institutions provided some comfort to administrators at the approximately 4,000 other colleges and universities in the country.

    Most higher education students in the United States are educated at regional public universities or community colleges. Such schools have not typically drawn attention from culture warriors.

    Students and professors at UCCS hoped Trump’s crackdown would bypass the school and others like it.

    “You’ve got everyone — liberals, conservatives, middle of the road,” said Jeffrey Scholes, a professor in the philosophy department. “You just don’t see the kind of unrest and polarization that you see at other campuses.”

    The purse strings

    The federal government has lots of leverage over higher education. It provides about $60 billion a year to universities for research. In addition, a majority of students in the U.S. need grants and loans from various federal programs to help pay tuition and living expenses.

    This budget year, UCCS got about $19 million in research funding from a combination of federal, state and private sources. Though that is a relatively small portion of the school’s overall $369 million budget, the college has made a push in recent years to bolster its campus research program by taking advantage of grant money from government agencies such as the U.S. Defense Department and National Institutes for Health. The widespread federal grant cut could derail those efforts.

    School officials were dismayed when the Trump administration terminated research grants from the National Endowment for the Humanities, the Defense Department and the National Science Foundation, emails show. The grants funded programs in civics, cultural preservation and boosting women in technology fields.

    School administrators scrambled to contact federal officials to learn if other grants were on the chopping block, but they struggled to find answers, the records show.

    School officials repeatedly sought out the assistance of federal officials only to learn those officials were not sure what was happening as the Trump administration halted grant payments, fired thousands of employees and shuttered agencies.

    “The sky is falling” at NIH, a university official reported in notes on a call in which the school’s lobbyists were providing reports of what was happening in Washington.

    There are also concerns about other changes in Washington that will affect how students pay for college, according to interviews with faculty and education policy experts.

    While only Congress can fully abolish the U.S. Department of Education, the Trump administration has tried to dramatically cut back its staff and parcel out many of its functions to other agencies. The administration laid off nearly 1,400 employees, and problems have been reported in the systems that handle student loans. Management of student loans is expected to shift to another agency entirely.

    In addition, an early version of a major funding bill in Congress included major cuts to tuition grants. Though that provision did not make it into the law, Congress did cap loans for students seeking graduate degrees. That policy could have ripple effects in the coming years on institutions such as UCCS that rely on tuition dollars for their operating expenses.

    DEI and transgender issues hit campus

    To force change on campus, the Trump administration has begun investigations targeting diversity programs and efforts to combat antisemitism.

    The Education Department, for example, opened an investigation in March targeting a Ph.D. scholarship program that partnered with 45 universities, including UCCS, to expand opportunities to women and nonwhites in graduate education. The administration alleged the program was only open to certain nonwhite students and amounted to racial discrimination.

    “Sorry to be the bearer of bad news UCCS is included on the list” of schools being investigated, wrote Annie Larson, assistant vice president of federal relations and outreach for the entire University of Colorado system.

    “Oh wow, this is surprising,” wrote back Hillary Fouts, dean of the graduate school at UCCS.

    UCCS also struggled with how to handle executive orders, particularly those on transgender issues.

    In response to an order that aimed to revoke funds to schools that allowed transwomen to play women’s sports, UCCS began a review of its athletic programs. It determined it had no transgender athletes, the records show. University officials were also relieved to discover that only one school in their athletic conference was affected by the order, and UCCS rarely if ever had matches or games against that school.

    “We do not have any students impacted by this and don’t compete against any teams that we are aware of that will be impacted by this,” wrote the vice chancellor for student affairs to colleagues.

    Avoiding the spotlight

    The attacks led UCCS to take preemptive actions and to self-censor in the hopes of saving programs and avoiding the Trump administration’s spotlight.

    Emails show that the school’s legal counsel began looking at all the university’s websites and evaluating whether any scholarships might need to be reworded. The university changed the web address of its diversity initiatives from www.diversity.uccs.edu to www.belonging.uccs.edu.

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    The Associated Press

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  • Judge puts Biden’s student loan cancellation on hold again

    Judge puts Biden’s student loan cancellation on hold again

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    A federal judge in Missouri put a temporary hold on President Joe Biden’s latest student loan cancellation plan on Thursday, slamming the door on hope it would move forward after another judge allowed a pause to expire.Related video above: Delinquency reports for student loan borrowers restart in OctoberJust as it briefly appeared the Biden administration would have a window to push its plan forward, U.S. District Judge Matthew Schelp in Missouri granted an injunction blocking any widespread cancellation.Six Republican-led states requested the injunction hours earlier, after a federal judge in Georgia decided not to extend a separate order blocking the plan.The states, led by Missouri’s attorney general, asked Schelp to act fast, saying the Education Department could “unlawfully mass cancel up to hundreds of billions of dollars in student loans as soon as Monday.” Schelp called it an easy decision.Biden’s plan has been on hold since September, when the states filed a lawsuit in Georgia arguing Biden had overstepped his legal authority. But on Thursday, U.S. District Court Judge J. Randal Hall decided not to extend the pause after finding that Georgia doesn’t have the legal right to sue in this case.Hall dismissed Georgia from the case and transferred it to Missouri, which Hall said has “clear standing” to challenge Biden’s plan.Proponents of student loan cancellation briefly had a glimmer of hope the plan would move forward — Hall’s order was set to expire after Thursday, allowing the Education Department to finalize the rule. But Schelp’s order put the question to rest.“This is yet another win for the American people,” Missouri Attorney General Andrew Bailey said in a statement. “The Court rightfully recognized Joe Biden and Kamala Harris cannot saddle working Americans with Ivy League debt.”Biden’s plan would cancel at least some student loan debt for an estimated 30 million borrowers.It would erase up to $20,000 in interest for those who have seen their original balances increase because of runaway interest. It would also provide relief to those who have been repaying their loans for 20 or 25 years, and those who went to college programs that leave graduates with high debt compared to their incomes.Video below: Older Borrowers Struggle with High Student Loan DebtBiden told the Education Department to pursue cancellation through a federal rulemaking process after the Supreme Court rejected an earlier plan using a different legal justification. That plan would have eliminated up to $20,000 for 43 million Americans.The Supreme Court rejected Biden’s first proposal in a case brought by Republican states including Missouri.In his order Wednesday, Hall said Georgia failed to prove it was significantly harmed by Biden’s new plan. He rejected an argument that the policy would hurt the state’s income tax revenue, but he found that Missouri has a strong case.Missouri is suing on behalf of MOHELA, a student loan servicer that was created by the state and is hired by the federal government to help collect student loans. In the suit, Missouri argues that cancellation would hurt MOHELA’s revenue because it’s paid based on the number of borrowers it serves.In their lawsuit, the Republican states argue that the Education Department had quietly been telling loan servicers to prepare for loan cancellation as early as Sept. 9, bypassing a typical 60-day waiting period for new federal rules to take effect.Also joining the suit are Alabama, Arkansas, Florida, North Dakota and Ohio.

    WASHINGTON —

    A federal judge in Missouri put a temporary hold on President Joe Biden’s latest student loan cancellation plan on Thursday, slamming the door on hope it would move forward after another judge allowed a pause to expire.

    Related video above: Delinquency reports for student loan borrowers restart in October

    Just as it briefly appeared the Biden administration would have a window to push its plan forward, U.S. District Judge Matthew Schelp in Missouri granted an injunction blocking any widespread cancellation.

    Six Republican-led states requested the injunction hours earlier, after a federal judge in Georgia decided not to extend a separate order blocking the plan.

    The states, led by Missouri’s attorney general, asked Schelp to act fast, saying the Education Department could “unlawfully mass cancel up to hundreds of billions of dollars in student loans as soon as Monday.” Schelp called it an easy decision.

    Biden’s plan has been on hold since September, when the states filed a lawsuit in Georgia arguing Biden had overstepped his legal authority. But on Thursday, U.S. District Court Judge J. Randal Hall decided not to extend the pause after finding that Georgia doesn’t have the legal right to sue in this case.

    Hall dismissed Georgia from the case and transferred it to Missouri, which Hall said has “clear standing” to challenge Biden’s plan.

    Proponents of student loan cancellation briefly had a glimmer of hope the plan would move forward — Hall’s order was set to expire after Thursday, allowing the Education Department to finalize the rule. But Schelp’s order put the question to rest.

    “This is yet another win for the American people,” Missouri Attorney General Andrew Bailey said in a statement. “The Court rightfully recognized Joe Biden and Kamala Harris cannot saddle working Americans with Ivy League debt.”

    Biden’s plan would cancel at least some student loan debt for an estimated 30 million borrowers.

    It would erase up to $20,000 in interest for those who have seen their original balances increase because of runaway interest. It would also provide relief to those who have been repaying their loans for 20 or 25 years, and those who went to college programs that leave graduates with high debt compared to their incomes.

    Video below: Older Borrowers Struggle with High Student Loan Debt

    Biden told the Education Department to pursue cancellation through a federal rulemaking process after the Supreme Court rejected an earlier plan using a different legal justification. That plan would have eliminated up to $20,000 for 43 million Americans.

    The Supreme Court rejected Biden’s first proposal in a case brought by Republican states including Missouri.

    In his order Wednesday, Hall said Georgia failed to prove it was significantly harmed by Biden’s new plan. He rejected an argument that the policy would hurt the state’s income tax revenue, but he found that Missouri has a strong case.

    Missouri is suing on behalf of MOHELA, a student loan servicer that was created by the state and is hired by the federal government to help collect student loans. In the suit, Missouri argues that cancellation would hurt MOHELA’s revenue because it’s paid based on the number of borrowers it serves.

    In their lawsuit, the Republican states argue that the Education Department had quietly been telling loan servicers to prepare for loan cancellation as early as Sept. 9, bypassing a typical 60-day waiting period for new federal rules to take effect.

    Also joining the suit are Alabama, Arkansas, Florida, North Dakota and Ohio.

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  • Biden’s student loan forgiveness plans can advance, judge rules

    Biden’s student loan forgiveness plans can advance, judge rules

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    A federal judge in Georgia declined to block President Joe Biden’s second attempt at broader debt relief and transferred that case to a Missouri federal court. The move could open the door for more than 20 million Americans to see their student loans debt discharged.

    Brad Smith sits down with Betsy Mayotte, president and founder of the Institute of Student Loan Advisors, on Wealth! to discuss what the news means for borrowers.

    “I’m certainly more cautiously optimistic than I was. We have to remember that the judge is just sort of moved this to a different court. So the fight is not over yet, but it is possible that some borrowers may see some see some relief sooner rather than later,” Mayotte tells Yahoo Finance.

    She says, “Because of what’s been happening over the last couple of years with these Republican states and these types of debt relief, I do expect they will probably try to file another suit. The question is whether they can show that they have standing and if they can’t, then this debt relief can go forward and it may be able to go forward in the meantime.”

    “It’s important to clarify that what this relief does for most borrowers. It’s not going to forgive all their loans. The most borrowers that would benefit from this would be people who owe more now than when they first went into repayment. And with this debt relief would do was sort of bring them back to where they started, [rather than] forgive the whole thing. There are some borrowers that who have been paying for decades that would get full relief, but most people that would get this benefit would just sort of see them be brought back to where they started, which is still a great thing.”

    For more expert insight and the latest market action, click here to watch this full episode of Wealth!

    This post was written by Naomi Buchanan.

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  • End of student loans grace period a potentially perilous time for borrowers

    End of student loans grace period a potentially perilous time for borrowers

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    The 12-month grace period for student loan borrowers ended on Sept. 30. The “on-ramp” period helped borrowers who are struggling to make payments avoid the risk of defaulting and hurting their credit score.

    “The end of the on-ramp period means the beginning of the potentially harsh consequences for student loan borrowers who are not able to make payments,” said Persis Yu, Deputy Executive Director at the Student Borrower Protection Center.

    Around 43 million Americans have student loan debt, amounting to $1.5 trillion. Around eight million of those borrowers had enrolled in the SAVE plan, the newest income-driven repayment plan that extended the eligibility for borrowers to have affordable monthly student loan payments. However, this plan is currently on hold due to legal challenges.

    With the on-ramp period and a separate program known as Fresh Start ending and the SAVE plan on hold, student loan borrowers who are struggling to afford their monthly payments have fewer options, added Yu. Student loan borrowers who haven’t been able to afford their monthly payments must consider their options to avoid going into default.

    What you need to know if you have student loans

    The Education Department implemented this grace period to ease the borrower’s transition to make payments after a three-year payment pause during the COVID-19 pandemic. During this year-long period, borrowers were encouraged to keep making payments since interest continued to accumulate.

    “Normally, loans will default if you fall about nine months behind on making payments, but during this on-ramp period, missed payments would not move people towards defaulting and then being subject to forced collections. However, if you missed payments, you still would be falling behind, ultimately, on repaying your loans,” said Abby Shaforth, director of National Consumer Law Center’s Student Loan Borrower Assistance Project.

    Since this grace period has ended, student loan borrowers who don’t make payments will go delinquent or, if their loans aren’t paid for nine months, go into default.

    Borrowers who can’t afford to make payments can apply for deferment or forbearance, which pause payments, though interest continues to accrue.

    Consequences of failing to pay  

    Borrowers who can’t or don’t pay risk delinquency and eventually default. That can badly hurt your credit rating and make you ineligible for additional aid and government benefits.

    If a borrower missed one month’s payment, they will start receiving email notifications, said Shaforth. Once the loan hasn’t been paid for three months, loan servicers notify to the credit reporting agencies that the loan is delinquent, affecting your credit history. Once the borrower hasn’t paid the loan for nine months, the loan goes into default.

    If you’re struggling to pay, advisers first encourage you to check if you qualify for an income-driven repayment plan, which determines your payments by looking at your expenses. You can see whether you qualify by visiting the Federal Student Aid website. If you’ve worked for a government agency or a non-profit organization, you could also be eligible for the Public Service Loan Forgiveness Program, which forgives student debt after 10 years.

    When you fall behind on a loan by 270 days – roughly 9 months – the loan appears on your credit report as being in default.

    Once a loan is in default, it goes into collections. This means the government can garnish wages (without a court order) to go toward paying back the loan, intercept tax refunds, and seize portions of Social Security checks and other benefit payments.

    If your budget doesn’t enable you to resume payments, it’s important to know how to navigate the possibility of default and delinquency on a student loan. Both can hurt your credit rating, which would make you ineligible for additional aid.

    If you’re in a short-term financial bind, you may qualify for deferment or forbearance – allowing you to temporarily suspend payment.

    To determine whether deferment or forbearance are good options for you, you can contact your loan servicer. One thing to note: interest still accrues during deferment or forbearance. Both can also impact potential loan forgiveness options. Depending on the conditions of your deferment or forbearance, it may make sense to continue paying the interest during the payment suspension.

    The U.S. Education Department offers several plans for repaying federal student loans. Under the standard plan, borrowers are charged a fixed monthly amount that ensures all their debt will be repaid after 10 years. But if borrowers have difficulty paying that amount, they can enroll in one of several plans that offer lower monthly payments based on income and family size. Those are known as income-driven repayment plans.

    Income-driven options have been offered for years and generally cap monthly payments at 10% of a borrower’s discretionary income. If a borrower’s earnings are low enough, their bill is reduced to $0. And after 20 or 25 years, any remaining debt gets erased.

    In August, the Supreme Court kept on hold the SAVE plan, the income-driven repayment plan that would have lowered payments for millions of borrowers, while lawsuits make their way through lower courts.

    Eight million borrowers who had already enrolled in the SAVE plan don’t have to pay their monthly student loan bills until the court case is resolved. Debt that already had been forgiven under the plan was unaffected.

    The next court hearing about this case will be held on Oct. 15.

    The Fresh Start program, which gave benefits to borrowers who were delinquent prior to the pandemic payment pause, also closed on Sept. 30. During this limited program, student loan borrowers who were in default prior to the pandemic were given the opportunity to remove their loans from default, allowing them to enroll in income-driven payment plans or apply for deferment, among other benefits.

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  • My Family And I Were Trapped In A Financial Prison. Then I Received A 6-Word Letter That Changed My Life.

    My Family And I Were Trapped In A Financial Prison. Then I Received A 6-Word Letter That Changed My Life.

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    Growing up in Belgium, I watched my mother leave for work at dawn every day to clean offices. She’d return home late, exhausted, and tell me about her day — the professors whose offices she cleaned often didn’t even acknowledge her presence. For them, she was the invisible person who emptied their trash. It was that invisibility that I vowed to escape. As a child, I didn’t know exactly how I would do it, but I knew that education was my way out.

    That realization crystallized on a Sunday when I was just 11 years old. I stood in my mother’s bedroom, watching the smoke swirl from her cigarette as she sat immersed in one of the many classic novels she read on her days off. It was at that moment, as I gazed at her and the literary world she was trying to escape into that I made a promise to myself: I would break this cycle. I would rise above the generational poverty that had weighed on my family for as long as I could remember.

    A few years later, my mother found love and remarried. We moved from Belgium to a small town on Cape Cod, where my stepfather lived. That move was life-changing for me. In this idyllic American town, I tasted freedom for the first time. I’ll never forget the feeling of buying my first bicycle, a pink Schwinn, with the $187.50 saved from my job at the Woods Hole Oceanographic Institute. The bike symbolized so much more than just a mode of transportation — it represented independence, a belief that I could chart my own path in life.

    Guided by my stepfather’s best friend, a high school teacher who took me under her wing, I excelled academically. I set my sights high, applying to elite universities, and was thrilled when I was accepted to Georgetown for undergrad. Later, I would go on to earn two master’s degrees from other prestigious institutions. I thought I had played my cards right and that my hard work would finally help me break free from the struggles of my mother’s life.

    But even as I achieved these educational milestones, the weight of my student loans loomed large. At each stage of my academic journey, I borrowed more, believing I was investing in a brighter future. However, with no one in my family to guide me through the basics of finance, I hadn’t fully grasped how those loans would compound over time, becoming a mountain of debt I could never climb out from under. Predatory interest rates meant that no matter how hard I worked or how much I paid, the debt never seemed to shrink.

    By my late 30s, I had achieved professional success, but I still felt something was missing. With time running out to have children of my own, I decided to become a foster parent and build a family of choice. Welcoming children who had experienced homelessness and trauma into my home was both a challenging and rewarding experience. I transformed my rented house into a nurturing space where they could finally feel secure and loved. However, the reality of renting remained an ever-present threat. Our sanctuary could be taken away at any moment by a landlord’s decision, and the dream of owning a home seemed out of reach under the weight of my debt.

    In 2020, just a few months into the pandemic, I received a call from the county’s adoption department about children ready to be adopted. Two years later, I officially adopted my three children from foster care. While the joy of creating my family was immense, I couldn’t shake the dream of offering them the stability I had always longed for as a child. I envisioned a home where they could grow up surrounded by the warmth of family, the sound of chickens clucking in the yard, the playful energy of rescue dogs, and perhaps even a donkey or two to guard against the coyotes that roam Southern California.

    The author’s younger children.

    Photo Courtesy of Mona de Vestel

    Yet that dream felt impossibly distant, with $185,000 in student loans hanging over my head. Homeownership, which could provide the stability my children and I desperately needed, seemed like a fantasy.

    Then, earlier this year, a life-changing letter arrived.

    When I tore open the envelope from Mohela, I expected yet another reminder of the debt I had carried for over 20 years — a staggering $185,000 in student loans. But this time, it was different. The letter said, “Congratulations! Your balance is now $0.” I didn’t believe it at first. This had to be a hoax. It couldn’t be real. Was I free? When I called Mohela, the customer service representative confirmed it: “Congratulations! Your student loans have been forgiven.”

    Thanks to the Biden-Harris administration’s student loan forgiveness program, my monumental debt was erased. For the first time in my adult life, I felt a wave of freedom I had never known.

    Biden’s student loan forgiveness didn’t just erase a number from my balance sheet — it gave me back my ability to dream. Suddenly, homeownership wasn’t just a far-off hope — it was a real possibility. The generational cycle of instability that had haunted my family for so long was finally breaking. I could see a future where my children and I had a permanent place to call home, a sanctuary where we could plant roots without fearing losing it to a landlord.

    But this isn’t just about my family. The Biden-Harris student loan forgiveness plan is a transformative policy, not just for me but for millions of Americans. Yet, with the recent court ruling blocking the latest iteration, many are still waiting for the relief I was fortunate to receive. For so many, that relief could mean the difference between financial ruin and stability, between being trapped in debt and having the freedom to invest in their children’s futures.

    Despite having a stable career as a professor and ghostwriter, the crushing weight of my loans, exacerbated by predatory interest rates, kept me in a financial prison. Now, with the latest student loan forgiveness plan blocked by a federal judge, my heart aches for the millions still ensnared by this burden. The battle for relief is far from over.

    Support Free Journalism

    Consider supporting HuffPost starting at $2 to help us provide free, quality journalism that puts people first.

    Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.

    The stakes are high this year, and our 2024 coverage could use continued support. Would you consider becoming a regular HuffPost contributor?

    Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.

    The stakes are high this year, and our 2024 coverage could use continued support. We hope you’ll consider contributing to HuffPost once more.

    Support HuffPost

    The impact of student loan forgiveness goes far beyond dollars and cents — it’s about creating a pathway to hope, stability, and opportunity for a better life. As I prepare to buy my first home — a milestone no one in my family has ever achieved — I am reminded of the power of policies that lift people. The chance to dream again, to provide a stable future for my children, and to break free from the generational hardships of my past is something that every American deserves.

    Mona de Vestel holds an MFA in creative writing from Goddard College and is a ghostwriter for thought leaders and visionaries. She is seeking publication for her memoir “The Invitation to Rescue,” a blend of personal reflection and magical realism. Mona also co-hosts the “Women Doing Big Things” podcast for female entrepreneurs. You can learn more at www.authormona.com.

    Do you have a compelling personal story you’d like to see published on HuffPost? Find out what we’re looking for here and send us a pitch at pitch@huffpost.com.

    Support Free Journalism

    Consider supporting HuffPost starting at $2 to help us provide free, quality journalism that puts people first.

    Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.

    The stakes are high this year, and our 2024 coverage could use continued support. Would you consider becoming a regular HuffPost contributor?

    Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.

    The stakes are high this year, and our 2024 coverage could use continued support. We hope you’ll consider contributing to HuffPost once more.

    Support HuffPost

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  • School tax: What can you claim as a deduction on your annual income tax? – MoneySense

    School tax: What can you claim as a deduction on your annual income tax? – MoneySense

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    The tuition tax credit

    Claim the tuition credit to receive a non-refundable credit worth 15% of your tuition claim on the federal portion of your taxes. Provincial tax returns each have their own rules surrounding this claim for a combined benefit that’s bigger, depending on where you live. British Columbia (5.06%), Nunavut (4%), Northwest Territories (5.9%), Nova Scotia (8.79%), Newfoundland and Labrador (8.7%) and Prince Edward Island (9.8%) also have an education amount for you to claim.

    Tuition fee transfer to parents and supporters

    If you don’t need the credit to bring your non-refundable credits up to the same level as your taxable income, thereby reducing your taxes to zero, the unused tuition amount may be transferred (at least in part) to your spouse or other supporting individual up to a maximum of $5,000. If you don’t have anyone to transfer the tuition to (or wish not to transfer), the unused tuition may be carried forward to be used in a future year. The bottom line is that you’ll get a credit for about 25% of your tuition, depending on your province of residence, but you will only benefit from this non-refundable tax credit if you have taxable income.

    What is the Canada Training Credit?

    The Canada Training Credit allows for a tax credit for tuition or other fees paid to an eligible university, college or other certified post-secondary level educational institution in Canada, providing courses for an occupational, trade or professional examination. If you have both tuition fees and are eligible for a Canada Training Credit, you can claim a refundable credit for the lesser of one-half of your tuition and your Canada Training Credit entitlement, plus you can claim a portion of your tuition fee credit if you need it. It’s important to always file a tax return to earn this notional credit, which increases each year by $250, to a lifetime maximum of $5,000. To claim the CTC you must be over 25 and under 66 and meet certain income requirements, described below:

    Income criteria 2024 2023 2022 2021 2020
    Minimum working income $11,511 $10,994 $10,342 $10,100 $10,000
    Maximum net income from prior year $165,430 $144,625 $151,978 $150,473 $147,667
    Accumulated CTC balance $1250 $1000 $750 $500 $250

    How to use the disability supports deduction

    Starting with the 2024 tax year, the disability supports deduction has been expanded to include new deductible expenditures. Students can claim this amount to offset taxable employment, self-employment, scholarships, fellowships, research grants or other qualifying income if they have a mental or physical impairment. The deduction cannot be shared with a supporting individual and the same expenses cannot be claimed for the medical expenses credit if they are claimed as a disability supports deduction.

    There is a long list of qualifying expenses; here’s what’s new for 2024:

    • For those with a severe and prolonged impairment in physical function, the costs of an ergonomic chair (as well as the costs of an assessment), bed positioning devices (again, as well as the cost of an assessment) and a mobile computer cart
    • For those with an impairment in physical or mental function, an alternative input device for computers and a digital pen device

    Also claimable this year, a navigation device for those with vision impairment, and memory or organizational aids for those with memory impairment.

    Other tax assistance students may claim

    And there’s more that students and supporters can claim.

    • Scholarship exemptions
      These exemptions come with varying criteria depending on whether you are a full-time or part-time student or have received an artist’s project grant.
    • Research grants
      You can claim expenses paid to do research including travelling costs, the cost of an assistant or costs for certain equipment or lab fees. But the amounts can’t exceed the grant, for tax purposes. 
    • Moving expenses
      Full-time students can claim moving expenses only if there is income at the new location from taxable scholarships, fellowships, bursaries, prizes and like income, employment or self-employment, and you move 40 kilometres or more closer to the educational institution.
    • Child-care expenses
      This will reduce net income, which in turn can increase refundable tax credits, like the federal GST/HST credit, and the Canada Child Benefit, the Canada Workers Benefit (which can’t be claimed by full time students unless the student is a parent), and some provincial credits. But if the student is not taxable, the higher income earner, in the case of a couple, may qualify for a claim. Likewise, these expenses may reduce income to a level that enables a tuition transfer to a supporting person like a spouse.
    • Medical Expenses
      There is a long list of qualifying expenses including service animals or tutoring services that can help students to support their studies (medical practitioner must provide verification). Other eligible costs include private insurance premiums, eyeglasses, contact lenses, prescriptions, the incremental costs of gluten-free food, and much more. Check it out and keep your receipts.

    How are RESP withdrawals taxed?

    Finally, those fortunate enough to have a registered education savings plan (RESP) can withdraw money from the plan to go to school. But the amounts are taxable to the student. Full-time students can now withdraw $8,000 during the first 13 consecutive weeks of enrolment; part-time students can withdraw $4,000 in that time. After this, there is no limit, unless the beneficiary takes a 12-month break from studies. In that case, the $8,000 limit is reinstated. Both full- and part-time students now may receive payments for up to six months after the end of their studies if the expenses would have qualified during the study period.

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  • Micro-credentials in Canada: Is it worth it to upskill? – MoneySense

    Micro-credentials in Canada: Is it worth it to upskill? – MoneySense

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    These digital-first bragging rights are known as micro-credentials, and they’re booming right now. Micro-credentialing has been accelerated by the pandemic-driven demand for online learning, job-seekers’ efforts to upskill or reskill, and educational institutions’ desire to attract more students. 

    If you’re looking to increase your skill set or stand out from a sea of job candidates, micro-credentials could be a worthwhile investment—plus, you may qualify for financial assistance or tax credits. The trick is to choose a micro-credential program that’s right for you and your goals.

    What is a micro-credential? 

    A micro-credential is similar to a certificate or a degree, but more targeted and with less of a time commitment. Essentially, it’s a skills or learning upgrade that is focused on helping workers meet the needs of employers—or, conversely, of helping employers find or train workers with the skills they need. And it’s a recorded achievement: you earn a badge or certificate, or something else to prove you earned each particular credential.

    Micro-credential programs are often offered by universities and colleges, but you’ll also find programs from major employers like IBM and Salesforce, specialty providers such as FutureLearn and Coursera, and non-profits. Many other individuals and organizations offer learning and training programs, too: you might see courses available from your favourite finance blogger, or from organizations like Raw Signal Group and The Trauma of Money. Since trustworthiness is a key factor in micro-credentials, institutions that already have that trust baked in are well placed to flourish in this relatively new industry. Whether you choose to go with an accredited educational institution or a startup depends on what you want to learn and why.

    What are people most interested in when it comes to micro-credentials? According to Google data from early August 2024, top searches include:

    1. PMP (project management professional)
    2. CPR (cardiopulmonary resuscitation)
    3. Food handler
    4. Food safety
    5. BLS (basic life support)
    6. CSM (certified scrum master)
    7. WHMIS (Workplace Hazardous Materials Information System)
    8. Smart Serve certification (responsible liquor training program for Ontario)
    9. Cybersecurity certifications
    10. Google certification

    And the top-searched topics on eCampusOntario’s Micro-credentials Portal over the past 12 months are: 

    1. Project management 
    2. Accounting 
    3. Data 
    4. Leadership 
    5. Business 
    6. Payroll 
    7. Health 
    8. Marketing 
    9. Mental health 
    10. Finance 
    11. Human resources 
    12. Data science 
    13. Law 
    14. Python 
    15. Construction 
    16. Education 
    17. Writing 
    18. Digital marketing 
    19. Healthcare 
    20. Cybersecurity 

    According to the Higher Education Quality Council of Ontario (HEQCO), the two defining features of micro-credentials are a narrow scope and a short completion time. That makes efficiency the primary appeal of micro-credential programs. Degrees take years to complete and often contain requirements that are superfluous for those in mid-career. And, of course, many Canadians simply don’t have the resources to take extended time off to upgrade their skills or go back to school full-time. 

    Micro-credential programs are appealing in other ways, too. Many are offered online or in a hybrid format, meaning students can complete them on their own schedule. Micro-credentials also tend to be timely and relevant, so that people can acquire competencies they can use immediately. Canada-based programs can be a useful bridge for newcomers trying to localize their international skill sets and experience. Plus, they’re more affordable than traditional in-depth education and skills programs. In essence, they’re mini-programs that offer you what you need, when you need it—and no more.

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    Kat Tancock

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  • 5 top money moves to consider before the Federal Reserve’s first rate cut since 2020

    5 top money moves to consider before the Federal Reserve’s first rate cut since 2020

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    Last week, Federal Reserve Chair Jerome Powell all but confirmed that an interest rate cut is coming soon.

    “The time has come for policy to adjust,” the central bank leader said in his keynote address at the Fed’s annual retreat in Jackson Hole, Wyoming.

    For Americans struggling to keep up with sky-high interest charges, a likely quarter-point cut in September may bring some welcome relief — especially with the right preparation. (A more aggressive half-point move has a roughly a 1-in-3 chance of happening, according to the CME’s FedWatch measure of futures market pricing.)

    “If you are a consumer, now is the time to say: ‘What does my spending look like? Where would my money grow the most and what options do I have?’” said Leslie Tayne, an attorney specializing in debt relief at Tayne Law in New York and author of “Life & Debt.”

    More from Personal Finance:
    How investors can prepare for lower interest rates
    More Americans are struggling even as inflation cools
    Some colleges is now cost nearly $100,000 a year

    Currently, the federal funds rate is at the highest level in two decades, in a range of 5.25% to 5.50%.

    If the Fed cuts rates in September, as expected, it would mark the first time officials lowered its benchmark in more than four years, when they slashed them to near zero at the beginning of the Covid-19 pandemic.

    “From a consumer perspective, it’s important to note that lower interest rates will be a gradual process,” said Ted Rossman, senior industry analyst at Bankrate.com. “The trip down is likely to be much slower than the series of interest rate hikes which quickly pushed the federal funds rate higher by 5.25 percentage points in 2022 and 2023.”

    Here are five ways to prepare for this policy shift:

    1. Strategize paying down credit card debt

    People shop at a store in Brooklyn on August 14, 2024 in New York City. 

    Spencer Platt | Getty Images

    With a rate cut, the prime rate lowers, too, and the interest rates on variable-rate debt — most notably credit cards — are likely to follow, reducing your monthly payments. But even then, APRs will only ease off extremely high levels.

    For example, the average interest rate on a new credit card today is nearly 25%, according to LendingTree data. At that rate, if you pay $250 per month on a card with a $5,000 balance, it will cost you more than $1,500 in interest and take 27 months to pay off.

    If the central bank cuts rates by a quarter point, you’ll save $21 altogether and be able to pay off the balance one month faster. “That’s not nothing, but it is far less than what you could save with a 0% balance transfer credit card,” said Matt Schulz, chief credit analyst at LendingTree.

    Rather than wait for a small adjustment in the months ahead, borrowers could switch now to a zero-interest balance transfer credit card or consolidate and pay off high-interest credit cards with a lower-rate personal loan, Tayne said.

    2. Lock in a high-yield savings rate

    Since rates on online savings accounts, money market accounts and certificates of deposit are all poised to go down, experts say this is the time to lock in some of the highest returns in decades.

    For now, top-yielding online savings accounts are paying more than 5% — well above the rate of inflation.

    Although those rates will fall once the central bank lowers its benchmark, a typical saver with about $8,000 in a checking or savings account could earn an additional $200 a year by moving that money into a high-yield account that earns an interest rate of 2.5% or more, according to a recent survey by Santander Bank in June. The majority of Americans keep their savings in traditional accounts, Santander found, which FDIC data shows are currently paying 0.46%, on average.

    Alternatively, “now is a great time to lock in the most competitive CD yields at a level that is well ahead of targeted inflation,” said Greg McBride, Bankrate’s chief financial analyst. “There is no sense in holding out for better returns later.”

    Currently, a top-yielding one-year CD pays more than 5.3%, according to Bankrate, as good as a high-yield savings account.

    3. Consider the right time to finance a big purchase

    If you’re planning a major purchase, like a home or car, then it may pay to wait, since lower interest rates could reduce the cost of financing down the road.

    “Timing your purchase to coincide with lower rates can save money over the life of the loan,” Tayne said.

    Although mortgage rates are fixed and tied to Treasury yields and the economy, they’ve already started to come down from recent highs, largely due to the prospect of a Fed-induced economic slowdown. The average rate for a 30-year, fixed-rate mortgage is now just under 6.5%, according to Freddie Mac.

    Compared with a recent high of 7.22% in May, today’s lower rate on a $350,000 loan would result in a savings of $171 a month, or $2,052 a year and $61,560 over the lifetime of the loan, according to calculations by Jacob Channel, senior economic analyst at LendingTree.

    However, going forward, lower mortgage rates could also boost homebuying demand, which would push prices higher, McBride said. “If lower mortgage rates lead to a surge in prices, that’s going to offset the affordability benefit for would-be buyers.”

    What exactly will happen in the housing market “is up in the air” depending on how much mortgage rates decline in the latter half of the year and the level of supply, according to Channel.

    “Timing the market is virtually impossible,” he said. 

    4. Assess the right time to refinance

    For those struggling with existing debt, there may be more options for refinancing once rates drop.

    Private student loans, for example, tend to have a variable rate tied to the prime, Treasury bill or another rate index, which means once the Fed starts cutting interest rates, the rates on those private student loans will come down as well.

    Eventually, borrowers with existing variable-rate private student loans may also be able to refinance into a less-expensive fixed-rate loan, according to higher education expert Mark Kantrowitz. 

    Currently, the fixed rates on a private refinance are as low as 5% and as high as 11%, he said.

    However, refinancing a federal loan into a private student loan will forgo the safety nets that come with federal loans, he added, “such as deferments, forbearances, income-driven repayment and loan forgiveness and discharge options.” Additionally, extending the term of the loan means you ultimately will pay more interest on the balance.

    Be mindful of potential loan-term extensions, cautioned David Peters, founder of Peters Professional Education in Richmond, Virginia. “Consider maintaining your original payment after refinancing to shave as much principal off as possible without changing your out-of-pocket cash flow,” he said.

    Similar considerations may also apply for home and auto loan refinancing opportunities, depending in part on your existing rate.

    5. Perfect your credit score

    Those with better credit could already qualify for a lower interest rate.

    When it comes to auto loans, for instance, there’s no question inflation has hit financing costs — and vehicle prices — hard. The average rate on a five-year new car loan is now nearly 8%, according to Bankrate.

    But in this case, “the financing is one variable, and it’s frankly one of the smaller variables,” McBride said. For example, a reduction of a quarter percentage point in rates on a $35,000, five-year loan is $4 a month, he calculated.

    Here, and in many other situations, as well, consumers would benefit more from paying down revolving debt and improving their credit scores, which could pave the way to even better loan terms, McBride said.

    Don’t miss these insights from CNBC PRO

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  • How to position yourself to benefit from the Fed’s first rate cut in years, according to financial experts

    How to position yourself to benefit from the Fed’s first rate cut in years, according to financial experts

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    The Federal Reserve could start lowering interest rates as soon as next month, based on the latest inflation data.

    “We think that the time is approaching,” Fed Chair Jerome Powell said at a press conference after the last Federal Open Market Committee meeting in July.

    For Americans struggling to keep up with sky-high interest charges, a likely September rate cut may bring some welcome relief — even more so with the right planning.

    “If you are a consumer, now is the time to say: ‘What does my spending look like? Where would my money grow the most and what options do I have?’” said Leslie Tayne, an attorney specializing in debt relief at Tayne Law in New York and author of “Life & Debt.”

    More from Personal Finance:
    ‘Emotion-proof’ your portfolio ahead of the election
    ‘Recession pop’ is in: How music hits on economic trends
    More Americans are struggling even as inflation cools

    Fed officials signaled they expect to reduce the benchmark rate once in 2024 and four times in 2025.

    That could bring the benchmark fed funds rate from the current range of 5.25% to 5.50% to below 4% by the end of next year, according to some experts.

    The federal funds rate is the one at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the rates they see every day on things such as private student loans and credit cards.

    Here are five ways to position your finances for the months ahead:

    1. Lock in a high-yield savings rate

    Since rates on online savings accounts, money market accounts and certificates of deposit are all poised to go down, experts say this is the time to lock in some of the highest returns in decades.

    For now, top-yielding online savings accounts are paying more than 5% — well above the rate of inflation.

    Although those rates will fall once the central bank lowers its benchmark, a typical saver with about $8,000 in a checking or savings account could earn an additional $200 a year by moving that money into a high-yield account that earns an interest rate of 2.5% or more, according to a recent survey by Santander Bank in June. The majority of Americans keep their savings in traditional accounts, Santander found, which FDIC data shows are currently paying 0.45%, on average.

    Alternatively, “now is a great time to lock in the most competitive CD yields at a level that is well ahead of targeted inflation,” said Greg McBride, chief financial analyst at Bankrate.com. “There is no sense in holding out for better returns later.”

    Currently, a top-yielding one-year CD pays more than 5.3%, according to Bankrate, as good as a high-yield savings account.

    2. Pay down credit card debt

    With a rate cut, the prime rate lowers, too, and the interest rates on variable-rate debt — most notably credit cards — are likely to follow, reducing your monthly payments. But even then, APRs will only ease off extremely high levels.

    For example, the average interest rate on a new credit card today is nearly 25%, according to LendingTree data. At that rate, if you pay $250 per month on a card with a $5,000 balance, it will cost you more than $1,500 in interest and take 27 months to pay off.

    If the central bank cuts rates by a quarter point, you’ll save $21 and be able to pay off the balance one month faster. “That’s not nothing, but it is far less than what you could save with a 0% balance transfer credit card,” said Matt Schulz, chief credit analyst at LendingTree.

    Rather than wait for a small adjustment in the months ahead, borrowers could switch now to a zero-interest balance transfer credit card or consolidate and pay off high-interest credit cards with a personal loan, Tayne said.

    3. Consider the right time to finance a big purchase

    If you’re planning a major purchase, like a home or car, then it may pay to wait, since lower interest rates could reduce the cost of financing down the road.

    “Timing your purchase to coincide with lower rates can save money over the life of the loan,” Tayne said.

    Although mortgage rates are fixed and tied to Treasury yields and the economy, they’ve already started to come down from recent highs, largely due to the prospect of a Fed-induced economic slowdown. The average rate for a 30-year, fixed-rate mortgage is now around 6.5%, according to Freddie Mac.

    Compared to a recent high of 7.22% in May, today’s lower rate on a $350,000 loan would result in a savings of $171 a month, or $2,052 a year and $61,560 over the lifetime of the loan, according to calculations by Jacob Channel, senior economic analyst at LendingTree.

    However, going forward, lower mortgage rates could also boost homebuying demand, which would push prices higher, McBride said. “If lower mortgage rates lead to a surge in prices, that’s going to offset the affordability benefit for would-be buyers.”

    What exactly will happen in the housing market “is up in the air” depending on how much mortgage rates decline in the latter half of the year and the level of supply, according to Channel.

    “Timing the market is virtually impossible,” he said. 

    4. Consider the right time to refinance

    For those struggling with existing debt, there may be more options for refinancing once rates drop.

    Private student loans, for example, tend to have a variable rate tied to the prime, Treasury bill or another rate index, which means once the Fed starts cutting interest rates, the rates on those private student loans will come down as well.

    Eventually, borrowers with existing variable-rate private student loans may also be able to refinance into a less expensive fixed-rate loan, according to higher education expert Mark Kantrowitz. 

    Currently, the fixed rates on a private refinance are as low as 5% and as high as 11%, he said.

    However, refinancing a federal loan into a private student loan will forgo the safety nets that come with federal loans, he added, “such as deferments, forbearances, income-driven repayment and loan forgiveness and discharge options.” Additionally, extending the term of the loan means you ultimately will pay more interest on the balance.

    Be mindful of potential loan -term extensions, cautioned David Peters, founder of Peters Professional Education in Richmond, Virginia. “Consider maintaining your original payment after refinancing to shave as much principal off as possible without changing your out-of-pocket cash flow,” he said.

    Similar considerations may also apply for home and auto loan refinancing opportunities, depending in part on your existing rate.

    5. Perfect your credit score

    Those with better credit could already qualify for a lower interest rate.

    When it comes to auto loans, for instance, there’s no question inflation has hit financing costs — and vehicle prices — hard. The average rate on a five-year new car loan is now nearly 8%, according to Bankrate.

    But in this case, “the financing is one variable, and it’s frankly one of the smaller variables,” McBride said. For example, a reduction of a quarter percentage point in rates on a $35,000, five-year loan is $4 a month, he calculated.

    Here, and in many other situations, as well, consumers would benefit more from paying down revolving debt and improving their credit scores, which could pave the way to even better loan terms, McBride said.

    Don’t miss these insights from CNBC PRO

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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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  • 3 money moves to make ahead of the Federal Reserve’s first rate cut in years

    3 money moves to make ahead of the Federal Reserve’s first rate cut in years

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    Recent signs that inflation is easing have paved the way for the Federal Reserve to start lowering interest rates as soon as this fall.

    The consumer price index, a key inflation gauge, dipped in June for the first time in more than four years, the Labor Department reported last week.

    “With abundant signs of a cooling economy, the consumer price index for June certainly constitutes the ‘more good data’ on inflation that Fed Chair Jerome Powell has said we need to see before the Fed can begin cutting interest rates,” said Greg McBride, chief financial analyst at Bankrate.com.

    With a fall rate cut looking more likely now, households may finally get some relief from the sky-high borrowing costs that followed the most recent series of interest rate hikes, which took the Fed’s benchmark rate to the highest level in decades.

    More from Personal Finance:
    High inflation is largely not Biden’s or Trump’s fault, economists say
    Why housing inflation is still stubbornly high
    More Americans are struggling even as inflation cools

    Fed officials signaled they expect to reduce its benchmark rate once in 2024 and four additional times in 2025.

    The federal funds rate, which is set by the U.S. central bank, is the interest rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the rates they see every day on things such as private student loans and credit cards.

    “If you are a consumer, now is the time to say, what does my spending look like? Where would my money grow the most and what options do I have?” said Leslie Tayne, an attorney specializing in debt relief at Tayne Law in New York and author of “Life & Debt.”

    Here are three key strategies to consider:

    1. Watch your variable-rate debt

    With a rate cut, the prime rate lowers, too, and the interest rates on variable-rate debt — such as credit cards, adjustable-rate mortgages and some private student loans — are likely to follow, reducing your monthly payments.

    For example, credit card holders could see a reduction in their annual percentage yield, or APR, within a billing cycle or two. But even then, APRs will only ease off extremely high levels.

    Rather than wait for a small adjustment in the months ahead, borrowers could switch now to a zero-interest balance transfer credit card or consolidate and pay off high-interest credit cards with a personal loan, Tayne said.

    Olga Rolenko | Moment | Getty Images

    Many homeowners with ARMs, which are pegged to a variety of indexes such as the prime rate, Libor or the 11th District Cost of Funds, may see their interest rate go down as well — although not immediately as ARMs generally reset just once a year.

    In the meantime, there are fewer options to provide homeowners with extra breathing room. “Your better move may be waiting to refinance,” McBride said.

    Private student loans also tend to have a variable rate tied to the prime, Treasury bill or another rate index, which means once the Fed starts cutting interest rates, the interest rates on those private student loans will start dropping.

    Eventually, borrowers with existing variable-rate private student loans may also be able to refinance into a less expensive fixed-rate loan, according to higher education expert Mark Kantrowitz. 

    Currently, the fixed rates on a private refinance are as low as 5% and as high as 11%, Kantrowitz said.

    2. Lock in savings rates

    While borrowing will become less expensive, those lower interest rates will hurt savers. 

    Since rates on online savings accounts, money market accounts and certificates of deposit are all poised to go down, experts say this is the time to lock in some of the highest returns in decades.

    For now, top-yielding online savings accounts and one-year CDs are paying more than 5% — well above the rate of inflation.

    The opportunity to earn 5% annually on those cash investments may not last much longer.

    Howard Hook

    wealth advisor with EKS Associates

    “One thing you may want to do is consider investing any idle cash you have into a higher-yielding money market fund,” said certified financial planner Howard Hook, a senior wealth advisor at EKS Associates in Princeton, New Jersey.

    “Money market brokerage accounts usually pay higher rates than money market or savings accounts at banks,” he said in an emailed statement. “If the Fed is indeed looking to reduce rates five times over the next eighteen months (as currently projected), then the opportunity to earn 5% annually on those cash investments may not last much longer.”

    3. Put off large purchases

    If you’re planning a major purchase, like a home or car, then it may pay to wait, since lower interest rates could reduce the cost of financing down the road.

    “Timing your purchase to coincide with lower rates can save money over the life of the loan,” Tayne said.

    Although mortgage rates are fixed and tied to Treasury yields and the economy, they’ve already started to come down from recent highs, largely due to the prospect of a Fed-induced economic slowdown. The average rate for a 30-year, fixed-rate mortgage is now just above 7%, according to Bankrate.

    However, lower mortgage rates could also boost homebuying demand, which would push prices higher, McBride said. “If lower mortgage rates lead to a surge in prices, that’s going to offset the affordability benefit for would-be buyers.”

    When it comes to auto loans, there’s no question inflation has hit financing costs — and vehicle prices — hard. The average rate on a five-year new car loan is now nearly 8%, according to Bankrate.

    But in this case, “the financing is one variable, and it’s frankly one of the smaller variables,” McBride said. For example, a quarter percentage point reduction in rates on a $35,000, five-year loan is $4 a month, he calculated.

    In this case, and in many other situations as well, consumers would benefit more from improving their credit scores, which could pave the way to even better loan terms, McBride said.

    Don’t miss these insights from CNBC PRO

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  • Voters share reasons why they’re backing Biden or Trump in 2024

    Voters share reasons why they’re backing Biden or Trump in 2024

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    Voters share reasons why they’re backing Biden or Trump in 2024 – CBS News


    Watch CBS News



    CBS News polls consistently show that democracy and the American Dream itself are on the ballot this November, but why do voters think that? And how do their personal lives shape their views on our national conversations? CBS News executive director of elections and surveys Anthony Salvanto spoke with people from across America, including some who participated in our polls, to find out.

    Be the first to know

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  • Two courts just blocked parts of Biden’s SAVE student loan repayment plan. Here’s what to know.

    Two courts just blocked parts of Biden’s SAVE student loan repayment plan. Here’s what to know.

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    Two courts on Monday issued temporary injunctions against the Biden administration’s flagship student loan repayment plan, decisions that experts say are likely to create new hurdles and uncertainties for millions of borrowers. 

    The rulings take aim at the Saving on a Valuable Education, or SAVE, plan, which was created a year ago by the Biden administration to address long-standing issues with the Department of Education’s previous income-driven repayment plans, or IDRs. SAVE has proved to be popular with borrowers and now has more than 8 million enrollees.

    But the SAVE plan was challenged by several Republican-led states that argued the plan overstepped the Biden administration’s authority. They also claimed it could lead to financial harm due to lost revenue because it offers loan forgiveness in fewer years than earlier plans. On Monday, judges in Kansas and Missouri ruled partially in favor of those arguments, halting some aspects of the SAVE plan and throwing its workings into doubt. 

    “It’s just chaos, and it’s unworkable chaos,” said Persis Yu, deputy executive director and managing counsel of the Student Borrower Protection Center, an advocacy group for people with student loans, about the court injunctions. “Borrowers right now need to hang tight” because there are so many questions about the SAVE plan’s future. 

    Here’s what to know about the status of the SAVE plan following this week’s legal setback.

    What did the courts decide? 

    In a ruling from Kansas, U.S. District Judge Daniel D. Crabtree placed an injunction on the next phase of the SAVE program, which had been scheduled to take effect on July 1. Those include a major overhaul that would have cut many borrowers’ payments in half starting next month. 

    In Missouri, U.S. District Judge John A. Ross in Missouri, blocked the SAVE plan from providing any additional loan forgiveness. Under the loan relief initiative, some borrowers can qualify for forgiveness after 10 years of repayments, instead of the typical 20 or 25 year span. 

    Can borrowers still enroll in the SAVE plan?

    Yes, according to the Department of Education.

    “While we are assessing the rulings, borrowers can still enroll in the SAVE Plan. We will be sharing more information with borrowers soon,” the Department of Education said on its website.

    If my student debt has been forgiven, could that be reversed? 

    That’s not certain, but It doesn’t appear so, according to Yu of the Student Borrower Protection Center. 

    “People who have received cancellation should be able to keep the cancellation,” Yu said. “It was in the Kansas case where the judge said once cancellation happens, you can’t unscramble the egg.”

    She added, “It doesn’t mean reinstating loans, but for everybody else this is incredibly chaotic.”

    What happens to student loan repayments on July 1? 

    Yu said it appears enrollees won’t get the benefit of lower payments beginning on that date, as the SAVE plan had promised. 

    Under the plan, payments for undergraduate loans were scheduled to be cut in half for many borrowers beginning next month. Repayments were slated to be cut from 10% to 5% of discretionary income above 225% of the federal poverty line. 

    For instance, a household with two people earning a combined $60,000 annually would have their income (up to 225% of the poverty line) protected from repayment, or about $44,370. That would give them discretionary income of about $15,630, with their repayments currently capped at 10% of that, or about $130.25 a month. 

    But starting on July 1, those payments would have been cut to 5% of their discretionary income, or about $65.13. That now appears to be halted by the Kansas ruling. 

    What happens with future efforts to forgive student loans? 

    That’s one of the questions that needs to be resolved. The Missouri judge wrote that his injunction applies to “those provisions of the SAVE plan that permit loan forgiveness,” but added that whether that becomes permanent will depend on how the litigation proceeds.

    “How long do these borrowers need to stay on the hook for these loans, especially those near to the cancellation period — what does this mean for them?” Yu said. “Those are very important questions that don’t have answers.”

    What is the Biden administration saying? 

    The White House on Monday said the Department of Justice “will continue to vigorously defend the SAVE Plan.”

    The Biden administration will appeal both decisions, White House Press Secretary Karine Jean-Pierre wrote on X on Tuesday. 

    “Republican elected officials and special interests sued to block their own constituents from being able to benefit from this plan — even though the Department has relied on the authority under the Higher Education Act three times over the last 30 years to implement income-driven repayment plans,” said Education Secretary Miguel Cardona in a statement. 

    What are the Republican states that sued saying?

    Republican officials applauded the legal decisions. Kansas Attorney General Kris Kobach, a Republican, called the Kansas injunction a “victory for the entire country.”

    “As the court correctly held, whether to forgive billions of dollars of student debt is a major question that only Congress can answer,” he said in a statement. “Blue collar Kansas workers who didn’t go to college shouldn’t have to pay off the student loans of New Yorkers with gender studies degrees.”

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  • Courts halt parts of President Biden’s student loan repayment plan

    Courts halt parts of President Biden’s student loan repayment plan

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    WASHINGTON — Two federal court judges in Kansas and Missouri have paused parts of a student loan repayment plan that the Biden administration launched last year, which lowers borrowers’ monthly payments and provides a faster route to debt forgiveness.

    Two lawsuits filed by Republican-led states argue that the Biden administration overstepped its authority when it implemented the SAVE (Saving on a Valuable Education) repayment plan.

    Both judges granted partial preliminary injunctions on Monday.

    Two parts of the SAVE plan will be on pause until the cases are fully litigated.

    The Biden administration cannot cancel any more federal student debt for borrowers enrolled in the SAVE plan. Under the plan, borrowers qualify for debt forgiveness once they make at least 10 years of payments. To date, $5.5 billion has been canceled for 414,000 people enrolled in SAVE.

    The Biden administration will also be blocked from implementing further provisions of the SAVE plan. In July, millions of people were expecting to see their payments lowered – but it’s now unclear whether those reductions will occur.

    RELATED: Federal student loan interest rate will rise to highest level in 12 years

    “Today’s rulings won’t stop our Administration from using every tool available to give students and borrowers the relief they need,” White House press secretary Karine Jean-Pierre said in a statement Monday night in which she criticized the rulings and said the Department of Justice would work to defend the plan.

    The Department of Education did not immediately respond to a request for comment.

    SAVE is one of Biden’s key student loan policies

    After the Supreme Court knocked down President Joe Biden’s signature student loan forgiveness program last summer, his administration launched the SAVE plan.

    Like existing income-driven repayment plans, SAVE ties monthly payments to a borrower’s income and family size. But the SAVE plan offers the most generous terms, especially for low-income borrowers.

    More than 8 million borrowers have enrolled in SAVE so far, and 4.6 million of them have a $0 monthly payment.

    Borrowers enrolled in SAVE may also be eligible for student debt relief in a shorter amount of time than under other income-driven plans. Those who borrowed $12,000 or less will see their debt forgiven after paying for just 10 years under SAVE. Every additional $1,000 borrowed above that amount would add one year of monthly payments to the required time a borrower must pay. Under other repayment plans, borrowers must make at least 20 years of payments before receiving debt forgiveness.

    The SAVE plan also prevents balances from ballooning due to interest when a borrower has a small monthly payment. If enrolled in SAVE, unpaid interest does not accrue if a borrower makes a fully monthly payment. For example, if $50 in interest accumulates each month and a borrower’s full required payment is just $30, the remaining $20 would be waived.

    SAVE is separate from the Biden administration’s efforts to cancel student loan debt for some public-sector workers and borrowers who were defrauded by a for-profit college.

    What’s next for borrowers

    Borrowers currently enrolled in SAVE can remain in the plan while the merits of the cases are heard. Their monthly payment amounts should remain the same.

    But there’s a provision of the SAVE plan that was expected to be phased in next month that may be paused if the litigation is ongoing.

    Starting in July, payments on loans borrowed for undergraduate school were set to be reduced from 10% to 5% of discretionary income for those enrolled in SAVE. And borrowers who have loans from both undergraduate and graduate school were expecting to pay a weighted average of between 5% and 10% of their income based upon the original principal balances of their loans.

    Also, no more student debt will be canceled for borrowers enrolled in SAVE, for now, even if the required number of monthly payments has been made.

    What the lawsuits say

    Eleven states, led by Kansas, filed the first lawsuit in late March and another group of seven states led by Missouri filed one soon after.

    Some of the states are among the plaintiffs who sued the Biden administration two years ago over its sweeping, one-time student loan forgiveness program.

    In the legal challenge led by Kansas, the complaint argues that the SAVE plan “transforms many or most loans into outright grants from the federal government – without any appropriation from Congress.”

    RELATED: Student loan forgiveness: Dept. of Education’s SAVE Plan could lower payments, forgive loans

    In 1993, Congress gave the Department of Education the power to create different repayment plans for borrowers with federal student loans. But the lawsuits say the Biden administration’s SAVE plan goes too far.

    “Congress never gave Biden the authority to saddle working Americans with half a trillion dollars in other people’s debt. A huge win for the Constitution,” Missouri Attorney General Andrew Bailey said on X Monday.

    The estimated cost of the SAVE plan varies, depending on how many borrowers end up enrolling, ranging from $138 billion to $475 billion over 10 years, according to different studies. In comparison, Biden’s student loan forgiveness program was expected to cost about $400 billion.

    (The-CNN-Wire & 2024 Cable News Network, Inc., a Time Warner Company. All rights reserved.)

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  • When students graduate debt-free

    When students graduate debt-free

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    Back in 2019, Freddie Williams Jr. had a lot on his mind at his college graduation: “That’s when, you know, it started really kicking in – hey, this is how much you owe, you’re gonna have to start paying this back,” he said.

    Growing up on the south side of Chicago, he had dreamed of going to Morehouse, the historically Black college in Atlanta that counts Martin Luther King Jr. among its distinguished alumni. “Once I got accepted and saw that, hey, the money is being offered, [I] didn’t have an idea of what I was really getting myself into,” he said.

    And then at commencement, Williams got the surprise of a lifetime, when billionaire businessman Robert F. Smith pledged to pay the student loans for the entire class, clearing some $34 million in student and parent debt. “We’re gonna put a little fuel on your bus,” Smith said.

    Williams said, “It was crazy, you know? To look back and see my parents in the stands crying and celebrating. That’s when I knew like, okay, this is big.”

    He said his total debt – around $125,000 – was a “tremendous” weight to be lifted.

    Total student loan debt in the U.S. is now nearly $1.8 trillion, and experts say many young people are delaying buying homes and starting families because of it. But the Morehouse Class of 2019 is something of an experiment: What could lives look like when students graduate debt-free?

    Filmmakers Joshua Reed and Emani Rashad Saucier, who were also part of the class of 2019, are making a documentary about how their classmates are faring thanks to that generous gift.

    “I think only now, as we get five years out, people realize the implication of what having no loans is,” said Reed. “You can buy a house right after graduation, which people we’ve interviewed did. Someone started a nonprofit to get Black and Brown students into tech. Someone became a family man.”

    Saucier said, “This is what happened at Morehouse: They got the debt cleared and they were able to have this exponential effect. What happens when we clear the debt for millions of Americans?”

    Last year the Supreme Court struck down President Biden’s ambitious $430 billion student debt relief plan. Since then, the Biden Administration has expanded existing programs to cancel $167 billion in debt, with most relief going to people working in the public sector and for nonprofits.

    Josh Mitchell, author of “The Debt Trap: How Student Loans Became a National Catastrophe,” said, “They’re sort of doing these piecemeal fixes, but they’re not doing anything to stop the underlying problem.”

    Simon & Schuster


    Mitchell said Congress created the federal student loan program to expand college access. But by allowing students and their parents to borrow virtually any amount to study virtually anything, the government has enabled colleges to raise tuition without consequence. “There’s a cycle of: students take out loans, schools raise their tuition, students take out more loans,” said Mitchell. “That’s essentially what’s happened over the past 40 years. That’s why tuition (up until recent years) has grown at sometimes triple the rate of inflation.”

    More than half (51%) of all college students now graduate with student loan debt, with the average owing $29,400, according to the College Board’s “Trends in College Pricing and Student Aid 2023” report.

    Mitchell says those levels of student debt are negatively affecting the economy: “The U.S. economy is the world’s biggest, most dynamic, in large part because of higher education,” he said. “But you also have a lot of students who are – not in default in their loans, but are devoting more and more of their paychecks to paying off debt. That’s money that they could have been using to save for retirement, or buy a house, or to even start a business. For the average student, there is a payoff for going to college. But I think that the problem is they’re overpaying,”

    Asked why the cost of tuition has increased at a rate greater than inflation, Nicole Hurd, president of Lafayette College, a private four-year school in Easton, Pennsylvania, said, “Colleges and universities obviously have to be good stewards, and we have to constantly look at our business model. But I will say this: We’re in the business of human capital, and human capital is expensive. So, when you think about investing in teaching, research, scholarship, those things are investments we have to make.”

    Hurd worries that fear of student debt is discouraging the lower- and middle-income students who benefit most from attending college: “We’re so fixed on the price, and we’re thinking about the sticker shock of the price. We’re not thinking about the long-term investment as individuals, as families, and as a country. If somebody goes to college, their children will go to college, their grandchildren will go to college. It changes everything.”

    Tuition and room and board at Lafayette is more than $87,000 a year, though in recent years, the school has made efforts to offer more grants and fewer loans as part of its financial aid packages.

    Hurd said, “Some debt is okay. A little skin in the game is not the end of the world. What we can’t have is people [having] tens of thousands, hundreds of thousands of dollars of student debt. That’s not okay. But the non-profit sector in higher education is getting much better about being transparent about what debt is, and then making sure students and families make good choices.”

    Still, more than 40 million Americans have student loan debt, with 3.5 million owing more than $100,000, according to the College Board. The Education Data Initiative says the average interest on that debt is 6.87 percent; the average length of repayment, 21.1 years.

    It’s why filmmaker Joshua Reed believes the story of the Morehouse Class of 2019 needs to be told. “People are being crushed by the immense weight of this debt,” he said. “But once it’s relieved, they can go on to do all sorts of things.”

    Freddie Williams Jr. said he thinks about not having to pay back student loans almost every day. He was back on campus last month for the five-year reunion of that lucky class. Now a 26-year-old software engineer, he said that, instead of paying back a mountain of debt, he gets to pay the gift forward: “It was, you know, bigger than just having my debt paid off. Because of that gift, you know, I was able to buy a house, and with me buying a house, that allowed for my brother to move in while he’s finishing his degree. And I know it, you know, in my soul that I have to continue to give back and pass it forward.”

         
    For more info:

         
    Story produced by Mark Hudspeth. Editor: Emanuele Secci. 

    Lilia Luciano


    headshot-600-lilia-luciano.jpg

    Lilia Luciano is an award-winning journalist and CBS News 24/7 anchor and correspondent based in New York City. Luciano is the recipient of multiple journalism awards, including a Walter Cronkite Award, a regional Edward R. Murrow Award and five regional Emmys.

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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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  • Instead of Biden paying off student debt, let’s try this in higher education instead | Opinion

    Instead of Biden paying off student debt, let’s try this in higher education instead | Opinion

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    OPINION AND COMMENTARY

    Editorials and other Opinion content offer perspectives on issues important to our community and are independent from the work of our newsroom reporters.

    Driller Cristo Flores, left, and Michael Manga, a rig manager, address a drill issue in 2017 on a rig in Midland, Texas. (Ilana Panich-Linsman/The New York Times)

    Driller Cristo Flores, left, and Michael Manga, a rig manager, address a drill issue in 2017 on a rig in Midland, Texas. (Ilana Panich-Linsman/The New York Times)


    ILANA PANICH-LINSMAN

    NYT

    As the election draws closer and record inflation wreaks havoc on the economy, President Joe Biden has dropped behind former President Donald Trump in nearly every battleground state. In a bid to regain ground, Biden’s administration recently unveiled a desperate proposal to wipe out student loan debt for 30 million borrowers — portraying it as a dream come true for young Americans.

    Once you peel back the veneer of generosity, this action reeks of a blatant bribe to win the votes of young Americans. As imperative as it is to maintain our status as a leading global force with a proficient, unburdened and dynamic workforce, Biden’s politically driven maneuver lacks foresight. It fails to offer sustainable solutions for students and young professionals, instead burdening diligent taxpayers with an unwarranted bill. Instead, we should redirect focus toward vocational and career training in high-demand sectors, where skilled labor commands lucrative salaries.

    It comes down to the numbers. In many cases, it has become a financially unwise decision to get a university degree unless you get a STEM degree. Choose whichever cliché proverb you like, whether it’s “rob Peter to pay Paul” or “teach a man to fish,” but Biden’s action won’t miraculously give these kids a higher-paying job or solve their struggle with inflation. Today, the average university degree costs about $43,000 and has increased 70% over the last 24 years. The only people benefiting from skyrocketing costs are the legions of administrative bureaucrats at colleges and universities.

    It’s past time our country redefined “higher education” and reevaluated what it means to ‘live the American Dream.’ Our nation needs more workers ready to roll up their sleeves and do the “dirty jobs” that Mike Rowe describes. We need more blue-collar Americans to help rebuild the nation’s infrastructure and re-establish our energy independence.

    Today’s youth should be encouraged to attend technical colleges. Students can get a degree in just two years, compared to four, and come out making the same salary, around $40,000, with some degrees paying nearly double. They’re also half the cost or less of a traditional university and have a hiring rate at about 90%.

    The Texas oil and natural gas industry is always looking for hard-working individuals to keep the state the top producer in the nation. The industry makes up about one-third of Texas’ economy and pays billions in taxes and royalties each year, literally fueling our state government. About 1 million Texans work in oil and gas because it pays an average salary of about $140,000 — about 103% higher than other industries.

    With ongoing international conflicts and inflation remaining high, global demand for energy remains vital. Texas has played a key role in providing that energy, with record production and employment in 2023.

    In 2019, the U.S. became a net exporter of energy for the first time in 67 years, surpassing Saudi Arabia and Russia to become the largest producer of oil and gas in the world. This gave us affordable energy, thousands of new jobs, economic growth, and improved national security. Our country achieved this by simply empowering — instead of attacking — domestic producers.

    America needs more skilled workers, not more taxpayer-subsidized bachelor’s degrees. That’s how you grow an economy, and that’s how you build a robust middle class.

    Wayne Christian, a Republican, is one of three members of the Texas Railroad Commission, which regulates oil and gas production.

    Wayne Christian
    Wayne Christian

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    Wayne Christian

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  • Biden announces another round of student loan cancellation. Here’s who qualifies

    Biden announces another round of student loan cancellation. Here’s who qualifies

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    The Biden administration is canceling student loans for another 206,000 borrowers as part of a new repayment plan that offers a faster route to forgiveness.

    The Education Department announced the latest round of cancellations Friday in an update on the progress of its SAVE Plan. More people are becoming eligible for student loan cancellation as they hit 10 years of payments, a new finish line for some loans that’s a decade sooner than what borrowers faced in the past.

    Casting a shadow over the cancellations, however, are two new lawsuits challenging the plan’s legality. Two groups of Republican-led states, fronted by Kansas and Missouri, recently filed federal suits arguing that the Biden administration overstepped its authority in creating the repayment option.

    “From day one of my Administration, I promised to fight to ensure higher education is a ticket to the middle class, not a barrier to opportunity,” President Joe Biden said in a statement. “I will never stop working to cancel student debt — no matter how many times Republican elected officials try to stop us.”

    With the latest action, the Education Department has now approved cancellation for about 360,000 borrowers through the new repayment plan, totaling $4.8 billion.

    The SAVE Plan is an updated version of a federal repayment plan that has been offered for decades, but with more generous terms.

    Congress created the first income-driven repayment option in the 1990s for people struggling to afford payments on standard plans. It capped monthly payments to a percentage of their incomes and canceled any unpaid debt after 25 years. Similar plans were added later, offering cancellation in as little as 20 years.

    Arguing that today’s borrowers need even more help, the Biden administration merged most of those plans into a single repayment option with more lenient terms.

    The SAVE (Saving on a Valuable Education) Plan allows more borrowers to pay nothing until their income rise above certain limits. It also lowers payments more than past plans, eliminates interest growth and cancels unpaid debt in as little as 10 years.

    Biden announced the plan in 2022 alongside his broader proposal for a one-time cancellation of up to $20,000 for more than 40 million people. While the one-time cancellation was struck down by the Supreme Court, the SAVE Plan moved forward and initially escaped legal scrutiny.

    The repayment plan opened for enrollment last fall, with certain provisions scheduled to be phased in later this year. The faster path to cancellation was among those slated to start this summer, but the Biden administration fast-tracked that benefit early this year, announcing forgiveness for 153,000 borrowers who had hit 10 years of payments.

    Almost 8 million Americans have enrolled in the plan, including 4.5 million who pay nothing because they have lower incomes.

    In a call with reporters, Education Secretary Miguel Cardona said the plan provides relief and prevents borrowers from falling behind on their loans.

    “Now they have some money back in their pockets, instead of a bill that too often competed with basic needs like groceries and health care,” he said.

    Under the plan, borrowers who originally borrowed $12,000 or less are eligible for forgiveness after 10 years. Those who took out more than $12,000 can get cancellation but on a longer timeline. For each $1,000 borrowed beyond $12,000, it adds an additional year of payments on top of 10 years.

    The Biden administration says it’s designed to help those who need it most. Counterintuitively, those with smaller student loan balances tend to struggle more. It’s driven by millions of Americans who take out student loans but don’t finish degrees, leaving them with the downside of debt without the upside of a higher income.

    In two separate lawsuits, Republican attorneys general in 18 states are pushing to have the plan tossed and to halt any further cancellation. They say the SAVE Plan goes beyond Biden’s authority and makes it harder for states to recruit employees. They say the plan undermines a separate cancellation program that encourages careers in public service.

    It’s unclear what the suits could mean for loans that have already been canceled. A court document filed by Kansas’ attorney general says it’s “unrealistic to think that any loan forgiveness that occurs during this litigation will ever be clawed back.”

    The lawsuits don’t directly address the question, and the attorneys general didn’t immediately respond to an Associated Press request.

    The Education Department says Congress gave the agency power to define the terms of income-driven payment plans in 1993, and that authority has been used in the past.

    Along with the repayment plan, Biden is trying again at a one-time student loan cancellation. In a visit to Wisconsin on Monday, he highlighted a proposal to reduce or cancel loans for more than 30 million borrowers in five categories.

    It aims to help borrowers with larges sums of unpaid interest, those with older loans, those who attended low-value programs, and those who face other hardships preventing them from repaying student loans. It would also cancel loans for people who are eligible for other forgiveness programs but haven’t applied.

    The Biden administration says it will accelerate parts of the proposal, with plans to start waiving unpaid interest for millions of borrowers starting this fall. Conservative opponents have threatened to challenge that plan, too.

    On Friday the administration also said it’s canceling loans for 65,000 borrowers who are enrolled in older income-driven repayment plans and hit the finish line for forgiveness. It also announced cancellation for another 5,000 borrowers through the Public Service Loan Forgiveness program.

    Through a variety of programs, the Biden administration says it has now provided loan relief to 4.3 million people, totaling $153 billion.

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    Collin Binkley | The Associated Press

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