1. Job growth slows
2. Supreme Court disallows student loan forgiveness
3. Mastercard launches subscription management service
4. Oil prices continue to slump
5. Key inflation indicator muted in May
6. Stress test shows bank resiliency
7. Manufacturing weakness continues
8. Yield curve signals likely recession
9. Mortgage rates hit 2023 high

1. Job growth slows

The US economy added 209,000 jobs in June. That marked a slower pace of employment growth than May’s 306,000. Along with weaker job growth, there were other signs of a weakening job market. Initial job growth estimates for April and May were revised downward by 110,000. Also, the number of people working part-time rather than full-time for economic reasons increased by 452,000. That marks a 12% increase in just one month of people who would prefer to work full-time but had to settle for part-time employment. See report at BLS.gov.

2. Supreme Court disallows student loan forgiveness

Following a Supreme Court ruling that canceled their student loan forgiveness plan, the Biden Administration seeks an alternative. The President is now proposing a plan that involves a grace period of 12 months once loan payments resume in October. It also would drastically modify current income-driven repayment programs. The new proposal would eliminate payments for anyone making less than 225% of the federal poverty level. It would limit payments to 5% of discretionary income. Finally, for loans of $12,000 or less, it would eliminate remaining loan balances after ten years. This proposal seems likely to lead to a new round of court challenges. See article at Yahoo.com.

3. Mastercard launches subscription management service

Amid criticisms that streaming and other subscription services have become overly expensive and hard to handle, Mastercard has teamed with Subaio to offer a new subscription management service. This service allows consumers to manage their subscription services through a single source rather than dealing with each provider separately. Subscription management has become a hot new area in fintech. Mastercard’s research found that the average consumer has 12 different media and entertainment subscriptions, with millennials juggling an average of 17 such subscriptions. See release at Mastercard.com.

4. Oil prices continue to slump

Brent oil prices, which act as a global benchmark for oil, declined for the fourth consecutive quarter in the second quarter of 2023. Prices have remained weak despite efforts by oil producers to limit supply. Falling energy prices have been a moderating influence on inflation over the past year. See article at Yahoo.com.

5. Key inflation indicator muted in May

The Personal Consumption Expenditure (PCE) price index rose by just 0.1% in May 2023. The PCE price index is the primary inflation indicator used by the Federal Reserve. The 0.1% increase represents slowing inflation after the PCE price index rose by 0.4% in April. May’s increase brings the inflation rate for the past year to 3.8%. However, core inflation remains more elevated at 4.6%. See details at BEA.gov.

6. Stress test shows bank resiliency

Key US banks passed a Federal Reserve stress test with flying colors. Twenty-three major banks, including industry leaders JP Morgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley, participated in the test. The test measured whether the banks’ financials could continue to meet the Fed’s reserve requirements in the event of a severe global recession. The test measured how the banks would react when unemployment reached 10% and the stock market lost 45%. See details at Yahoo.com.

7. Manufacturing weakness continues

A widely-followed measure of US manufacturing activity fell for an eighth straight month in June. The Institute for Supply Management (ISM) manufacturing index fell to 46, down from 46.9 in May. Any reading below 50 indicates declining manufacturing activity. The index has been below 50 for the longest time since the 2008-2009 recession. The current reading is the lowest since May 2020. See article at Yahoo.com.

8. Yield curve signals likely recession

The spread between 2-year and 10-year Treasuries is now the most inverted in 42 years. An inverted yield curve is when short-term yields exceed long-term yields. The spread recently reached 109.5 basis points. High short-term yields are partly due to the Fed’s string of rate increases. While lower long-term yields could be taken as a sign that the Fed’s inflation-fighting efforts will succeed, they also suggest that a recession might be necessary to smother inflation thoroughly. See article at Reuters.com.

9. Mortgage rates hit 2023 high

30-year mortgage rates rose for a second week to reach 6.81%. That marks their highest in 2023, though it’s still short of last year’s peak of 7.08%. 15-year rates also reached their highest point in 2023, reaching 6.24%. See details at FreddieMac.com.

Weekly News Headlines from Credit Sesame

• Last week’s news roundup June 24, 2023
• Next week’s news roundup July 15, 2023

The post Personal finance weekly news roundup July 8, 2023 appeared first on Credit Sesame.

On November 10, 2022 a U.S. District Court in Texas ruled President Biden’s student loan forgiveness program to be unconstitutional.

Beyond being a setback for the President and the millions of borrowers who may be affected, this ruling creates a lot of uncertainty over what happens when student loan payments resume in January.

This is understandably an emotional issue to people who have thousands of dollars worth of debt hanging in the balance. It is important to think rationally about what to do next. Coping with the uncertainty the right way could save you money and help protect your credit score for years to come.

This is not the end of the story

The ruling in question is more definitive than an earlier court challenge which put the loan forgiveness program on hold. That earlier ruling by the Eighth U.S. Circuit Court of Appeals simply delayed implementation until the court could consider separate challenges to the program.

The new ruling by a U.S. District Court judge found the program to be unconstitutional on the grounds that the Executive Branch had overstepped its authority to forgive student loans.

In a statement following the ruling, Secretary of Education Miguel Cardona noted that the Justice Department had filed an appeal of the U.S. District Court decision. In short, the District Court judge’s ruling is not the final word on the matter. Given what’s at stake, it wouldn’t be surprising if the issue were not decided until it goes before the Supreme Court.

Even then, there are other court challenges to the program in the works, on different legal grounds. It’s entirely possible that the program could be in limbo for a long time to come.

That creates a very challenging situation for a large number of borrowers. In his statement, Secretary Cardona noted that 26 million borrowers had applied for loan forgiveness under the Biden program. 16 million of those had already been approved.

Are payments to resume in January?

The backdrop to this legal wrangling is the fact that the scheduled resumption of payments is fast approaching. The appeals process and other legal challenges are unlikely to be resolved by January.

There is the possibility that the Biden Administration will grant yet another extension of the deadline for resuming payments, but that is far from certain. The pause on student loan payments was originally put in place because of financial hardships caused by COVID. Now that employment has soared past pre-pandemic levels that reasoning no longer applies.

Significantly, Secretary Cardona’s statement made no comment on what borrowers should do if the deadline for repayment should come before the fate of the loan forgiveness program is resolved. Until such guidance is forthcoming, borrowers are left to decide for themselves how to proceed.

Prepare for either outcome

While the best solution may depend on a borrower’s particular circumstances, the safest thing to do might be to assume that you still owe your full amount of debt. That means getting ready to resume your payments in January.

Preparing to make payments based on the full amount of your debt covers you in case the forgiveness program is not ultimately rescued. That way, you won’t be subject to penalties, additional interest charges and damage to your credit score as a result of failure to make full payments.

At the same time, there’s no harm in applying for the forgiveness program, if you haven’t done so already. Then, if it turns out the forgiveness program is saved, you could be in line for a financial windfall.

The following are a few steps you can take to be prepared for either outcome.

Apply for the forgiveness program anyway

As of this writing, the application for the student loan forgiveness program is still live on the official Federal Student Aid website.

If you haven’t done so already, go ahead and fill out your application. It doesn’t cost anything, takes about five minutes to complete and requires no special documentation.

If the legal challenges are resolved in favor of the loan forgiveness program, having your application already processed allows you to benefit sooner.

Contact your loan servicer before year end for an update on your obligation

Since payments have been suspended for over two years now, contact your loan servicer to see where you stand. Check your remaining balance and payment amount if you have to start making it again.

Failing to resume your loan payments could have consequences. It could cost you additional interest charges plus penalties. It could also damage your credit for years to come.

Apply for income-based repayment now

One under-utilized tool for people with student loan debt is income-based repayment. That can limit the size of your payments to a certain percentage of your income. The aim is to make sure those payments are not too onerous.

If you expect to have trouble making your payments because your income is too low, it might be worth looking into income-based repayment.

Also, there are a variety of other loan forgiveness programs available. These are based on the borrower’s occupation or circumstances. Information on other student loan forgiveness programs can be found on on the Federal Student Aid website. It’s worth checking out whether you’re eligible, in case the general loan forgiveness program doesn’t survive.

Create a budget based on no forgiveness

While the Biden program is still in doubt, work out a budget assuming that you owe the full amount of your debt. Practice living on this budget between now and the end of the year so you will be ready. This may even help you put a little extra cash aside to help you get by once student loan payments resume.

Prioritize your debts

If you’re going to be juggling student loan payments along with other debts, you need to prioritize how you repay your debts.

The best approach is to make sure you make at least the minimum payment on every debt. Then, if you have any money left over, apply that to the debt with the highest interest rate.

Government-sponsored student loans typically have relatively low interest rates. So, you may want to apply extra payment amounts to more expensive debt, like credit card balances.

Frustrating as it is to have the student loan forgiveness yanked away, you are simply back to where you were before it was announced. For now, manage your finances as if you have to start payments and student loan forgiveness is blocked for good.

You may also be interested in:

• 6 Things You Should Know Before Taking Out a Student Loan
• How to Build Credit as a Student

Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

The post Student Loan Forgiveness Blocked: What Now? appeared first on Credit Sesame.

1. Court ruling threatens student loan forgiveness
2. Consumers are growing more pessimistic about the economy
3. Home prices still trending upward
4. Household debt up sharply in the third quarter
5. Mastercard survey expects strong Black Friday sales
6. SEC issues Investor Alert on cyber fraud
7. New housing construction slows down
8. Mortgage rates take a steep fall
9. Import and export prices fell in October

1. Court ruling threatens student loan forgiveness

A U.S. District Court in Texas has ruled that President Biden’s sweeping forgiveness of some student loan balances was unconstitutional. This is a more direct threat to the program than a ruling a few weeks ago by a different court. That earlier ruling merely put the loan forgiveness on hold until the court could consider a different lawsuit challenging the program. In this newer ruling, a judge appointed by then-President Trump said that the Biden administration exceeded its authority to act by granting such sweeping loan forgiveness. The government will appeal the ruling, though the forgiveness program will remain in limbo for the time being. See article at Yahoo.com.

2. Consumers are growing more pessimistic about the economy

A monthly survey by the Federal Reserve Bank of New York found that consumers are becoming more pessimistic about inflation, employment and access to credit. Since the last survey, consumers have increased their expectation of what the inflation rate will be in the year ahead by 0.5%. The percentage of consumers who think unemployment will be higher a year from now rose by 3.8% in the past month, to 42.9%. That’s the highest level of pessimism about the job market since April of 2020, when pandemic lockdowns were in effect. The percentage of households reporting that it’s harder to obtain credit than it was a year ago rose to 56.7%. That marks a new high for that data series. See full survey results at NYFed.org.

3. Home prices still trending upward

Despite rising mortgage rates, home prices generally have continued to rise. According to the National Association of Realtors (NAR) home prices over the past year rose in 98% of metropolitan areas. Nationally, the median single-family home price rose by 8.6% over the past year to reach $398,500. According to the NAR’s Lawrence Yun, the median income needed to buy a home is now $88,000, almost $40,000 more than it was back in 2019. See news release at NAR.Realtor.

4. Household debt up sharply in the third quarter

New data from the Federal Reserve Bank of New York’s Quarterly Report on Household Debt & Credit showed that the total amount owed by consumers rose sharply in the third quarter of 2022. The total household debt balance rose by $351 billion, the largest non-inflation-adjusted increase since 2007. Mortgage debt led the way, increasing by $282 billion in the quarter. This is the largest component of household debt, representing 71%. Credit card debt rose by $38 billion. That debt rose by 15% year-over-year, which is the largest percentage increase in more than 20 years. See analysis at NewYorkFed.org.

5. Mastercard survey expects strong Black Friday sales

The latest Mastercard SpendingPulse report projects that retailers will see Black Friday sales increase by 15% over last year. Since that is nearly twice the rate of inflation over the past year, the increase in spending is driven by more than just higher prices. In fact, there are some indications that retailers may offer more aggressive discounts this year. Amazon plans to stretch its Black Friday discounts out over 48 hours. Walmart is offering special discounts every Monday during November. Target is advertising a full week of Black Friday deals. This year’s retail activity is expected to mark the continued recovery of in-store shopping. In-person Black Friday purchases are expected to be up by 18% over last year, more than the general 15% increase in all retail sales that Mastercard is projecting. See full article at PYMNTS.com.

6. SEC issues Investor Alert on cyber fraud

With identity theft and other breaches of investment account information on the rise, the SEC has issued an Investor Alert on the subject. This advisory bulletin includes nine steps investors should consider taking to guard against cyber fraud. These steps range from account monitoring in an effort to detect fraud to actions that can secure or close an account an investor thinks has been compromised. See full Investor Alert at SEC.gov.

7. New housing construction slows down

Census Bureau figures for October show that residential building activity has been slowing down. New permits for residential housing were down by 2.4% for the month and 10.1% over the past year. Residential building starts were down by 4.2% for the month and 8.8% for the year. The slowdown in new residential construction may reflect a combination of builder pessimism over the housing market and weakened demand due to sharply higher mortgage rates. See full release at Census.gov.

8. Mortgage rates take a steep fall

30-year mortgage rates fell by nearly half a percent last week. They declined by 0.47%, from 7.08% to 6.61%. That reverses a rising trend and puts rates at their lowest level since late September. The reversal in mortgage rates comes on the heels of last week’s Consumer Price Index report that showed inflation rose less drastically than expected in October. Despite the downturn, 30-year rates are still more than twice as high as they were when the year started. See latest rate data at FreddieMac.com.

9. Import and export prices fell in October

More evidence of slowing inflation could be seen in October’s data on U.S. import and export prices. The price of imports to the U.S. dropped by 0.2% in October. That was the fourth consecutive month of price declines for imports. Falling import prices can lower the cost of goods sold in the U.S. The prices of exports from the U.S. have also fallen for four straight months. That could indicate some easing of the global inflation problem. The only sour note is that falling export prices are not good for U.S. economic growth. See full release at BLS.gov.

Weekly News Headlines from Credit Sesame

• Last week’s news roundup November 12, 2022
• Next week’s news roundup November 26, 2022

The post Personal Finance Weekly News Roundup November 19, 2022 appeared first on Credit Sesame.

1. Court puts a hold on student loan forgiveness
2. Water bills leaving Californians awash in debt
3. Economists support continued Fed rate hikes
4. Fannie Mae and Freddie Mac to use expanded credit score models
5. Consumer confidence fell in October
6. CFPB warns that some bank fees may be illegal
7. Non-banked population falls to new low
8. U.S. economic growth rebounded in the third quarter

1. Court puts a hold on student loan forgiveness

The 8th U.S. Circuit Court of Appeals has put a hold on President Biden’s student loan forgiveness plan. The hold is temporary until the court can rule on a lawsuit filed by six Republican-led states that are attempting to block the program. The lawsuit claims that the President overstepped his authority by granting the debt relief. The Biden Administration has argued in response that those state governments don’t have the legal standing necessary to be heard on this matter. The Department of Education has stated that even with debt forgiveness itself on hold, it will continue to process applications so it can act swiftly once the court rules. See full article at ABCNews.com.

2. Water bills leaving Californians awash in debt

A long-term drought combined with outdated infrastructure has left Californians with sharply-higher water bills. In many cases, this has left them owing money on overdue water charges. Water costs in California have been rising rapidly for more than a decade. A survey found that 12% of Californians are behind on their water bills, with an average household debt on those bills of $500. Governor Gavin Newsome recently vetoed a bill that would have provided rate assistance to residential water customers. His reason for blocking the bill was the strain the multi-billion dollar cost would have put on the state’s budget. See article at LATimes.com.

3. Economists support continued Fed rate hikes

With the Federal Reserve scheduled to make its next interest rate decision next week, a poll of economists found that most think the Fed should continue to raise rates until inflation eases. A majority of the economists polled expect another 0.75% rate increase when the Fed meets next week. The poll found a median target of a 4.4% inflation rate to be the point at which economists think the Fed can halt its interest rate increases. Economists recognize the necessity of continued rate increases despite the heightened risk of a recession as a result. See article at Reuters.com.

4. Fannie Mae and Freddie Mac to use expanded credit score models

The Federal Housing Finance Agency (FHFA) has approved the use of new credit score models by Fannie Mae and Freddie Mac. The two mortgage finance companies make government-insured loans. The new credit score models are the FICO 10T and the VantageScore 4.0. These new models use a broader range of payment history which includes rent, utilities and telecom payments. The FHFA also announced that Fannie Mae and Freddie Mac will be cutting upfront mortgage fees for lower-income borrowers. They will make up for those cuts by raising upfront fees on most cash-out refinance loans. See full article at ABA.com.

5. Consumer confidence fell in October

The Consumer Confidence Index declined in October, following two consecutive positive months. Both components of the Index, one that measures consumers’ views of current conditions and one that measures expectations for upcoming conditions, declined. The Expectations Index declined by less, but was already below a level that has traditionally signaled an upcoming recession. See full release at Conference-Board.org.

6. CFPB warns that some bank fees may be illegal

The Consumer Finance Protection Bureau (CFPB) has issued new guidance on its interpretation of the Consumer Financial Protection Act. This guidance puts banks on notice that some of their practices may be against the law. Specifically, the CFPB is warning banks to stop charging fees to deposit account customers under two circumstances. One is where the depositor has a check from a third party bounce. The CFPB’s interpretation is that unless the depositor has repeatedly tried to deposit checks that bounce from the same source, the customer should not be penalized for someone else’s bounced check. The second circumstance is where a debit card transaction is authorized when the account has a positive balance, but subsequent transactions cause the balance to go negative. The CFPB is advising banks that they should not charge overdraft fees on transactions that were authorized when there was a sufficient balance to cover them. See full release from ConsumerFinance.gov.

7. Non-banked population falls to new low

An updated report by the FDIC found that the percentage of the U.S. adult population without access to a bank account has fallen to its lowest level since the FDIC began tracking this data in 2009. The report found that just 4.5% of households had no bank accounts. This is down from a high of 8.2% in 2011. While income plays a role, race or ethnicity seem to be even more of a factor in people remaining unbanked. See full report at FDIC.gov.

8. U.S. economic growth rebounded in the third quarter

Gross Domestic Product (GDP) grew at a 2.6% inflation-adjusted annual rate in the third quarter. That marks a return to growth after slight declines in inflation-adjusted GDP in the first two quarters of the year. GDP growth was helped by a reduction in the trade deficit, as exports grew and imports declined. The inflation-adjusted GDP number was also helped by an easing in the rate at which the Personal Consumption Expenditure Price Index rose in the third quarter. That index is the measure of inflation that the Fed prefers to use. See full release at BEA.gov.

Weekly News Headlines from Credit Sesame

• Last week’s news roundup October 22, 2022
• Next week’s news roundup November 5, 2022

The post Personal Finance Weekly News Roundup October 29, 2022 appeared first on Credit Sesame.

Student loan forgiveness just got real. On Monday, October 17, the Department of Education launched the official application for student loan forgiveness.

A successful application allows borrowers with federal student loans to have up to $10,000 worth of that debt forgiven, plus another $10,000 for students who received Pell Grants. To qualify for the program, the borrower must earn under $125,000 per year (or $250,000 for married couples).

Borrowers have until December 31, 2023 to apply, but the economy at the end of 2022 gives people some compelling reasons to apply right away. Here are seven reasons why eligible borrowers should apply now rather than wait until the deadline nears:

1. The student loan forgiveness application is easy

The application is available at StudentAid.gov. Applicants don’t need a special log-in, nor do they have to provide any legal documentation to apply.

The application takes an estimated five minutes or under to complete. Information requested include personal identifiers such as name, phone number, Social Security number and email address. The applicant has to make a statement affirming that they meet the income eligibility requirement. The government might follow-up if any further information is needed.

It takes five minutes to earn thousands of dollars worth of loan forgiveness. It’s hard to imagine a more productive use of time.

2. Student loan payments resume in January

Payments on federal student loans were paused because of financial hardships created by the pandemic. The deadline for their resumption has been extended multiple times. With a program to forgive student loan debt, it would be unrealistic to expect another extension.

Applications take a few weeks to process. The government expects successful applications received by mid-November to be in effect before student loan payments resume this coming January.

Monthly payments are based on the amount the borrower still owes. By getting some or all debt forgiven, borrowers can get payments reduced. Getting student loan forgiveness in place before those payments resume in January means smaller payments.

3. Inflation is already making big demands on consumer dollars

It’s hard to imagine a better time to reduce or eliminate student loan payments. The worst inflation in 40 years is stretching people’s budgets to the breaking point.

Over the past two years, consumer prices in the United States have risen by a little over 14%. Most incomes have not kept up. For many people that means the lifestyle they had is no longer affordable.

Student loan forgiveness means keeping more money for other purposes, such as rising prices due to high inflation.

4. Less of a student loan burden can help minimize other debt

Debt can have a domino effect. Payments on past borrowing reduce the money available for current expenses. People then resort to more borrowing to fill the cashflow the gap.

Inflation accelerates that cycle. Recent numbers from the Federal Reserve show that consumer debt is at an all-time high. The cost of debt has gone up because of rising interest rates. Federal Reserve figures going back to the mid-1990s indicate that credit card interest rates have never been higher. With more rate hikes expected before the end of the year, those rates are likely to rise even more.

Reducing or eliminating monthly student loan payments gives consumers a chance to break this cycle. The money saved on student loan payments can pay for expenses without the need to increase debt. It could even be used to pay down other debt. In particular, if reduced student loan payments allow consumers to pay down credit card debt, the benefit to household finances is amplified.

5. Loan forgiveness can go towards a down payment on a house

A frequent complaint is that student loan payments prevent young adults from buying a home.

The current economy makes this a particularly challenging time to buy a house. Not only have home prices climbed steadily over the past decade, but mortgage interest rates have risen along with other rates. 30-year mortgage rates are higher than they’ve been in the past two decades.

Money saved from student loan forgiveness can be used to build a larger down payment for a home purchase. This is an ideal time for a larger down payment, which:

• Makes higher-priced homes accessible
• Results in a smaller home loan
• May qualify borrowers for a lower interest rate

6. An ideal opportunity to start saving for the future

Another possible use for the extra money borrowers can keep because of student loan forgiveness is to jump-start retirement saving.

Inflation has made it necessary for people to revisit their retirement savings assumptions. They may find they are going to need more savings to afford retirement.

Prices have risen sharply in the past two years so your retirement savings targets may have to rise accordingly. If inflation continues to run at a higher-than-average rate, you may have to set your target even higher.

Your retirement savings target has to allow for all the price increase you may see between now and when you retire. Setting aside that much money is a big job. Student loan forgiveness may give you some extra money for retirement savings.

7. Savings are worth more with interest rates rising

Whether you’re saving for a down payment, retirement or other financial goal, rising interest rates give you the opportunity to earn more on your savings.

Interest rates on savings deposit products have risen this year. They haven’t risen as much as inflation or interest rates on debt, which makes it especially important for consumers to shop around for high-interest deposit products.

Student loan forgiveness provides borrowers with the equivalent of gift of money. This may be a one-time occurrence, but that money could have an impact on their finances for years to come.

You may be interested in:

• 8 Ways to Make the Most of the New Student Loan Debt Relief Program
• How Inflation Threatens Retirement Savings

Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

The post 7 Reasons to Apply for Student Loan Forgiveness appeared first on Credit Sesame.

1. Colleges profit by recommending banks to students
2. Application for student loan forgiveness now available
3. Analysts warn of corporate debt defaults
4. Retail sales struggle to keep pace with inflation
5. FBI-older-Americans-most-susceptible-to-tech-support-scams
6. Wage growth not keeping up with inflation
7. Mortgage applications down to a 25-year low
8. Mortgage rates edge upward towards 7%

1. Colleges profit by recommending banks to students

The Consumer Financial Protection Bureau (CFPB) issued a report to Congress about financial arrangements between banks and institutions of higher education. Schools often steer students to bank accounts they can use to direct payments to the school. They don’t always disclose that they have financial incentives to refer business to those banks. The CFPB found that 17% of students in a sample they studied had opened accounts with a bank that had a financial relationship with their college. In many cases, colleges appeared to be directing students to more expensive bank accounts than other available options. See full report at ConsumerFinance.gov.

2. Application for student loan forgiveness now available

The U.S. Department of Education has launched the initial application for student loan forgiveness. The application can be found on the Federal Student Aid website. Borrowers are advised that this version of the application is the only legitimate way to apply for student loan forgiveness. Applications will be accepted until the end of next year, but borrowers are encouraged to apply as soon as possible. With student loan payments slated to resume in January of 2023, applying sooner can result in borrowers having their monthly payments recalculated based on their reduced balances. See article at Yahoo.com.

3. Analysts warn of corporate debt defaults

Wall Street analysts are warning that higher interest rates may make it impossible for some companies to pay their corporate debt. Companies that grew accustomed to borrowing at low interest rates may now find that making loan payments at higher rates could overwhelm their cash flow. This not only can affect investors in corporate bonds, but also may have a ripple effect throughout the economy. Defaulting corporations are likely to lay off employees and those defaults will also damage the finances of their creditors. See article at Yahoo.com.

4. Retail sales struggle to keep pace with inflation

A Census Bureau survey found that U.S. retail and food service sales were unchanged in September, and up by 8.2% for the prior year. This is an important indicator of whether consumer activity is still growing despite inflation and recession concerns. The 8.2% growth in spending over the past year matches the change in the Consumer Price Index (CPI) for the past year. This suggests that the extra spending was simply to keep pace with higher prices. Worse, with no change in September spending failed to keep pace with the 0.4% rise in the CPI. So, for the most recent month consumers spent the same amount as in the prior month but got less for their money due to inflation. See full release at Census.gov.

5. FBI: older Americans most susceptible to tech support scams

While younger Americans may be more frequent technology users, older people are more likely to fall victim to the new wave of tech support scams. The FBI has issued a warning about criminals posing as representatives of computer security firms contacting people to gain control of their computers and financial information. The FBI warned that losses from these scams more than doubled last year. More than half the victims were over 60 years old. The FBI advised that genuine tech support representatives don’t just call people out of the blue. See detailed advisory at FBI.gov.

6. Wage growth not keeping up with inflation

The Bureau of Labor Statistics announced that the average weekly pay of American full-time and salaried workers was $1,070 in the third quarter of 2022. That’s 6.9% higher than it was a year earlier. However, that increase did not represent a true increase in wealth because it failed to keep up with inflation. Over the same period, consumer prices were up by 8.3%. See full release at BLS.gov.

7. Mortgage applications down to a 25-year low

The impact of fast-rising interest rates on the housing market can be seen in the drop-off of mortgage application activity. According to the Mortgage Bankers Association, mortgage applications have been declining for four months now. Purchase applications are 38% lower than they were a year ago. Refinancing activity has been hit even harder. Applications for refinance mortgages are 86% lower than they were a year ago. Overall, mortgage application volume is at its lowest level since 1997. See full release at MBA.org.

8. Mortgage rates edge upward towards 7%

Mortgage rates rose slightly over the past week. Their rise of 0.2% put 30-year fixed mortgage rates at 6.94%. Mortgage finance company Freddie Mac reported that rising rates have cut homebuilder confidence in half over the past six months. This has the effect of slowing new home construction. See full release at FreddieMac.com.

Weekly News Headlines from Credit Sesame

• Last week’s news roundup October 15, 2022
• Last week’s news roundup October 29, 2022

The post Personal Finance Weekly News Roundup October 22, 2022 appeared first on Credit Sesame.

The Biden Administration’s announcement that it plans to forgive up to $20,000 per borrower in student loan debt came as a relief to millions of Americans. However, it isn’t the end of the student loan problem.

You may continue to take on debt if you’re still in school. Before you know it, you could return to where you were before your debt was forgiven.

It would be naïve to believe that the government can keep forgiving future student loan debt. This would put a significant strain on the federal budget. It would be so financially unsound that it might endanger the future of the federal student loan program. Also, future administrations may not be as generous at forgiving student loan debt.

The best approach to avoiding future student loan problems is to rely on yourself rather than the government. Borrowing responsibly can help you leave college with less of a financial burden. It can also help you establish a good credit record that gives you better access to financial services in the future.

Here are six things you should know that may help your student loan experience and provide a successful introduction to using credit.

1. What is the graduation rate of the school you plan to attend?

Imagine leaving school with a ton of debt and no degree to show for it. That would be tough. It pays to look carefully at what you’re getting into. Beyond the school’s slick website and campus amenities, investigate what the school can deliver regarding your education.

What percentage of first-year students graduate from the school? How many years does it take to graduate?

Consider those statistics in the context of your qualifications. Are your high school grades and test scores above or below the average of other incoming students at your college? It’s not that you cannot succeed if your academic record is a little below average. It means that you may need to work harder than others to succeed.

As they leave high school, students often focus on getting admitted to college. If you want to avoid a future student loan problem, look further down the road than just getting into a school. Try to assess your chances of leaving that school on time and with a degree.

2. What are the requirements for the career you have in mind?

One of the shady practices of some educational institutions is that they market a program as relating to a particular career, even though a degree in that program isn’t what hiring managers look for in that profession.

To improve the chances that your education can help you get a worthwhile job, it helps to know what qualifications employers look for in that field.

An excellent way to approach this is to work backward. Before you enter a college or trade school, imagine you’re about to graduate from it and are looking for a job. Check out employment listings in your chosen career and see if the degree or certificate from the school you’re thinking of attending would qualify you for the type of job you want.

3. What are the placement and income prospects for that career?

Some professions sound great, but there isn’t much demand for them. In other cases, the pay may not come close to earning enough to repay the loans you took to get your degree.

The Occupational Outlook Handbook from the U.S. Bureau of Labor Statistics is valuable for checking out in advance.

The Occupational Outlook Handbook can give you a sense of the demand for a given profession. It lists how many new jobs are expected to be in that profession over the next ten years and whether the growth rate for that profession is expected to be faster or slower than average.

This handbook also lists the average income for different occupations, so you can see how well that career may pay off. It also lets you research the qualifications required for a given type of job.

4. How does your repayment schedule look?

As you take out loans over your college career, you should get an updated repayment schedule each time. This shows you how much you owe and how much you have to pay monthly.

Compare these amounts with the typical income in the profession you plan to enter. Are student loan payments affordable on that kind of income? Be sure to account for other living expenses, too.

People get in over their heads with student loan debt when they don’t think about repayment until they leave school—the time to figure out how student loan repayments is before you commit to a loan.

5. Is taking out a student loan your only financial aid possibility?

For many students, taking out a student loan is not the only financial aid possibility. It may not even be your best option.

Grants and scholarships are forms of student financial aid that don’t have to be paid back. You should apply for as many of these forms of assistance as you can before you borrow or spend money out of pocket for tuition. Some of these are awarded based on academic or other qualifications, while others are based on need.

You can find out about some financial aid possibilities by filling out the Free Application for Federal Student Aid online. Also, check with your state’s education department to see what aid programs are available.

Finally, talk to the financial aid department of any school you’re considering about grants and scholarships that may be available. The helpfulness of the financial aid department and the amount of aid they can identify for you may be an important consideration in your choice of school.

6. Are you getting a federal or private student loan?

Finally, before taking out a student loan, be clear on whether you are getting a federal or private student loan.

Federal student loan interest rates are often lower because the U.S. government backs the loan. Also, federal student loans have several programs designed to make repayment affordable. Private student loans are generally less flexible.

There’s a good chance that taking out a student loan is your first major financial decision. Financial decisions have far-reaching consequences, so take the time to make decisions you can live with in the years ahead.

If you enjoyed 6 Things You Should Know Before Taking Out a Student Loan you may be interested in:

• 8 Ways to Make the Most of the New Student Loan Debt Relief Program
• How to Build Credit as a Student
• Student Freebies, Hacks and Discounts

Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

The post 6 Things You Should Know Before Taking Out a Student Loan appeared first on Credit Sesame.

1. Russian gas shutdown could worsen inflation problem
2. Student loan forgiveness may have tax consequences
3. Banks join effort to lend to low-credit consumers
4. Bed Bath & Beyond situation turns from troubled to tragic
5. Service sector of U.S. economy shows third quarter growth
6. Experian tests including rent payments in credit scores
7. Mortgage rates now highest since 2008
8. Consumer debt continues to climb

1. Russian gas shutdown could worsen inflation problem

The price of natural gas in Europe jumped by 30% on September 5, potentially adding more fuel to high inflation. Russia triggered the sudden price rise by shutting down the Nord Stream 1 gas pipeline to Europe. European officials accuse Russia of manipulating the gas supply in retaliation for sanctions against Russia because of the war with Ukraine. Russia claims that those sanctions have interfered with maintenance of the pipeline, creating a need to shut it down. In any case, the sudden drop in supply caused an immediate spike in prices. While Europe was most directly affected, price changes of global commodities could be felt around the world. See full article at Reuters.com.

2. Student loan forgiveness may have tax consequences

The Biden administration’s forgiveness of student loan debt may create a tax liability for some borrowers. That liability would stem from state income tax, depending on where the borrower lives. Normally, when debt is forgiven the amount that’s written off is considered income for tax purposes. That makes it taxable, but the federal government is waiving those taxes in the case of the student loan forgiveness program. However, state taxes may apply in some cases. While several states have also waived their taxes in connection with this program, some have chosen not to. Others haven’t decided yet. Mississippi and North Carolina have announced that forgiven student loan debt will be taxable in their states. Arkansas, Minnesota, West Virginia and Wisconsin are still undecided about the tax treatment. See full article at CNBC.com.

3. Banks join effort to lend to low-credit consumers

A number of high-profile banks are working with the Comptroller of the Currency on a program to extend credit to individuals who don’t have good credit scores. In some cases, the consumers are “credit invisibles” who haven’t generated the type of transactions that go into a credit history. As part of the program, banks are looking at other account and payment data in place of traditional credit scores. In some cases they are also lowering credit standards and down payment requirements. National banks participating in this effort include Citigroup, Bank of America, JP Morgan Chase, Wells Fargo and USBancorp. See full article at WSJ.com.

4. Bed Bath & Beyond situation turns from troubled to tragic

Retailer Bed Bath & Beyond’s stock has been plummeting lately due to the company’s financial troubles. The company recently announced that it will be closing 150 stores and laying off 20% of its workforce. It will also attempt to float a new stock issue worth about $100 million dollars. The gravity of the company’s problems were underscored when its Chief Financial Officer committed suicide on September 2. The problems of Bed Bath & Beyond have upset investors beyond those who own the company’s stock because the its troubles highlight the risks of two prominent investment trends: stock buybacks and meme stocks. See full article at Yahoo.com.

5. Service sector of U.S. economy shows third quarter growth

With two months of the third quarter of 2022 complete, an important indicator suggests the economy may have stopped shrinking. The Institute for Supply Management’s non-manufacturing Purchasing Manager’s Index rose for a second consecutive month in August. The rise in this index over the past two months represents a turnaround after it had fallen for three months in a row prior to that. This index is considered a key indicator for overall economic growth because it represents the service sector. That sector makes up over two-thirds of economic activity. See full article at Reuters.com.

6. Experian tests including rent payments in credit scores

Experian, one of the three major credit bureaus, has launched a beta release that will add rent payments to the data used to calculate credit scores. Under the program, rent payments will be included in the payment history that goes into the FICO 8 credit score. The FICO 8 score is one of the most widely-used credit scores, and payment history is the largest single component of it. Rent payments will be included if they are made to one of 1,500 participating property management companies or through certain rent payment platforms. To have their rent payments count toward their credit scores, consumers have to create an account with Experian, which can be done for free. See full release at BusinessWire.com.

7. Mortgage rates now highest since 2008

30-year mortgage rates rose for the fourth time in five weeks. At 5.89%, 30-year fixed-rate mortgage rates are now the highest they’ve been since late 2008. Mortgage finance company Freddie Mac notes that as rates have risen, differences between rates offered by different lenders have widened. That means there’s more money borrowers can potentially save by shopping around. See full data release at FreddieMac.com.

8. Consumer debt continues to climb

The Federal Reserve reported that non-mortgage consumer debt rose by $23.8 billion in July. While that’s less new debt than June’s $39.1 billion, it still reflects a growing inflation-driven debt burden for consumers. What’s worse is that credit card debt grew at a faster pace than loan debt. Credit card debt is generally more expensive, which adds to the pressure inflation is putting on household budgets. See full story at Morningstar.com.

Weekly News Headlines from Credit Sesame

• Last week’s news roundup September 3, 2022
• Next week’s news roundup September 17, 2022

The post Personal Finance Weekly News Roundup September 10, 2022 appeared first on Credit Sesame.

The Biden Administration’s new student loan relief plan has eased the debt burden for many borrowers. Even so, most still have payments to make starting after December 31, 2022. Now’s the time to start preparing.

Though payments won’t come due until after the new year, there are things you’ll need to do in the meantime. This article will explain how to take full advantage of the debt relief program and resume making your payments successfully.

While their have been previous extensions to the repayment deadline, announcement of the debt forgiveness program seems to signal that the December 31, 2022 deadline is the real thing.

As for the hope that even more debt will be forgiven, for now it’s best to assume that this new debt relief program is the best deal most borrowers are going to get. Cancellation of all student loan debt is unlikely simply because of the scope of the problem.

Universal cancellation of federal student loans would not only create a massive, instant increase in the U.S. government’s debt. It would also endanger the future of federally-backed student loans. That could put post-high school education out of the reach of most Americans.

The student loan relief plan announced last week should make loan payments much more affordable. To take advantage of it though, people with student loan debt must start planning.

Just like returning to school in the fall, resuming student loan payments may seem like a hard habit to get back into. Before you know it though, you can adjust and be back in the swing of things. The sections below will summarize the student loan relief plan, and then list 6 steps you can take to benefit from it fully.

What will student loan relief do for you?

There are three key benefits from the Biden plan:

• Debt forgiveness. For people earning $125,000 or less (or married couples earning $250,000 or less) the plan will wipe out part of their debt balance. Most borrowers will have $10,000 in government student loan debt forgiven. For recipients of Pell Grants, the amount will be $20,000.
• Extension of the payment resumption deadline to December 31, 2022. Payments were originally scheduled to begin after August 31, 2022. Now borrowers have another four months.
• Easier income-driven payments. Borrowers can now apply for an income-driven repayment plan that will limit payments to 5% of income.

Here’s the catch: you may not get these benefits automatically. Many borrowers will need to apply for them between now and when payments resume early next year. Over that same time, there are other steps you should take to get ready.

Below are 8 steps you can take to benefit fully from the student loan relief plan:

1. Update your information and look for an eligibility application

Because the loan relief is income based, people with student loan debt will have to apply for it by providing information on their earnings.

The government has announced that an application will be available in a matter of weeks. In the meantime, log onto the federal student aid website and update your profile information. Also check to see that your loan servicer has your current contact information.

Once you’re sure your contact information is up to date, keep an eye out in the weeks ahead for information on how to apply for debt relief. Then, around the end of this year, your loan servicer should notify you with information about your new repayment amounts and due dates.

2. Get your application for relief in on time

Once the application for relief is available, get it in as soon as possible. That way you can make sure it’s effective by the time payments resume.

For years, there have been programs available to make federal student loan payments more affordable. Unfortunately, borrowers often didn’t benefit from these programs simply because they failed to apply.

Don’t let that happen with this program. Instant debt relief of $10,000 to $20,000 is too good to let pass you buy. Get your application in as soon as possible.

By the way, if you are already enrolled in an income-driven payment plan or other special repayment program, the debt relief may already have been applied to your account. Be sure to check though – don’t just assume this is the case.

3. Make a loan payment schedule

Once you find out when your payments will be due, set up a schedule to ensure you make those payments on time.

If you set up automated payments through your bank account, plan to check it each month to make sure there’s enough cash available to make the next payment.

4. Review your new payment terms and balance

Once your application for relief has been accepted, you should see your total loan balance and payment amounts change. Check your account to make sure this is the case.

Also check that the balance of your loans didn’t rise during the payment moratorium. During that period, interest and late penalties were suspended. So, the balance on any federal student loans you have should have stayed the same since back in 2020 when the moratorium began (unless you kept on making payments). It should then be reduced by the new forgiveness program.

Some borrowers may even have qualified for debt forgiveness beyond the $10,000 and $20,000 limits of the new plan. For example, the federal government cancelled the debt of students who were victims of schools that were found to be fraudulent, including:

• ITT Technical Institute
• Kaplan Career Institute
• Corinthian Colleges
• DeVry University

If you think you might be eligible for a full cancellation  of student loan debt, contact your student loan servicer or log on to www.studentaid.gov to find out.

There are many commercial websites out there offering information on student loans.  If you want to get the definitive information on your student loan, make sure the site has a .gov url suffix. Certainly, never provide any sensitive financial information to a non-government website without first researching it.

5. Create a payment budget

Once you’ve established the amount of your new monthly payments, you should figure out where the money is going to come from.

Create a budget that makes those loan payments a priority. This is may involve some lifestyle changes from when government student loan payments were paused. Remember that the break from payments was a temporary exception, and readjust your budget to the new reality of resuming those payments.

6. Start saving up to make repayment easier

Don’t wait until December 31, 2022 to start your loan repayment budget. You can get ahead of the game by putting that budget into action right away and depositing the payment amounts into savings over the next few months until payments resume.

Doing this will give you some extra cash on hand to make those payments in the new year. You can even build up an emergency fund to help prevent a future financial setback from jeopardizing your ability to make your loan payments.

7. Rank your loans by interest rate to prioritize payment

As noted earlier, students often take out a series of loans over their college careers. Interest rates on new federal loans are subject to change from year to year, so your loans may have different interest rates.

If you are in a position to pay a little extra toward your debt, you can save money by doing so. The faster you repay your loans, the less interest you pay.

You can save the most by paying down the highest interest debt fastest. So, rank your loans from the one with the highest interest rate to the one with the lowest. Then apply any extra payments to the one with the highest interest rate first.

Note that you have to make the scheduled payment on every one of your loans each month. Do not neglect the payment on one loan in order to pay extra on another. If you can meet more than the minimum payment on all your loans, direct the extra amounts toward the loan with the highest interest rate.

8. Look into other repayment assistance programs

If you have trouble finding the money to make your payments, don’t panic. Besides the new one-time debt relief, the government has several programs to help people figure out ways of paying their federal student loans.

Contact your student loan servicer or check out www.studentaid.gov for information on repayment assistance programs.

These programs include income-based repayment and loan forgiveness for people pursuing occupations like military service, teaching and public service. You might also apply for loan deferment forbearance in cases of temporary financial distress.

Don’t be caught unprepared when student loan payments start up again. The problems you encounter if you simply blow off your payments would be a lot tougher and longer-lasting than taking the steps to get ready to resume payments.

You may also be interested in:

• All There is to Know About Debt Consolidation
• Credit Explained: Credit, Credit Score, Credit Rating, Credit History and Credit Report

Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

The post 8 Ways to Make the Most of the New Student Loan Debt Relief Program appeared first on Credit Sesame.