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Have questions about the recent student loan forgiveness announcement?
We’ve got (some) answers.
(Please forward this email to anyone you know who might need some clarity about their student loans. There's also a very important note about scams at the bottom that's worth sharing. #themoreyouknow)
You've probably heard by now that the government plans to forgive federal student loans for roughly 20 million Americans.1
Here's what we know about the loan forgiveness so far:2
- The Dept. of Education will forgive up to $10,000 in federal student loans to single borrowers who earned less than $125,000 and households that made less than $250,000 in 2020 or 2021.
- Borrowers of federally-held undergraduate, graduate, and Parent PLUS loans are eligible, even if the loans are in default.
- Recipients of Pell Grants will receive an extra $10,000 (totaling $20,000 in debt forgiveness) with the same income thresholds.
The student loan payment moratorium is also extended through December 31, 2022. This means payments start on your new balance on January 1, 2023.
But! Here's a big detail that got left out of most headlines:
Under new Dept. of Education rules, monthly payments on undergraduate debt will be slashed to 5% of a borrower's "discretionary income," and the amount of income shielded from repayment calculations will also increase.3
This rule change could end up halving monthly payments for millions of folks and might be an even bigger deal than one-time forgiveness.
Will I owe taxes on the forgiven loan amount?
It depends. While you would typically owe federal taxes on forgiven debt, the American Rescue Plan exempted student loans from the usual federal tax rules.4
Many states have decided not to levy state taxes, but some states explicitly will or haven't announced their position. Depending on where you file state income taxes, you may owe taxes.
What if I made loan payments during the moratorium? Can I get a refund?
Very likely. Any payments on your qualifying federal loans made since March 13, 2020 can be refunded by contacting your loan servicer.5
How do I get my loans (or my kids' loans) forgiven?
According to the Dept. of Education, an online application will be available by October, and you'll have until December 31, 2023 to apply.2
Those who filled out FAFSA forms in 2021-2022 for themselves or their dependent children may be automatically enrolled in the forgiveness program because their relevant income information is already on file.6
How big a deal is this whole thing, economically speaking?
Hard to say yet. Court challenges or administrative hurdles could change what actually happens and for whom.
Some folks think that forgiving student loans is a bad idea.
The thing is, the federal government has forgiven loans for defrauded students, small businesses, farms, and public service employees for years, so those concerns may be overblown. Time will tell.
Goldman Sachs economists ran some numbers on the expected effect of the current plan on the economy; they concluded that it probably won't have much macro impact at all, though the caps on monthly payments should increase household income.7
Should I take out more loans so they'll be forgiven?
Please don't. So far, only loans initially disbursed by June 30, 2022 will be covered by this plan. Anything taken out afterward will not be eligible.6
What do I need to do right now?
Nothing. Nada. Zilch. The details are still being hammered out and more information will be coming. A great place to get alerts is from the Dept. of Education. You can sign up for them here.
SCAM ALERT: We're expecting A LOT of scammer activity targeting folks waiting for student loan relief. Please be VERY careful with emails or text messages claiming to be about your loans.
Get your information straight from reliable sources like the Dept. of Education and your student loan servicer’s official website (and us!).
If you've read all the way through, thanks for sticking with us. We know this was a lot of information all at once.
We'll know more about the details of the plan in the weeks ahead, but if you have questions or want to update your strategies in anticipation of lower (or no) student loan payments, please hit “reply” to this email and we’ll set up a time.
Meet The World’s Easiest Brussels Sprout Salad
Eating healthy can be delicious with recipes like this shaved Brussels sprout salad! You only need a few ingredients to bring it all together.
You’ll need:
- 4 cups shaved Brussels sprouts
- ¼ cup extra-virgin olive oil (and a bit more for a drizzle on top)
- ¼ cup fresh lemon juice
- ½ cup pine nuts
- ⅓ cup dried cranberries
- ⅓ cup grated pecorino cheese
- ⅓ cup chopped chives
- Sea salt and pepper to taste
To make this salad, all you have to do is thinly slice the Brussels sprouts with a mandoline (or a knife if you don’t have one), then place them in a bowl with the olive oil, lemon juice, pine nuts, cheese, chives, and a sprinkle of salt and pepper to taste. Toss everything together, then drizzle with more olive oil to serve.
Tip adapted from Love and Lemons6
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The Week on Wall Street
In a holiday-shortened week of trading, stocks posted healthy gains despite more tough talk on monetary policy from Fed officials.
The Dow Jones Industrial Average rose 2.66%, while the Standard & Poor’s 500 gained 3.65%. The Nasdaq Composite index picked up 4.14% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, lost 1.26%. 1,2,3
Stocks Rise
Stocks fell coming off the Labor Day weekend, dragged down by news that Russia was cutting off natural gas supplies to its European customers. Stocks also were under pressure due to a surprisingly strong report on business conditions, which heightened fears of continued Fed hawkishness.
Sentiment quickly improved as bond yields turned lower and oil prices fell. Investors reacted positively to comments by Fed Vice Chair Lael Brainard, who reiterated the Fed’s commitment to quashing inflation while acknowledging the risks of going too far. Stocks added to their gains on Thursday as the market digested another speech from Fed Chair Powell and a 0.75% hike by the European Central Bank. The markets surged on Friday amid little news, ending a positive week on an upbeat note.
Inflation Walk Back
In his first public comments since his speech at Jackson Hole that sent markets into a tailspin, Fed Chair Powell did not seek to soften the edges of the Fed’s commitment to fighting inflation. In an interview on Thursday, Powell reaffirmed the need for sustained and robust actions to bring down inflation. He emphasized that it was critical that “the longer inflation remains well above target, the greater the risk the public does begin to see higher inflation as the norm, and that has the capacity to really raise the costs of getting inflation down.”4
With the Federal Open Market Committee (FOMC) set to meet on September 20-21, these comments may indicate that market expectations of a rate hike of 0.75% this month align with the Fed’s plans.
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THE WEEK AHEAD
KEY ECONOMIC DATA
Tuesday: Consumer Price Index (CPI)
Wednesday: Producer Price Index (PPI)
Thursday: Retail Sales. Industrial Production. Jobless Claims
Friday: Consumer Sentiment
Source: Econoday, September 9, 2022
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
COMPANIES REPORTING EARNINGS
Monday: Oracle Corporation (ORCL)
Source: Zacks, September 9, 2022
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
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Student Loan Article:
1 - https://www.cnbc.com/select/biden-to-erase-up-to-20k-in-student-loan-debt-heres-who-qualifies/
2 - https://studentaid.gov/debt-relief-announcement/one-time-cancellation
3 - https://www.ed.gov/news/press-releases/biden-harris-administration-announces-final-student-loan-pause-extension-through-december-31-and-targeted-debt-cancellation-smooth-transition-repayment
4 - https://taxfoundation.org/student-loan-debt-cancelation-tax-treatment/
5 - https://www.cnbc.com/2022/08/25/how-to-get-a-student-loan-refund-and-boost-forgiveness-eligibility.html
6 - https://www.nasfaa.org/news-item/27820/Answering_the_10_000_Question_Biden_Takes_Executive_Action_on_Student_Loan_Cancellation_Extends_Repayment_Pause
7 - https://www.marketwatch.com/story/goldman-sachs-has-run-the-numbers-on-student-loan-relief-heres-their-assessment-11661417918
Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.
This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
Market Update:
1. The Wall Street Journal, September 9, 2022
2. The Wall Street Journal, September 9, 2022
3. The Wall Street Journal, September 9, 2022
4. The Wall Street Journal, September 8, 2022
Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.
U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.
Please consult your financial professional for additional information.
This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with the named representative, financial professional, Registered Investment Advisor, Broker-Dealer, nor state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security. Copyright 2022 FMG Suite.
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