Ordinary Cents

           Having been a concern, which has been looming in the U.S. for many years, Student Loan Debt is now a hot topic in Washington these days. This past year the government announced a plan to help reduce Federal student loan debt through a loan forgiveness program. A participant, meeting eligibility requirements, could apply for $10,000 in relief and an additional $10,000 Pell Grant assistance. A web site has been established for just this purpose.

          Though controversial, at this writing, it is still alive in the courts. Challengers claim that the program is preferential to a select group of people and want it halted. However, if one was to consider the recent past, $800 Billion was earmarked for a” payroll protection plan (PPP) “during the early Covid years for loans to businesses large and small to continue to pay employees unable to work due to lockdowns, restrictions, and closures. In all, some 11 Million loans were provided, and, to date, a recent report claims that 90% of these have been partially or fully forgiven.

             So, why not students? Keep in mind, these are no longer students, but rather friends, neighbors and working couples raising families still burdened with student loan debt, sometimes 10 years after graduation. And a one-time forgiveness of $10,000, will only serve to reduce their overall student loan debt, not eliminate it all together. You might be surprised to learn the number of your co-workers who fall into this group.

             There are, today in the U.S. several sizeable companies who have recognized this issue; having asked employees why they are not participating in the company 401k plan…. the answer… Monies that could otherwise be saved for retirement, are being spent on student loan debt. An online article at Forbes.com 12/1/22, describes the launch of a 1st of its kind program, in 2018, with IRS approval, for employees of Abbott Labs to participate in the company’s 401k plan whereby, payments to federal student loans could be considered (as if they were contributions to the plan) for company matching funds. Others would soon follow, most notably Travelers companies in 2020. And now, the Secure Act 2.0 is circulating in Congress with a provision making it easier for most companies to offer this as part of their 401k plan. In the face of reports that we are not saving enough for retirement, that Social Security will be in crisis before long…. a provision like this is welcome news.

P.S….. Recently announced: the White House has once again extended deferring student loan payments (set to expire on Dec 31) through June 2023; while courts decide on the challenge to student debt forgiveness.

              Did you know that there are 5 repayment plans for Federal student loans? (See www.studentaid.gov)

              Regards… Cents Maker

          As 2022 comes to a close, I find it useful to see just where we stand, financially speaking. When the year began, 30 yr. mortgage rates were as low as 3% and a third $1400 stimulus payment had been authorized. Having endured 3 years of Covid lockdowns, and restrictions, we were then treated to the highest inflation in modern times…at 8 % (but nothing like Great Britain at 10% during the same period.) Adding to this, Russian aggression in Ukraine, and OPEC reducing output of oil, driving gas prices higher, the administration authorized the release of some 180 million barrels of oil from the Strategic Petroleum Reserve (SPR) to ease the “pain at the pump” The Fed ( Federal Reserve Bank ) was then forced to intervene with numerous interest rate hikes to try and slow the Inflation Monster, which in turn increased interest rates from auto loans to credit cards, and most notably Mortgage rates ,(the 30yr rate rising to 7%) But relief was in sight…….

          By early Fall, the Social Security Administration (SSA)announced an 8.7% cost of living adjustment (COLA) for recipients beginning in 2023; and the “pause” in Student loan payments (set to expire Dec 31) will be extended through June 2023. At this writing, Inflation is down to 6.5% ; likewise the 30yr mortgage rate, not to mention that unemployment is at a 50yr low…3.7% .More notably, gas prices have begun to fall below $3 gallon in some areas…for everyone who drives a car; and , for everyone who pays Federal income taxes, the government has just announced a 7% increase in the limits of each tax bracket, whereby a couple with filing status married filing jointly (MFG)with a taxable income of $83,550 for 2022 ( 12% bracket limit ) will pay a minimum 22% tax on every dollar beyond that limit. However, beginning in 2023, Its limit rises to $ 89,450, shielding nearly $6000 from that 22% rate.

          All in all, despite individual and retirement investments down nearly double digits, there are glimmers of hope, that the worst could be behind us, that maybe, just maybe we can see the (light at the end of the tunnel) ….we all could use a sense of normalcy after such a tumultuous year.

Cents Maker