Even under an unfavorable choice of law, a debtor in Connecticut was allowed to enjoy the state’s new $250,000 homestead exemption, even though her debts had accrued before the increase went into effect.
The Biden administration announced that it would cancel $39 billion of student debt owed by more than 804,000 borrowers whose debts have been outstanding for more than 20 years, Politico reported. The Education Department said that it was implementing its plan, announced in April 2022, to compensate borrowers for what it called “historical inaccuracies” and other failures in how the agency and its contracted loan servicers have managed the income-driven repayment programs. The program is separate from President Joe Biden’s sweeping student debt relief program that the Supreme Court struck down last month. But the announcement comes as the Biden administration looks to highlight its alternative pathways for delivering student debt relief in the face of that legal defeat.
Click here for the Department of Education's press release.
More than 2,500 U.S. adults said in a new Bankrate survey that they would need to earn, on average, $233,000 a year to feel financially secure and $483,000 annually to feel rich or to attain financial freedom, CNN Business reported. For comparison, the median earnings for a full-time, year-round worker in 2021 was $56,473, according to the U.S. Census Bureau. Of course, there is no objective or “right” answer to these questions. What it takes for one person to feel financially comfortable can depend a lot on their early childhood experiences with money, how much they perceive those around them to have, their current financial situation, the cost of living in their area and, if they’ve thought about it, what is most important to them in life. Plus, a big income isn’t necessarily a guarantee of financial security if you’re living paycheck to paycheck, not saving much and carrying big debts. The same goes if you’re feeling insecure about your economic prospects. In Bankrate’s survey 72% of respondents said that they did not currently feel financially secure, although 46% said they expect to someday. The reasons cited for not feeling secure today included high inflation (63%); the economic environment (48%); insufficient emergency savings (42%); insufficient retirement savings (41%); rising interest rates (36%); low pay or low career mobility (33%); high debt (26%); and housing affordability (25%).
President Joe Biden is launching another effort to forgive at least some federal student loan debt after the Supreme Court struck down his initial proposal to wipe away as much as $20,000 for borrowers, ABC News reported. The White House's new approach is based on the Higher Education Act (HEA) of 1965, which provides government-backed student loans and grants the U.S. Education Department the ability to "compromise, waive or release loans." Further details will be revealed during a rulemaking process: Implementing any changes will take multiple steps over months, the National Economic Council's deputy director, Bharat Ramamurti, said. It's unclear if any debt cancellation offered through HEA would be of a similar scope and scale as Biden's first program, which the White House said covered 43 million borrowers — with 20 million expected to see their student loans entirely erased. Conservatives had sharply criticized that loan forgiveness as a misuse of tax dollars and an excessive and unconstitutional "scam," with some saying it didn't address underlying cost problems in education. Ramamurti said that "even a typical rulemaking process can take some amount of time. You have to do a proposal, it has to receive comments, it has to be finalized and so on." A negotiated rulemaking process is "even more complicated," Ramamurti said, and will involve public hearings. The Education Department will hold one virtually on July 18.
In other news, Republicans are moving forward with their own proposed student loan debt solution, ABC News reported. Conservative lawmakers from both chambers, vocally opposed to the president's landmark program, which they said was an overreach, celebrated the court's decision. Even with the 6-3 ruling against him, President Joe Biden laid out alternative options to his original call for sweeping debt forgiveness, though some specific details remain unclear. An on-ramp to repayment will begin later this fall, according to Biden. It will include a 12-month grace period after the pause unfreezes in September. Federal student loan borrowers should expect interest on their debts to kick back in on Sept. 1 and payments to resume starting in October. Repayments had been paused for more than three years amid disruptions from COVID-19. Recently, Louisiana Sen. Bill Cassidy, the ranking member of the Senate's Health, Education, Labor and Pensions committee, and House Education and the Workforce Committee Chairwoman Virginia Foxx of North Carolina requested to meet with Education Secretary Miguel Cardona on or before July 20 to discuss federal student aid servicer roadblocks, as well as internal memos and documents about the department's strategy for the return to repayment. Cassidy and Senate Republicans previously sent a letter to the secretary seeking to halt Biden's student debt relief plan in early June, calling it an "affront to the millions of Americans [who] do not have student loans." Read more.
While Americans had built up savings at an unprecedented rate following the pandemic, households are struggling to put money away this year — a trend that has fueled fears among economists of an incoming recession, Newsweek reported. During the COVID-19 health emergency, people's personal savings thrived, with people saving as much as 30 percent of their monthly income and having $2.3 trillion in excess savings between 2020 and 2021, according to the Federal Reserve. Three years later, the rate of savings among American households is rapidly falling. In February, the U.S. personal savings rate was estimated to be around 4.6 percent — much below the decades-long average of about 8.9 percent, according to the Bureau of Economic Analysis. Some economists think that the collapse of household savings could lead to a spending slowdown and trigger a recession. Consumer spending currently represents about 70 percent of the U.S. GDP. Up until now, the recent growth of inflation and the Federal Reserve's attempts to curtail it by raising the bank's key interest rate in 2022 and this year have not curbed household spending by as much as expected. Americans had a lot of savings accumulated during the years of the health emergency they could burn through. Now, these savings are starting to dry up, as inflation remains relatively high at 4.05 percent in May despite having cooled down compared to its peak of 9.1 percent in June last year. On top of that, wages haven't grown much at all in recent years, staying much behind inflation, but it's not only inflation contributing to putting more economic pressure on Americans.