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Biden's Student Loan Forgiveness 2.0 Could Cost an Estimated $475 Billion

Submitted by ckanon@abi.org on
President Joe Biden's new plan to erase student loan debt after the Supreme Court blocked his initial plan could cost around $475 billion, according to economists at the University of Pennsylvania and reported by Washington Free Beacon. The Court last month overturned Biden's order to give borrowers $10,000 to $20,000 in onetime student debt forgiveness and said the president overstepped in his powers and circumvented Congress's power to make laws regarding spending. The administration quickly moved to roll out an alternative plan. Biden unveiled the Saving on Valuable Education (SAVE) plan. Proposed by the Education Department, SAVE would bring down payments by thousands of dollars over the life of many people's loans. A single person making less than $32,805 a year would see their monthly payment go to $0 under the policy. That plan, which is set to take effect in July 2024, could cost an estimated $475 billion over the next decade, according to the Penn Wharton Budget Model. The model shows that the cost could even be tens of billions of dollars higher. The Supreme Court's 6-3 decision that overturned Biden's first attempt at student debt forgiveness spared the U.S. roughly $300 billion in spending. Biden's Education Department had estimated the debt relief would cost $30 billion a year for the next decade.
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IRS Steps Toward a New Free-File Tax Return System Have Both Supporters and Critics Mobilizing

Submitted by ckanon@abi.org on
An IRS plan to test drive a new electronic free-file tax return system next year has got supporters and critics of the idea mobilizing to sway the public and Congress over whether the government should set up a permanent program to help people file their taxes without needing to pay somebody else to figure out what they owe, the Associated Press reported. On one side, civil society groups launched a coalition to promote the move toward a government-run free-file program. On the other, tax preparation firms have been pouring millions into trying to stop the idea cold. The advocacy groups are exponentially out-monied. Federal law doesn’t require domestic lobbyists to itemize expenses by specific issue, so the sums are not limited to free-file. The IRS in May released a report that said most taxpayers are interested in filing their taxes directly to the IRS for free, and concurrently announced plans to launch the pilot program for the 2024 filing season. The goal is to test a direct file system that will help the IRS decide whether to move forward with a more permanent program. That idea has faced the immediate threat of budget cuts from congressional Republicans. Republicans on the House Appropriations Committee in June proposed a budget rider that would prohibit funds to be used for the IRS to create a government-run tax preparation software, unless approved by a group of House and Senate committees. The move “safeguards the IRS from an obvious conflict of interest where the tax collector becomes the tax preparer,” the bill’s summary states. A Government Accountability Report in April 2022 found that 70% of taxpayers were eligible to use an existing free-file program but just 3% actually used the service.
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Bankruptcy Code
501
502
506
507
726
1308
1325
1327
1328
1322
362
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Bankruptcy Code
523
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Predatory Lending

N.Y. Fed Report Finds Americans Increasingly Facing Borrowing Headwinds

Submitted by ckanon@abi.org on
Americans are increasingly getting shot down when they seek out loans, new data from the New York Fed said, Reuters reported. The bank reported that in June, credit was the hardest to get in years, with fewer people seeking out loans, at least for now. The report’s findings were compiled as part of the New York Fed’s monthly Survey of Consumer Expectations, with respondents polled every four months about credit access issues. The bank said that the overall rejection rate for credit applicants rose to its highest level since June 2018, and stood at 21.8%, up from 17.3% in February. The bank noted the rise in the rejection rate “was broad-based across age groups and highest among those with credit scores below 680.” The survey also found that rejection rates for auto loans hit the highest level for a data series that goes back to 2013 and stood at 14.2%, an increase from 9.1% in February. Rejection rates for credit cards, credit limit increases also gained ground. The rejection rate for mortgages stood at 13.2% in June from 10% in February, while the rejection rate for mortgage refinancing jumped to 20.8% last month, from 16.3% in the prior survey. The survey found that what it called the average probability that a loan will be rejected "sharply" surged to record levels for auto loans, credit cards, credit limit increases and housing related credit. The survey found a modest pullback in those seeking loans, to 40.3% of respondents in June — that’s the lowest level since October 2020 — from February’s 40.9%. But it noted that respondents who plan to apply for credit over the next year ticked up a touch to 26.4% of respondents, from February’s 26.1%. The New York Fed data arrives amid a sea change for U.S. lending, as the Fed has pumped up its short-term target interest rate very aggressively since the spring of 2022, as it has sought to cool high levels of inflation. (Subscription required.)
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Biden Administration Unveils $39B of Student Debt Relief as Part of Income-Driven Repayment Fix

Submitted by ckanon@abi.org on
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.

 

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State Partners and CFPB Sue Prehired For Illegal Student Lending Practices

Submitted by jhartgen@abi.org on

The Consumer Financial Protection Bureau (CFPB) yesterday joined with several state attorneys general and a state regulator to take action against Prehired for deceptive marketing and debt collection practices, according to a CFPB release. Prehired operated a 12-week online training program claiming to prepare consumers for entry-level positions as software sales development representatives with “six-figure salaries” and a “job guarantee.” Prehired drove interested applicants to sign an “income share” loan to finance the costs of the program and represented that consumers would pay nothing until they got a high-income job through Prehired. In reality, Prehired deceptively buried terms that required consumers to pay even if they never got a job and, in many cases, unilaterally increased consumers’ required minimum monthly payments without any evidence that they had secured employment or experienced an increase in income. The CFPB is seeking to void the loans and obtain redress for affected consumers and a penalty, which would be deposited into the CFPB’s victims relief fund. The attorneys general from Washington, Oregon, Delaware, Minnesota, Illinois, Wisconsin, Massachusetts, North Carolina, South Carolina, and Virginia joined the action, along with California’s Department of Financial Protection and Innovation.

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Student Loans: Looming Payments Put Spotlight on ‘Real Danger’ for Borrowers

Submitted by jhartgen@abi.org on

Americans with student loans could see thousands of dollars in interest added to their tabs as part of President Biden’s backup relief proposal, The Hill reported. The Biden administration is attempting to use a proposed aid program to help millions of student debt holders handle the dual blow of payments resuming in October and the Supreme Court striking down a sweeping debt forgiveness plan. Biden’s “on-ramp” repayment plan allows borrowers in financial distress to delay payments from Oct. 2023 to Sept. 2024 without the threat of default or credit score decline. But unlike the current pause on student loans, interest will still accrue on those loans and give borrowers a steeper hill to climb when they begin payments again. Experts are concerned that millions of Americans who leaned on loan relief throughout the pandemic may be caught off guard under the new system. “I can envision millions of borrowers who are going to be deluded into thinking they don’t have to think about their student loans for another year, the same way they didn’t have to think about that for the last three years,” said Jonathan Petts, cofounder of Upsolve, a nonprofit that seeks to helps people with difficult financial situations. “I think there’s a real danger for borrowers right now,” Petts said.

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