The biggest personal finance news of the week was the announcement from the White House regarding student loan forgiveness. Then we have all the buzz about the Jackson Hole for Kansas City Fed’s annual conference and some more economic data too.

Student Loans

• The long anticipated announcement about the administration’s intentions regarding forgiveness of student debt finally came this week. It has created a political firestorm, so let’s focus strictly on the key components of the plan:
  • For those earning less than $125,000, $10,000 of remaining debt will be forgiven.
  • This figure jumps to $20,000 for those who received Pell Grants.
  • Going forward, the income driven repayment plan will cap payments at 5% (vs. 10%) of discretionary income, with a tighter definition of discretionary income. The government will pay interest on the balance if not covered by the payment so balances don’t balloon under income-driven repayment plans. (Change from the previous plans.)
  • Forgiveness of balances will occur after ten years for loans under $12,000. Otherwise, twenty years.
  • Loan forgiveness will no longer be a taxable event. (Change from previous plans.)
  • Loan repayments will not resume until January.
• The NYT gives the most comprehensive guide to what you need to know about the plan, eligibility, etc. in the form of a Q&A. Reuters provides a Q&A as well, and includes a few of the criticisms of the plan in terms of cost. You can also read the release from The White House.
• The Washington Post provides the most thorough breakdown of student loans by a number of factors and is worth a read in order to understand who may be impacted by this new plan.

Economics

• Three headlines in one story: The Jackson Hole conference takes place this week, the jobless claims figure this week was low again, and 2^nd quarter GDP revision suggests the small decline was even smaller. (Forexlive)
• Economic data released today suggest inflation is abating a bit, and prices may be starting to soften consumer demand too. The Fed’s preferred data measure, the PCE deflator, dropped 0.1% in July, and consumer spending was up only 0.1%. (Reuters)
• Here is your weekly “this does not look like a recession” article—this one gives Nobel Economist Richard Thaler’s views. (CNBC)
• Will central banks stop raising interest rates? Here is an international view from Charles Schwab while we wait to see if any clues come from Jackson Hole this week.
• The sector that does appear to be in a recession is the housing sector. The Atlanta Fed produces the Home Ownership Affordability Monitor.
• The Euro dipped below $1.00 this week, then returned to parity. How low might it go? (CNBC)

Investing

• How does a company (AMC) that is not allowed to issue more common stock raise capital in attempt to reduce debt? Issue preferred shares (APE). Investopedia

 Labor/Careers

• After the pandemic supply issues, US companies appear to be pulling lots and lots of jobs back to the US. (WSJ-subscription may be required)
• The 40-hour workweek has been around since 1940. After the pandemic necessitated more flexibility in the workplace, and we ready for a four-day workweek? Knowledge @ Wharton
• The New York Fed released its July SCE Labor Market Survey that is a great source of microeconomic data for the labor market. July data show a slowing of the rate of “transitioning to a new employer.”
• Long Covid may be keeping as many as 4 million workers out of the workforce, contributing to the labor shortage. (Brookings)

Personal Finance Advocacy

• NGPF in the news—California will receive $1.4 million in support from NGPF to train teachers and hire specialists to provide personal finance classes to high schools. EdSource
• USA Today ran this story advocating for high school personal finance education.

About the Author

Beth Tallman

Beth Tallman entered the working world armed with an MBA in finance and thoroughly enjoyed her first career working in manufacturing and telecommunications, including a stint overseas. She took advantage of an involuntary separation to try teaching high school math, something she had always dreamed of doing. When fate stepped in once again, Beth jumped on the opportunity to combine her passion for numbers, money, and education to develop curriculum and teach personal finance at Oberlin College. Beth now spends her time writing on personal finance and financial education, conducts student workshops, and develops finance curricula and educational content. She is also the Treasurer of Ohio Jump$tart Coalition for Personal Financial Literacy.