Finance
Millions of borrowers to see student loan payments drop in July after SAVE adjustment
In July, borrowers enrolled in the SAVE plan will have their payments calculated using 5% of their income. (iStock)
President Joe Biden’s Saving on a Valuable Education (SAVE) plan has lowered student loan payments for 153,000 borrowers. In July, the plan is set to drop payments even more for nearly every borrower enrolled.
The plan uses a borrower’s income to determine payment amounts. Until July, the formula considers 10% of a borrower’s discretionary income when calculating these monthly payments. Starting on July 1, the repayment formula will start basing payments on 5% of borrowers’ income instead, lowering the payment of every person enrolled in the SAVE plan.
This drop to 5% only applies to those paying down undergraduate student loans. For borrowers with a mix of undergraduate and graduate loans, they’ll pay a weighted average of between 5% and 10% of their income.
The same forgiveness applies under the plan. After 20 or 25 years, depending on whether borrowers have graduate loan debt, the remaining balance of the loans is forgiven. This includes retroactive payments borrowers made before they enrolled in the SAVE plan.
If you have private student loans, federal relief doesn’t apply to you, but you can potentially lower your payments by refinancing. Visit Credible to find your personalized interest rate without affecting your credit score.
BIDEN CANCELS $1.2 BILLION IN STUDENT LOANS FOR BORROWERS ENROLLED IN SAVE
Some borrowers have until 2025 to apply for forgiveness
Parents who take out Parent PLUS loans for their children are eligible for a loophole that could lower their payments. However, this loophole is set to end in 2025.
Unfortunately, Parent PLUS loans don’t qualify for President Biden’s SAVE plan, but they do qualify for consolidation options. The loophole they qualify for is called double consolidation.
Parents essentially consolidate each of their loans twice and, in the end, do become eligible for the SAVE plan. For those with two or more Parent PLUS loans, parents can consolidate them into two separate Direct Consolidation loans. After these consolidations, parents can then consolidate those two loans into a single Direct Consolidate loan that’s eligible for SAVE plan enrollment.
For parents who have a Parent PLUS loan and other federal loans, the process is similar. The Parent PLUS loan needs to be consolidated first and then that loan and the rest of the federal loans get consolidated together in a Direct Consolidation loan, which is also eligible for the SAVE plan.
If you don’t have federal student loans that qualify for these programs, refinancing can also help save you money. You can use Credible to compare student loan refinancing rates from multiple private lenders at once.
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Thousands of defrauded student loan borrowers set to get checks from the FTC
Many borrowers who were taken advantage of by debt relief scammers will receive a check in the mail soon to refund some of the money they lost.
The Federal Trade Commission plans to send more than $4.1 million in refunds to 27,584 consumers affected by these scams.
These consumers were lured into fake forgiveness claims by sham companies such as Mission Hills Federal, Federal Direct Group, National Secure Processing and The Student Loan Group.
The 2019 complaint the FTC filed alleged that these companies got borrowers to pay thousands of dollars in illegal fees and falsely claimed they would lower payments for borrowers.
These fraudulent companies also tricked consumers into sending payments directly to them, saying they were going to take over the servicing of borrowers’ loans.
Recipients of these checks will need to cash their checks within 90 days, which should be indicated on the check.
“Don’t trust anyone who contacts you promising debt relief or loan forgiveness, even if they say they’re affiliated with the Department of Education,” the FTC advised.
“Scammers try to look real, with official-looking names, seals and logos,” it continued. “They promise special access to repayment plans or forgiveness options — which don’t exist. If you’re tempted, slow down, hang up and log into your student loan account to review your options.”
If you want help lowering your monthly student loan payments, consider refinancing your loans into a private loan with a lower interest rate. To see if refinancing is right for you, view this rates table from Credible that compares rates from multiple lenders at once.
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Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.
Walmart stock may be a steal.
Former Walmart U.S. CEO Bill Simon contends the retailer’s stock sell-off tied to a slowing profit growth forecast and tariff fears is creating a major opportunity for investors.
“I absolutely thought their guidance was pretty strong given the fact that… nobody knows what’s going to happen with tariffs,” he told CNBC’s “Fast Money” on Thursday, the day Walmart reported fiscal fourth-quarter results.
But even if U.S. tariffs against Canada and Mexico move forward, Simon predicts “nothing” should happen to Walmart.
“Ultimately, the consumer decides whether there’s a tariff or not,” said Simon. “There’s a tariff on avocados from Mexico. Do you have guacamole with your chips or do you have salsa and queso where there is no tariff?”
Plus, Simon, who’s now on the Darden Restaurants board and is the chairman at Hanesbrands, sees Walmart as a nimble retailer.
“The big guys, Walmart, Costco, Target, Amazon… have the supply and the sourcing capability to mitigate tariffs by redirecting the product – bringing it in from different places [and] developing their own private labels,” said Simon. “Those guys will figure out tariffs.”
Walmart shares just saw their worst weekly performance since May 2022 — tumbling almost 9%. The stock price fell more than 6% on its earnings day alone. It was the stock’s worst daily performance since November 2023.
Simon thinks the sell-off is bizarre.
“I thought if you hit your numbers and did well and beat your earnings, things would usually go well for you in the market. But little do we know. You got to have some magic dust,” he said. “I don’t know how you could have done much better for the quarter.”
It’s a departure from his stance last May on “Fast Money” when he warned affluent consumers were creating a “bubble” at Walmart. It came with Walmart shares hitting record highs. He noted historical trends pointed to an eventual shift back to service from convenience and price.
But now Simon thinks the economic and geopolitical backdrop is so unprecedented, higher-income consumers may shop at Walmart permanently.
“If you liked that story yesterday before the earnings release, you should love it today because it’s… cheaper,” said Simon.
Walmart stock is now down 10% from its all-time high hit on Feb. 14. However, it’s still up about 64% over the past 52 weeks.
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Investors may want to reduce their exposure to the world’s largest emerging market.
Perth Tolle, who’s the founder of Life + Liberty Indexes, warns China’s capitalism model is unsustainable.
“I think the thinking used to be that their capitalism would lead to democracy,” she told CNBC’s “ETF Edge” this week. “Economic freedom is a necessary, but not sufficient precondition for personal freedom.”
She runs the Freedom 100 Emerging Markets ETF — which is up more than 43% since its first day of trading on May 23, 2019. So far this year, Tolle’s ETF is up 9%, while the iShares China Large-Cap ETF, which tracks the country’s biggest stocks, is up 19%.
The fund has never invested in China, according to Tolle.
Tolle spent part of her childhood in Beijing. When she started at Fidelity Investments as a private wealth advisor in 2004, Tolle noted all of her clients wanted exposure to China’s market.
“I didn’t want to personally be investing in China at that point, but everyone else did,” she said. “Then, I had clients from Russia who said, ‘I don’t want to invest in Russia because it’s like funding terrorism.’ And, look how prescient that is today. So, my own experience and those of some of my clients led me to this idea in the end.”
She prefers emerging economies that prioritize freedom.
“Without that, the economy is going to be constrained,” she added.
ETF investor Tom Lydon, who is the former VettaFi head, also sees China as a risky investment.
“If you look at emerging markets… by not being in China from a performance standpoint, it’s provided less volatility and better performance,” Lydon said.
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