Personal Finance

Senate to vote on bill to increase Social Security for some beneficiaries

Published

3 months ago

December 15, 2024

Business Finance News

Cavan Images | Cavan | Getty Images

Last month, Congress moved to take rare bipartisan action to change certain Social Security rules.

The House of Representatives on Nov. 12 passed the Social Security Fairness Act by an overwhelming 327 to 75 majority.

The proposal would eliminate rules that reduce Social Security benefits for those who also receive income from public pensions, roughly around 2.8 million people.

For supporters of the bill, that legislative victory has been followed by a suspenseful wait. The Senate must also pass the proposal for it to become law. And the number of legislative days left in this session of Congress are quickly running out.

At a Wednesday rally on Capitol Hill, Senate Majority Leader Chuck Schumer, D-New York, promised to put the bill up for a vote.

“I am here to tell you the Senate is going to take action,” Schumer said, prompting cheers from the crowd including fire fighters, police, postal workers, teachers and other government employees, who stood outside the Capitol building in the rain.

“I got all my Democrats lined up to support it,” said Schumer, adding they need 15 Republicans.

“What’s happening to you is unfair, un-American,” Schumer said. “I will fight it all the way.”

Bette Marafino, an 86-year-old retired teacher and a member of a national grassroots task force that has pushed to have the rules eliminated, was at the Capitol when the House voted in November.

The vote prompted cheers that turned into tears of joy from the small group of advocates who witnessed it. “We were so happy,” Marafino said.

Now, she is worried what may happen if the Senate does not pass the bill by Dec. 20.

“It’s going to be start all over again, and we’ll need to have some champions,” Marafino said, now that Reps. Garret Graves, R-La., and Abigail Spanberger, D-Va., who co-led the bill, are leaving Congress.

Prospect of nixing rules prompts fierce debate

Despite the enthusiasm from advocates behind the bill, many experts on both the left and right have said the Social Security Fairness Act is not the best policy.

The rules the bill would eliminate — the Windfall Elimination Provision, or WEP, and the Government Pension Offset, or GPO — were designed to make it so all Social Security beneficiaries received a comparable reimbursement for their contributions to the program.

Social Security is progressive, which means workers with lower lifetime earnings receive higher income replacement rates.

Without the rules, workers who are eligible for Social Security retirement benefits — and who also have income from pensions where they didn’t pay taxes into the program — may receive a higher income replacement than some workers who contributed to the program for their entire careers, experts argue.

The bill also does not include a way to offset the cost of the benefit increases it includes.

Over 10 years, it would cost around $196 billion, according to the Congressional Budget Office. That’s as the program currently has just nine years before the trust fund it relies on to help pay retirement benefits may be depleted.

“As far as I know, there are no policy experts who support repealing the Windfall Elimination Provision and Government Pension Offset,” said Emerson Sprick, associate director of economic policy at the Bipartisan Policy Center.

House Majority Leader Rep. Scalise on DOGE, GOP House majority and top legislative priorities

The WEP affects about 2.1 million Social Security beneficiaries — or about 3% of all Social Security beneficiaries — who see their retirement or disability benefit checks reduced because they also receive pension benefits from jobs not covered by Social Security.

The GPO affects almost 746,000 individuals — about 1% of all Social Security beneficiaries — by reducing spousal or widow(er) benefits because of pensions from non-covered government employment.

Rather than eliminate the rules altogether, some experts have suggested it would make more sense to replace them with more precise formulas for adjusting benefits.

Yet groups like the International Association of Fire Fighters maintain eliminating the rules altogether is the best policy.

The starting salary for a firefighter in Louisiana is around $40,000, said Edward Kelly, general president of IAFF. To make ends meet, those professionals often take on second or third jobs, where they do pay Social Security payroll taxes. Yet once they become eligible for the program’s benefits, they have that income reduced.

Generally, workers who pay in the same amount as non-public employees can see their monthly benefits reduced by $500 or $600, Kelly said.

“That’s devastating and it’s patently unfair,” Kelly said. “You’re basically being discriminated against for your public service.”

Public workers say Social Security cuts hurt

For many public workers, the reduction of their Social Security benefits comes as a surprise.

Roger Boudreau, a 75-year-old former teacher who is on the executive board of the Alliance for Retired Americans, regularly received Social Security’s annual benefit statements with estimates of how much monthly income he may expect.

However, those disclosures did not include any information on the WEP or GPO penalties, he said.

Boudreau didn’t realize how much his monthly checks would be reduced until he went to sign up for his Social Security benefits 10 years ago.

It was a shock to find out his Social Security benefits would be cut by 40%, Boudreau said. He estimates has resulted in a loss of about $5,000 per year over the past decade.

Other public workers are forced to delay their retirements because of the way the rules affect them, according to Lois Carson, 64, president of the Ohio Association of Public School Employees, an affiliate of the American Federation of State, County & Municipal Employees.

Carson, who has been a Columbus City School employee for about 37 years, has delayed her own retirement since the rules limit the Social Security survivor benefits she would receive while collecting a pension.

“Most women work longer, because they can draw their husband’s Social Security while they’re working,” Carson said. “But once they retire, it drops down to a third.”

If the bill is not passed, most of the 30,000 members she represents will go way beyond their 30 years of employment, she said.

Advocacy groups have been working tirelessly to get lawmakers to move the bill.

Since the proposal passed in the House in November, Kelly said the firefighters alone have sent around 29,000 emails urging Senate leaders to pass the bill.

The stakes are high, experts say.

The initiative must compete with the Senate’s other legislative priorities. If the bill doesn’t get passed in this Congress, it dies, Kelly said.

With 62 Senate co-sponsors, the bill has a strong chance of passing once it is brought up for a vote.

“If it gets to a final vote under standard Senate procedure, I don’t see a whole lot of opportunity for it to fail,” Sprick said. “The question is whether it gets to that final vote.”

Personal Finance

Student loan borrowers in the dark as Trump targets Education Dept.

Published

10 hours ago

March 6, 2025

Business Finance News

An American flag and a U.S. Department of Education flag fly outside the US Department of Education building in Washington, D.C., U.S., Feb. 1, 2025.

Annabelle Gordon | Reuters

Federal student loan borrowers experiencing difficulties with their loans could find they have no recourse as President Donald Trump‘s cuts to staff at the Department of Education are carried out, employees at the agency said.

Staffers at the Education Department tasked with fielding complaints from federal student loan holders and resolving their issues were let go in the recent job cuts, one employee told CNBC. At least eight of the fired staffers were working on a total of nearly 800 student loan borrower complaint cases, an employee said.

The remaining staff will likely have to take over these accounts. But, the employee said, “I have no idea when they’ll get reassigned.”

As a result, those borrowers “just have to continue to wait, and maybe they go into delinquency,” the staffer said.

Hundreds of thousands of people submit complaints to the Office of the Ombudsman at Federal Student Aid each year, according to a rough calculation by higher education expert Mark Kantrowitz.

Trump is expected to sign an executive order calling on Education Secretary Linda McMahon to abolish the agency, a move that experts say would worsen the situation for borrowers. The Wall Street Journal first reported on that expected order.

As a department authorized by Congress, the department cannot be eliminated without congressional approval. But in the meantime, the Trump administration can slowly starve it by cutting resources.

There are roughly 42 million Americans who owe federal student loans, and the outstanding debt exceeds $1.6 trillion. Currently, around 9.2 million people — 43% of the roughly 22 million borrowers with payments due — are behind on their payments, according to a recent VantageScore report.

Federal student loan borrowers need assistance now more than ever, the Education Department staffers said. Collection activity is resuming for the first time in roughly five years after the expiration of pandemic-era relief, and a new repayment plan, called SAVE, that millions had enrolled in is now blocked by the courts.

“People will start having their wages or benefits garnished,” the staffer said. “If this happens erroneously, it would be extremely difficult to resolve that on your own.”

“Borrowers would be stuck having their money seized without a way to stop it,” they said.

Borrowers who reach out the Education Department with questions or complaints are now less likely to get assistance, the staffers told CNBC

Sources for this story requested anonymity because they feared retribution if they were named..

A White House spokesperson did not respond to questions from CNBC about the slowdown in student loan borrower assistance at the Education Department.

The in-house team dedicated to helping borrowers with Public Service Loan Forgiveness program no longer exists, a staffer said. As a result, remaining employees are unsure of where to direct borrowers who have issues with this program, the employee said. (PSLF is a popular way for public servants and those who work at nonprofits to get their debt canceled after 10 years of payments.)

“We lost that expertise and the ability to answer complaints in a timely manner,” the employee said.

Staffers say borrowers are already feeling the effect.

One employee told CNBC they are currently helping a woman get her student debt discharged because of her disability, and that “every time we talk she’s terrified I won’t be there the next time.”

The employees said their work in complaint resolution has had huge impacts on people’s financial lives, and those efforts are now at risk.

They said they were able to get loans discharged for victims of identity theft, teachers and countless disabled borrowers.

Personal Finance

Past-due student loan borrowers may see credit scores tank: VantageScore

Published

11 hours ago

March 6, 2025

Business Finance News

Students walk through the University of Texas at Austin on February 22, 2024 in Austin, Texas.

Brandon Bell | Getty Images

For the first time since the pandemic, becoming past-due on your student loan payments will hurt your credit again.

The more than 9 million borrowers who are late on their payments may see their credit scores tank by as much as 129 points as the U.S. Department of Education ramps up collection activity again, a new report by VantageScore finds. The credit score company analyzed U.S. Department of Education data.

Meanwhile, those who are paying their student loan bills on time will likely benefit from a rise in their credit scores by much as eight points, according to VantageScore.

Credit scores typically range from 300 to 850, with around 670 and higher considered good.

It’s been a long time since federal student loan borrowers have needed to worry about the downsides of missed payments, which can also include the garnishment of wages and retirement benefits. That’s because collection activity was suspended during the the pandemic and for a while after. The relief period officially expired on Sept. 30, 2024.

“For the first time in five years, federal student loan delinquencies will start to reappear on credit files,” said Rikard Bandebo, chief economist at VantageScore, in a statement.

Here’s what student loan borrowers should know about their credit scores.

43% of borrowers with bills due were behind

Around 9.2 million people — 43% of the roughly 22 million borrowers with payments due — are behind on their payments, according to the VantageScore report.

The delinquencies will pop up on credit reports between now and May.

Those borrowers’ credit scores will likely take a hit, triggering a cascade of other financial consequences, said Cathy Curtis, a certified financial planner and the founder and CEO of Curtis Financial Planning in Oakland, California.

“Borrowers with past-due student loans and lower credit scores face higher borrowing costs across the board — from mortgages, car loans and credit cards,” said Curtis, a member of CNBC’s Advisor Council.

Federal student loan borrowers who’ve defaulted on their loans may also see their wages garnished starting in October of this year, according to a January memo from the U.S. Department of Education.

How to stay current on your student loans

Student loan borrowers struggling to make their payments have options, said higher education expert Mark Kantrowitz.

The borrowers can apply for an income-driven repayment plan, which will cap their monthly bill at a share of their discretionary income. Many borrowers end up with a zero monthly payment. As of now, the applications for IDR plans are unavailable while the Education Department makes sure its plans comply with a new court order. But you should be able to access one in the coming months.

Borrowers can also apply for a number of deferments or forbearances, which can pause your payments for a year or more.

Additionally if you’re already in default on your loans, you should consider rehabilitating or consolidating your debt, experts said.

Rehabilitating involves making “nine voluntary, reasonable and affordable monthly payments,” according to the Education Department. Those nine payments can be made over “a period of 10 consecutive months,” its web site notes.

Consolidation, meanwhile, may be available to those who “make three consecutive, voluntary, on-time, full monthly payments.” At that point, they can essentially repackage their debt into a new loan. (The online loan consolidation application is also temporary unavailable.)

If you don’t know who your loan servicer is, you can find out at Studentaid.gov.

Experts also recommend that you check your credit reports regularly for free at AnnualCreditReport.com to make sure all three credit rating companies — Experian, Equifax and TransUnion — are showing your correct student loan balance and payment status.

Personal Finance

Wealth creation is booming as U.S. multimillionaire population jumps

Published

11 hours ago

March 6, 2025

Business Finance News

Global multimillionaire population rises 4.4% in 2024, report finds

When it comes to the rise of multimillionaires, the United States is leading the charge, a new report found.

The number of high-net worth individuals — or those with assets worth more than $10 million — rose 4.4% worldwide in 2024, to 2,341,378, but jumped 5.2% in North America, according to the annual Wealth Report by global real estate consultancy Knight Frank.

The U.S. is now home to almost 40% of the world’s super rich, the report estimates — nearly double the share that resides in China, the region with the next highest contingent of wealthy individuals.

“While the global economy slowed through 2024, the resilience of the U.S. helped prop up investor confidence,” Liam Bailey, global head of research at Knight Frank, said in a statement. “The trends powering wealth creation, including growth in financial markets led by equity markets and the bitcoin run, continued through 2024.”

Over the year, positive market conditions helped boost investors’ bottom line. The S&P 500 stock index gained 23% in 2024. The tech-heavy Nasdaq grew about 29% and the Dow Jones Industrial Average rose more than 12%.

“And despite geopolitical tensions, resilient global trade further contributed to growth,” Bailey said.

The rich are getting richer

After increasing 4.2% in 2024, the population of global citizens worth at least $100 million surpassed the 100,000 mark for the first time, Knight Frank also found.

Meanwhile, the total number of billionaires jumped nearly 8% last year, according to a separate report by Oxfam from January.

“We’ve reached a new era now, we are in the era of the billionaire,” Jenny Ricks, general secretary of the human rights group Fight Inequality Alliance, recently told CNBC.

Roughly 204 new billionaires were minted in just 12 months, the Oxfam report found.

“Not only has the rate of billionaire wealth accumulation accelerated — by three times — but so too has their power,” Amitabh Behar, Oxfam International’s executive director, said in a statement after the report’s release.

The latest numbers also underscore a deepening divide between the world’s rich and poor.

Despite the fact that America ranks first as the richest nation, 36.8 million Americans live in poverty, accounting for 11.1% of the total population, according to the latest report from the U.S. Census Bureau.

Many middle-class Americans are also showing signs of strain amid the escalating trade war and increased inflationary fears.

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