Connect with us

Personal Finance

Student loan relief most at risk under Trump, experts say

Published

on

US President Donald Trump holds up outgoing President Joe Biden’s letter as he signs executive orders in the Oval Office of the WHite House in Washington, DC, on Jan. 20, 2025.

Jim Watson | AFP | Getty Images

With President Donald Trump back in the White House and Republicans in control of Congress, experts worry that a number of student loan programs may now be in jeopardy.

At-risk programs include the U.S. Department of Education’s new repayment option for borrowers — called the Saving on a Valuable Education, or SAVE, plan — and the Biden administration’s more lenient bankruptcy policy.

Meanwhile, House Budget Committee Republicans are floating proposals that would reduce or eliminate more student loan programs, including the Biden administration-era rules that made it easier for borrowers to get debt relief when they’re defrauded by their schools, Politico reported last week.

Consumer advocates are worried for borrowers based on Trump’s comments about student loan relief on the campaign trail. At one rally, he called the Biden administration’s debt forgiveness efforts “vile” and “not even legal.”

The White House did not immediately respond to a request for comment.

More than 40 million Americans carry federal student loans, and the outstanding debt exceeds $1.6 trillion, according to higher education expert Mark Kantrowitz.

Here are the programs experts think are most at risk under the Trump administration.

SAVE plan

When SAVE launched in 2023, the Biden administration called its new repayment plan for federal student loan borrowers “the most affordable student loan plan ever.” SAVE cut many borrowers’ monthly bills in half and shortened the timeline to loan forgiveness for those with smaller balances.

It quickly proved popular. To that point, around 8 million borrowers signed up for the new income-driven repayment, or IDR, plan, the White House had said.

But the plan also quickly ran into legal troubles.

Republican attorneys general in Kansas and Missouri, who led the legal challenges against SAVE, argued that President Joe Biden was essentially trying to find a roundabout way to forgive student debt after the Supreme Court blocked its sweeping debt cancellation plan in June 2023. Due to those legal actions, the plan has been on hold since last year.

More from Personal Finance:
Here’s the inflation breakdown for December 2024 — in one chart
Worried about Social Security’s future? What to consider before claiming benefits
Here’s who qualifies for Biden’s $4.2 billion in student loan forgiveness

The plan is unlikely to survive a second Trump term, Kantrowitz said.

“There are several methods the Trump administration could use to kill the SAVE repayment plan,” he said. “They could abandon the defense of the repayment plan in the pending lawsuits.”

“They could issue new regulations to revoke the repayment plan,” or Congress could pass a law to do away with the plan, Kantrowitz added.

Currently, SAVE enrollees are excused from making payments while the plan is tied up in the courts. That reprieve may soon end, too, experts said.

Bankruptcy protections

For decades, student loan borrowers found it next to impossible to walk away from their federal student debt in bankruptcy. The Biden administration changed that.

In the fall of 2022, the Department of Education and the Department of Justice jointly released updated bankruptcy guidelines to make the bankruptcy process for student loan borrowers less arduous. The Biden administration’s updated policy treated student loans like other types of debt in bankruptcy court, experts said.

Trump is likely to rescind that guidance, Kantrowitz said.

“There may be more of a scorched earth approach to opposing all attempts to discharge federal student loans in bankruptcy,” he said.

However, Malissa Giles, a consumer bankruptcy attorney in Virginia, said she was hopeful that the guidance will remain in place.

Still, her concern is that many jurisdictions will have new assistant U.S. attorneys, “and we may see a shift in the approach based on changing politics and pressures of more Republican-aligned U.S. attorneys.”

For now, she said she was being more conservative in what student loan bankruptcy cases she took on.

Other student loan aid at risk

Among the recent ideas floated by House Budget Committee Republicans is the partial repeal of the Biden administration’s Borrower Defense regulations, which made it easier for borrowers to get their debt excused when their school engaged in misconduct.

The GOP members are also reviewing reforms to Public Service Loan Forgiveness, including the possibility of “limiting eligibility for the program,” according to the document obtained by Politico.

They’re also considering eliminating the student loan interest deduction. That tax break allows qualifying borrowers to deduct up to $2,500 a year in interest paid on eligible private or federal education debt. Before the Covid pandemic, nearly 13 million taxpayers took advantage of the deduction, according to Kantrowitz.

Continue Reading

Personal Finance

Trump administration loses appeal of DOGE Social Security restraining order

Published

on

A person holds a sign during a protest against cuts made by U.S. President Donald Trump’s administration to the Social Security Administration, in White Plains, New York, U.S., March 22, 2025. 

Nathan Layne | Reuters

The Trump administration’s appeal of a temporary restraining order blocking the so-called Department of Government Efficiency from accessing sensitive personal Social Security Administration data has been dismissed.

The U.S. Court of Appeals for the 4th Circuit on Tuesday dismissed the government’s appeal for lack of jurisdiction. The case will proceed in the district court. A motion for a preliminary injunction will be filed later this week, according to national legal organization Democracy Forward.

The temporary restraining order was issued on March 20 by federal Judge Ellen Lipton Hollander and blocks DOGE and related agents and employees from accessing agency systems that contain personally identifiable information.

More from Personal Finance:
Judge slams Social Security chief for agency shutdown ‘threats’
Social Security changes may impact service, benefit payments
Trump pick to lead Social Security faces questions on DOGE

That includes information such as Social Security numbers, medical provider information and treatment records, employer and employee payment records, employee earnings, addresses, bank records, and tax information.

DOGE team members were also ordered to delete all nonanonymized personally identifiable information in their possession.

The plaintiffs include unions and retiree advocacy groups, namely the American Federation of State, County and Municipal Employees, the Alliance for Retired Americans and the American Federation of Teachers. 

“We are pleased the 4th Circuit agreed to let this important case continue in district court,” Richard Fiesta, executive director of the Alliance for Retired Americans, said in a written statement. “Every American retiree must be able to trust that the Social Security Administration will protect their most sensitive and personal data from unwarranted disclosure.”

The Trump administration’s appeal ignored standard legal procedure, according to Democracy Forward. The administration’s efforts to halt the enforcement of the temporary restraining order have also been denied.

“The president will continue to seek all legal remedies available to ensure the will of the American people is executed,” Liz Huston, a White House spokesperson, said via email.

Fiserv CEO on the nomination to Social Security Commisioner role

The Social Security Administration did not respond to a request from CNBC for comment.

Immediately after the March 20 temporary restraining order was put in place, Social Security Administration Acting Commissioner Lee Dudek said in press interviews that he may have to shut down the agency since it “applies to almost all SSA employees.”

Dudek was admonished by Hollander, who called that assertion “inaccurate” and said the court order “expressly applies only to SSA employees working on the DOGE agenda.”

Dudek then said that the “clarifying guidance” issued by the court meant he would not shut down the agency. “SSA employees and their work will continue under the [temporary restraining order],” Dudek said in a March 21 statement.

Don’t miss these insights from CNBC PRO

Continue Reading

Personal Finance

Most credit card users carry debt, pay over 20% interest: Fed report

Published

on

Julpo | E+ | Getty Images

Many Americans are paying a hefty price for their credit card debt.

As a primary source of unsecured borrowing, 60% of credit cardholders carry debt from month to month, according to a new report by the Federal Reserve Bank of New York.

At the same time, credit card interest rates are “very high,” averaging 23% annually in 2023, the New York Fed found, also making credit cards one of the most expensive ways to borrow money.

“With the vast majority of the American public using credit cards for their purchases, the interest rate that is attached to these products is significant,” said Erica Sandberg, consumer finance expert at CardRates.com. “The more a debt costs, the more stress this puts on an already tight budget.”

More from Personal Finance:
How to spring-clean your finances
Americans are suffering from ‘sticker shock’ — how to adjust
1 in 5 Americans are ‘doom spending’ — how that can backfire

Most credit cards have a variable rate, which means there’s a direct connection to the Federal Reserve’s benchmark. And yet, credit card lenders set annual percentage rates well above the central bank’s key borrowing rate, currently targeted in a range between 4.25% to 4.5%, where it has been since December.

Following the Federal Reserve’s rate hike in 2022 and 2023, the average credit card rate rose from 16.34% to more than 20% today — a significant increase fueled by the Fed’s actions to combat inflation.

“Card issuers have determined what the market will bear and are comfortable within this range of interest rates,” said Matt Schulz, chief credit analyst at LendingTree.

APRs will come down as the central bank reduces rates, but they will still only ease off extremely high levels. With just a few potential quarter-point cuts on deck, APRs aren’t likely to fall much, according to Schulz.

Credit card debt?

Despite the steep cost, consumers often turn to credit cards, in part because they are more accessible than other types of loans, Schulz said. 

In fact, credit cards are the No. 1 source of unsecured borrowing and Americans’ credit card tab continues to creep higher. In the last year, credit card debt rose to a record $1.21 trillion.

Because credit card lending is unsecured, it is also banks’ riskiest type of lending.

“Lenders adjust interest rates for two primary reasons: cost and risk,” CardRates’ Sandberg said.

The Federal Reserve Bank of New York’s research shows that credit card charge-offs averaged 3.96% of total balances between 2010 and 2023. That compares to only 0.46% and 0.43% for business loans and residential mortgages, respectively.

As a result, roughly 53% of banks’ annual default losses were due to credit card lending, according to the NY Fed research.

“When you offer a product to everyone you are assuming an awful lot of risk,” Schulz said.

Further, “when times get tough they get tough for most everybody,” he added. “That makes it much more challenging for card issuers.”

The best way to pay off debt

The best move for those struggling to pay down revolving credit card debt is to consolidate with a 0% balance transfer card, experts suggest.

“There is enormous competition in the credit card market,” Sandberg said. Because lenders are constantly trying to capture new cardholders, those 0% balance transfer credit card offers are still widely available.

Cards offering 12, 15 or even 24 months with no interest on transferred balances “are basically the best tool in your toolbelt when it comes to knocking down credit card debt,” Schulz said. “Not accruing interest for two years on a balance is pretty hard to argue with.”

Subscribe to CNBC on YouTube.

Continue Reading

Personal Finance

The 60/40 portfolio may no longer represent ‘true diversification’: Fink

Published

on

Andrew Ross Sorkin speaks with BlackRock CEO Larry Fink during the New York Times DealBook Summit in the Appel Room at the Jazz at Lincoln Center in New York City on Nov. 30, 2022.

Michael M. Santiago | Getty Images

It may be time to rethink the traditional 60/40 investment portfolio, according to BlackRock CEO Larry Fink.

In a new letter to investors, Fink writes the traditional allocation comprised of 60% stocks and 40% bonds that dates back to the 1950s “may no longer fully represent true diversification.”

“The future standard portfolio may look more like 50/30/20 — stocks, bonds and private assets like real estate, infrastructure and private credit.” Fink writes.

Most professional investors love to talk their book, and Fink is no exception. BlackRock has pursued several recent acquisitions — Global Infrastructure Partners, Preqin and HPS Investment Partners — with the goal of helping to increase investors’ access to private markets.

More from Personal Finance:
Why uncertainty makes the stock market go haywire
Investors are ‘miles ahead’ if they avoid 3 things, CIO says
How investors can ready their portfolios for a recession

The effort to make it easier to incorporate both public and private investments in a portfolio is analogous to index versus active investments in 2009, Fink said.

Those investment strategies that were then considered separately can now be blended easily at a low cost.

Fink hopes the same will eventually be said for public and private markets.

Yet shopping for private investments now can feel “a bit like buying a house in an unfamiliar neighborhood before Zillow existed, where finding accurate prices was difficult or impossible,” Fink writes.

60/40 portfolio still a ‘great starting point’

After both stocks and bonds saw declines in 2022, some analysts declared the 60/40 portfolio strategy dead. In 2024, however, such a balanced portfolio would have provided a return of about 14%.

“If you want to keep things very simple, the 60/40 portfolio or a target date fund is a great starting point,” said Amy Arnott, portfolio strategist at Morningstar.

If you’re willing to add more complexity, you could consider smaller positions in other asset classes like commodities, private equity or private debt, she said.

However, a 20% allocation in private assets is on the aggressive side, Arnott said.

The total value of private assets globally is about $14.3 trillion, while the public markets are worth about $247 trillion, she said.

For investors who want to keep their asset allocations in line with the market value of various asset classes, that would imply a weighting of about 6% instead of 20%, Arnott said.

Yet a 50/30/20 portfolio is a lot closer to how institutional investors have been allocating their portfolios for years, said Michael Rosen, chief investment officer at Angeles Investments.

BlackRock CEO Larry Fink: Infrastructure will be the largest growing sector in private capital

The 60/40 portfolio, which Rosen previously said reached its “expiration date,” hasn’t been used by his firm’s endowment and foundation clients for decades.

There’s a key reason why. Institutional investors need to guarantee a specific return, also while paying for expenses and beating inflation, Rosen said.

While a 50/30/20 allocation may help deliver “truly outsized returns” to the mass retail market, there’s also a “lot of baggage” that comes with that strategy, Rosen said.

There’s a lack of liquidity, which means those holdings aren’t as easily converted to cash, Rosen said.

What’s more, there’s generally a lack of transparency and significantly higher fees, he said.

Prospective investors should be prepared to commit for 10 years to private investments, Arnott said.

And they also need to be aware that measurement issues with asset classes like private equity means past performance data may not be as reliable, she said.

For the average person, the most likely path toward tapping into private equity will be part of a 401(k) plan, Arnott said. So far, not a lot of companies have added private equity to their 401(k) offerings, but that could change, she said.

“We will probably see more plan sponsors adding private equity options to their lineups going forward,” Arnott said.

Don’t miss these insights from CNBC PRO

Continue Reading

Trending