Markus Andrews

The Biden administration announced Friday the next step in its new plan to cancel people’s student debt.
The Supreme Court struck down the original policy in June.
It appears that the administration will focus on certain groups of borrowers in its new plan, including those suffering from financial hardship.

U.S. President Joe Biden delivers remarks at Prince George’s Community College on September 14, 2023 in Largo, Maryland.
Kevin Dietsch | Getty Images

The Biden administration announced on Friday the next step in its new plan to cancel people’s student debt after the Supreme Court struck down its original policy in June.
The U.S. Department of Education released its initial agenda of policy considerations for its second attempt at delivering Americans student loan relief. It also shared a list of individuals who will serve on the “Student Loan Debt Relief Committee,” including Wisdom Cole at the NAACP, Kyra Taylor at the National Consumer Law Center and several student loan borrowers.

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The Biden administration will focus on certain groups of borrowers in its new plan, including those suffering from financial hardship or who entered in repayment decades ago. Its original plan was broader, only cutting out student loan borrowers who earned more than $125,000 as individuals or $250,000 as couples.
“The Biden-Harris Administration has taken unprecedented action to fix the broken student loan system and deliver record amounts of student debt relief,” U.S. Secretary of Education Miguel Cardona said in a statement. “Now, we are diligently moving through the regulatory process to advance debt relief for even more borrowers.”

Student loan repayment resumes on Oct. 1

The announcement comes days before the Covid pandemic-era pause on federal student loan bills expires. Tens of millions of Americans have taken advantage of that relief, which has spanned two presidencies and more than three years.
Interest began accruing again on federal student loans as of Sept. 1. Bills will restart on Oct. 1, although some borrowers have extra time before their first payment is due.

The Biden administration had hoped to ease the transition back into repayment by forgiving up to $20,000 in student debt for tens of millions of Americans. But shortly after President Joe Biden rolled out his plan in August 2022, conservative groups and Republican states sued to block the relief.
The Supreme Court struck down the policy in June, concluding the president didn’t have the power to cancel up to $400 billion in consumer debt without prior authorization from Congress.

Borrowers may not see relief until July 2025

Legal experts anticipated the president to narrow his relief this round, in the hopes of increasing its chances of survival.
“That would be easier to justify in front of a court that is skeptical of broad authority,” Luke Herrine, assistant professor of law at the University of Alabama, told CNBC in a previous interview.

Unlike Biden’s first attempt to forgive student debt quickly through an executive order, this time he’s turned to the lengthy rulemaking process. As a result, borrowers might not see the relief before July 2025, according to higher education expert Mark Kantrowitz.
“But the Department of Education might try implementing it sooner, perhaps around the time of the election,” Kantrowitz said. More

If you’re saving for retirement with a 401(k) or individual retirement account, it’s easy to lose money to taxes and penalties when moving money between accounts.
Denise Appleby, CEO of Appleby Retirement Consulting, covers three of the biggest rollover mistakes.

The one-year rule is an “archaic belief,” according to career expert Sarah Doody.
Courtneyk | E+ | Getty Images

1. Bypassing the once-per-year IRA rollover rule

“The biggest one is breaking the one-per-year IRA to IRA rollover rule,” Appleby told CNBC. “And that happens because people are impatient.”

Generally, you can’t make more than one IRA rollover from the same IRA within a 12-month period, she explained. Otherwise, you must include the rollover in gross income and it may be subject to a 10% early withdrawal penalty before age 59½.
Plus, the IRS treats the additional rollover as an excess contribution, which triggers a 6% levy per year for every year the money stays in the new IRA.

2. Missing the 60-day rollover deadline

Another common mistake is missing the 60-day retirement plan rollover deadline, Appleby said.
You have 60 days to complete a retirement plan or IRA rollover and the clock starts ticking when you receive the proceeds, she explained.
“People have good intentions and then life happens,” she said. Generally, missing the 60-day deadline means treating the money as a taxable distribution — unless you qualify for an IRS waiver.

3. Losing eligibility for the 10% penalty exception

Most retirement plan distributions are taxable and trigger a 10% early withdrawal penalty unless you qualify for one of the exceptions.
However, these exceptions are account-specific and may not apply after transferring money from a 401(k) to IRA, or vice versa. “That happens quite a lot,” Appleby said.
For example, there’s a 10% penalty exception of up to $10,000 for first-time homebuyers for IRAs, but not 401(k) plans. And there’s no exception for leaving your job at age 55 or older, known as “separation from service,” when pulling the money from an IRA. That’s typically in play for employer plans such as 401(k)s.
That’s why you need to check the list before rolling over funds to see if you lose eligibility for certain exceptions, she said. More

If you’re making $65,000 per year, saving $1 million for retirement might seem out of reach. But with a little dedication and the right timing, it’s certainly possible — if you stick to a clear plan.
As a rule of thumb, most financial advisors suggest that you save 10% to 15% of your salary for retirement. But if your goal is to get to $1 million, the percentage you need to invest will vary drastically depending on how old you are when you start investing.

CNBC crunched the numbers, and we can tell you how much of your income you’ll want to tuck away if you make $65,000 per year. 
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These numbers assume that you plan to retire at age 65 and have no money in savings now.
Financial advisors typically recommend the mix of investments in your portfolio shift gradually to become more conservative as you approach retirement. For investing, we assume an average annual 6% return. We don’t take into account inflation, taxes, pay increases or other savings-affecting factors life may throw your way, so make sure you plan accordingly. 
Watch the video above to learn how much you should be saving to reach your goal. More

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Blackstone, the biggest owner of commercial real estate in the world, is placing its bets on the student housing rental market as demand surges worldwide.
“Student housing is, I think where the opportunity is most specifically generating a lot of strong cash for us and our investors,” as universities seek more accommodations to satisfy growing student bodies and heightened demand, said Kathleen McCarthy, Blackstone’s global co-head of real estate, speaking at CNBC’s Delivering Alpha conference Thursday.

She highlighted last year’s acquisition of student housing provider American Campus Communities as one way Blackstone can work with universities to increase supply amid shortages. The company, she added, also focuses on rental housing because it shows a “great deal of resiliency.”
Last year, the company made a sizable bet on the real estate industry, raising a little more than $30 billion for its Blackstone Real Estate Partners X fund, which McCarthy highlighted as another way the company is using its insights to provide consistent performance for investors and confidence amid a market with heightened “dislocation.”
But student housing issues aren’t solely a U.S. problem, and Blackstone has made investments in Australia, Canada and the U.K. as students seek English-language degrees, McCarthy said.
“Those countries are really looking at education as somewhat of an export, and, where the U.S. has had more challenging visa policies, those countries have been able to capitalize on that, and are seeking to grow their universities but they need housing to do that,” she said.
Along with student housing, McCarthy also highlighted datacenters and logistics as other key conviction real estate areas as artificial intelligence booms and consumers do more online shopping.
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A recession is all but inevitable for the U.S., and investors should be playing defense in that kind of environment, TCW CEO Katie Koch said.
Koch said the Federal Reserve’s interest rate hikes targeted at slowing the economy and bringing down inflation will start to bite.

A recession is all but inevitable for the U.S. and investors should be playing defense in that kind of environment, according to the head of the TCW Group.
“We are going to have a recession, because that’s the way the world works,” Katie Koch, CEO of the firm with $210 billion under management, said Thursday at CNBC’s “Delivering Alpha” conference. “We haven’t had a real one for over a decade and a half.”

While Wall Street has been bracing for a contraction for much of the past two years, the U.S. economy has stayed afloat due largely to a resilient consumer flush with cash and a labor market that has remained powerful.
However, Koch said the Federal Reserve’s interest rate hikes targeted at slowing the economy and bringing down inflation will start to bite. Higher rates have long been thought to work with lag effects, the timing of which is uncertain and dependent on a variety of factors.
“I do think it pays to be patient and wait to see higher rates work their way through the system,” Koch said. “We haven’t seen the pain of higher rates, but it’s coming.”
From an investment standpoint, Koch recommends a mostly conservative array of choices that includes cash. She also spoke favorably of agency debt, mortgage-backed securities and Treasurys, as well as companies that have longer-duration capital.
But Koch worries about consumers as well as companies that have used the “extend and pretend strategy” to put off paying down loans.

“That is the bedrock of the U.S. economy, obviously the consumer and small and medium companies, and I think they are going to struggle to finance themselves in this environment and that further leads us to a relatively bearish outlook,” she said.

Don’t miss the biggest investment ideas in the business. Learn more about CNBC’s Delivering Alpha investor summit here. More

October is expected to be a particularly big month for holiday shopping, with consumers planning to start earlier and spend more than before.
It’s also the month when millions of borrowers will face their first student loan bill in more than three years.
So far, U.S. households have remained remarkably resilient. The resumption of student loan payments pose the next big threat.

October is unofficial start of holiday shopping season

This year, half of shoppers plan to begin their holiday shopping by Halloween, according to a recent Bankrate report.
A separate study by RetailMeNot found that more shoppers are starting even earlier than before — with as many as 64% kicking off the season in October, up from 53% in 2022.

Early estimates point to a strong shopping season

With more shoppers getting an early start on the season, holiday retail sales are likely to increase between 3.5% and 4.6% in 2023, according to Deloitte’s annual forecast.
“We expect healthy employment and income growth to keep the volume of sales growing for the 2023 holiday season,” said Daniel Bachman, Deloitte’s U.S. economic forecaster.
And despite predictions that people are shopping earlier to take advantage of sales and spread out their holiday expenses, research from Morning Consult found that early shoppers are splurging, not saving. 

So far, consumers have remained remarkably resilient. However, there are recent signs of a shift.
Shoppers are still buying more than last year, but spending growth is slowing as the economy settles down, according to the National Retail Federation.
Going forward, “we expect moderate growth to continue despite uncertainties like the direction of inflation and interest rates as well as a potential government shutdown,” NRF President and CEO Matthew Shay said in a statement.
“Households have the capacity to spend, but momentum is slowing, in part because savings built up during the pandemic are running lower and credit costs are rising,” added Jack Kleinhenz, the NRF’s chief economist.

Student loans payments could weigh on wallets

“Student loan payments are another drag on the consumer,” said Brett House, professor of professional practice in economics at Columbia Business School. 
“On the one hand, higher interest rates are constraining household budgets,” House said. Inflation has shown some signs of cooling but remains well above the Fed’s 2% target, leaving open the possibility of another interest-rate increase to come.
“On the other hand, labor markets remain strong,” House added. An unemployment rate of 3.8% is just slightly higher than it was a year ago. Job openings have been coming down, but “we still have very high participation rates,” he noted.

When it comes to consumer spending, “the biggest factor is always whether people have a job or not and we are near full employment,” House said.
Still, roughly half of borrowers are worried that the end of the payment pause will negatively impact their lives, according to a new survey from the National Endowment for Financial Education, or NEFE.
With borrowers feeling anxious heading into October, most will have to make budgetary changes, according to Billy Hensley, NEFE’s president and CEO.
“One in four of all U.S. adults will be reducing their spending in other areas,” Hensley said, “and that’s a shift in consumer spending that could be felt across the entire economy.”
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Life Changes

Retirement security is a concern for many older Americans, and outliving savings is often their biggest fear.
But “retirement spending is not pass-fail,” said Justin Fitzpatrick, co-founder of Income Lab, a retirement planning software company.
You can use “risk-adjusted guardrails” to shift spending throughout retirement, depending on your goals.

Martin Barraud | Caiaimage | Getty Images

PHOENIX — Retirement security is a concern for many older Americans and outliving savings is often their biggest fear.
To that point, some 58% of savers and retirees worry about running out of money, according to recent research from Cerulli Associates.

But “retirement spending is not pass-fail,” said certified financial planner Justin Fitzpatrick, co-founder of Income Lab, a retirement planning software company.
Your retirement spending isn’t static, meaning there’s room for adjustments over time, depending on your needs and goals, he said, speaking at the Financial Planning Association’s annual conference on Wednesday.

More from Life Changes:

Here’s a look at other stories offering a financial angle on important lifetime milestones.

It’s “really disquieting” to go from working with a steady paycheck to retirement with income uncertainty, which can lead to paralysis, Fitzpatrick said. Here’s what retirees need to consider.

Total financial ruin is ‘almost impossible’

Financial advisors often rely on “probability of success” scores as clients approach retirement — based on a so-called Monte Carlo simulation which shows a range of possible outcomes.
However, Fitzpatrick sees retirement expenses as “a series of small liabilities,” and many of these costs can be flexible. For example, you may opt for the brewpub over a steakhouse or skip a vacation, he said.

“These are not necessarily the things you would prefer ahead of time, but they’re different from financial ruin,” Fitzpatrick said.
Total financial ruin is “almost impossible” because individual liabilities can be small and spending generally happens slowly enough to make “minor and temporary adjustments” over time, he said.

Leverage ‘risk-based guardrails’

Fitzpatrick suggests using “risk-based guardrails,” or predefined guidelines, to increase or decrease retirement spending. The strategy uses planning software and considers longevity, future cash flows and income changes, along with other factors.
“You find a spending level that is reasonable,” and when the risk of doing nothing gets too high, you need to start spending less, he said. However, this requires monitoring and updating the plan regularly.
“An advisor can be that spending GPS along the way and let you know when an adjustment makes sense,” Fitzpatrick added. More

A federal government shutdown will start Oct. 1 unless Congress passes spending legislation.
If the government shuts down, nonessential functions would cease.
Federal workers wouldn’t get paychecks, households may not receive some federal benefits and customer service for student loan borrowers and others may be delayed.
The potential impact will grow the longer a shutdown persists.

Bloomberg Creative | Bloomberg Creative Photos | Getty Images

What is a government shutdown?

During a shutdown, the federal government ceases operations that are deemed nonessential.
Every year Congress must pass legislation to fund the federal government for the coming fiscal year. A shutdown occurs if legislators can’t finish this appropriations process on time.

The government’s 2024 fiscal year starts on Oct. 1. If Congress is unable to pass the necessary spending bills — or a continuing resolution that offers stopgap funding — then a shutdown will commence on Sunday morning.

Speaker of the House Kevin McCarthy, R-Calif.
Win Mcnamee | Getty Images News | Getty Images

It’s poised to occur this year as hard-right conservatives in the Republican-controlled House are using a possible shutdown as leverage to force deep cuts in federal spending.
There have been 14 shutdowns since 1980, according to the Bipartisan Policy Center. The most recent was a partial shutdown in 2018-19; it was also the longest, lasting 34 days, according to the Congressional Research Service.
A shutdown affects “discretionary” spending. “Mandatory” spending, like Social Security and Medicare, is spared because it doesn’t require annual congressional approval.
Discretionary spending accounted for about 27% of the $6 trillion federal budget in fiscal year 2022, according to the Congressional Budget Office.

How would a shutdown hit your wallet?

Every shutdown is “unique,” which makes gauging its exact impact difficult, Sprick said.
Here’s how it’s likely to play out.
Among the most immediate and direct results: More than 2 million civilian federal employees will either be furloughed or keep working without pay until the shutdown resolves.
“Losing out on income for one, two or three pay periods can be the difference between paying rent or a mortgage,” Sprick said. “That can pose really significant household issues.”
Workers deemed nonessential would be furloughed, while those considered essential would keep working. It’s likely to be about a 50-50 split of employees, said Mark Zandi, chief economist of Moody’s Analytics.
In addition, military personnel on active duty — about 1.3 million people — would stay on the job without pay. Contractors hired by the federal government would also be at risk of not getting paid for services — and those businesses may start laying off or furloughing workers, Zandi said.

Millions may also lose certain federal benefits, with that threat increasing with the length of a shutdown, experts said.
For example, about 7 million people would likely see aid delayed from the Special Supplemental Nutrition Program for Women, Infants and Children program, according to the White House. Known as WIC, the program provides federal funds to low-income women, infants and children up to age 5 who are considered to be at nutritional risk.
Food assistance through the Supplemental Nutrition Assistance, or SNAP, program is “on better footing” than WICs, which would likely be affected within days of a shutdown, Sprick said. But SNAP benefits would also be at risk if a shutdown persists for a couple weeks, he said.
Section 8 housing vouchers, which are used by families with low incomes, seniors and people with disabilities, would also be at risk, Sprick said.
Some veterans benefits — such as disability compensation and transition assistance — might be delayed, as might certain loans for farmers.
Loans secured through the Small Business Administration might be delayed to business owners, Zandi said. Closing on a home that requires federal flood insurance would also likely be delayed, he said.

Loan servicing, taxes and travel to be affected

Customer service would be impaired across government functions due to reduced staff, experts said.
If past experiences are a guide, absenteeism may also become an issue among essential workers if the shutdown persists, since they wouldn’t be getting paychecks, they said.
Significantly, 90% of staff at the U.S. Department of Education may be furloughed just as federal student loan payments are poised to restart Oct. 1. Borrowers who call the Education Department with questions about their bills will have “a really tough time getting those answers,” Sprick said.

How long it lasts has a real impact on American households, to a greater extent than just if it happens or not.

Emerson Sprick
senior economic analyst at the Bipartisan Policy Center

Service snafus will vary by agency, depending on their respective contingency plans. For example, taxpayers might see delayed service at the IRS, as might people trying to get certain help from the Social Security Administration.
Travelers may also see plans disrupted. Personnel like air traffic controllers and Transportation Security Administration workers are generally considered essential but may not keep coming to work after a few weeks — making it painful to get through airport security lines, for example, Zandi said. That occurred during the last shutdown in 2018-19.
National parks and certain museums may also be closed or limit services, Zandi added.

Inflation and the U.S. economy

These disruptions can have a big impact on the U.S. economy over time.
For example, if the U.S. stops purchasing typical goods and services — things like computer equipment, paper clips, office furniture — less money is pumped into the economy. Federal employees who are forgoing pay may cut back their spending, too. Consumers more broadly might get anxious and cut back if they lose confidence, and investors may get jittery and stock market volatility may increase.
That may all coincide with other economic headwinds like the end of the student loan pause, the United Auto Workers strikes, and higher oil and gasoline prices, Zandi said.

“I think if it’s a two-, three-week shutdown it’s a nuisance for some but not a significant problem for most,” he said. “If it goes on for more than a month or longer, that may be a headwind that blows so hard it pushes the economy over.”
And everyone is affected by a recession, he said.  
Additionally, federal agencies that issue economic data — on inflation and the labor market, for example — won’t do so during a shutdown. The Federal Reserve relies on such data points as it weighs how to proceed with its interest rate policy — increasing the odds that the Fed makes a mistake, Zandi said. More