Markus Andrews

President Donald Trump plans to unveil reciprocal tariffs against U.S. trade partners on April 2.
The White House considers value-added taxes, or VATs, an unfair trade practice.
VATs, similar to a U.S. retail sales tax, are the world’s most common type of consumption tax. They don’t create trade distortions because they apply equally to U.S. and foreign products, economists said.

A container ship at the Port of Hamburg in Hamburg, Germany.
Maria Feck/Bloomberg via Getty Images

President Donald Trump is planning to unveil reciprocal tariffs on Wednesday to retaliate against trade practices his administration deems unfair or discriminatory. Among the grievances is the “value-added tax,” or VAT, which Trump called “far more punitive” than tariffs in a Feb. 15 post on Truth Social.
Many economists, however, disagree with that characterization.

“It would be complete nonsense” to levy a tariff on U.S. trading partners in response to a value-added tax, said Erica York, an economist and vice president of federal tax policy at the Tax Foundation.
“A value-added tax does not distort trade,” York said. “It’s not a protectionist measure, so it makes no sense to retaliate against a VAT.”
The White House didn’t respond to a request from CNBC for comment.
The precise scope of reciprocal tariffs are unclear. President Trump suggested in recent weeks, for example, that there might be flexibility on reciprocal tariffs, but on Sunday he said that the tariffs would “start with all countries.”

What is a VAT?

Value-added taxes are a tax on domestic consumption, like retail sales taxes charged by U.S. state and local governments.

VATs are the most common type of consumption tax in the world, used by more than 80% of nations, Youssef Benzarti and Alisa Tazhitdinova, economists at the University of California, Santa Barbara, wrote in a 2019 paper for the National Bureau of Economic Research.
More than 170 countries worldwide use VATs, according to the European Commission.

The U.S. is the only nation in the Organisation for Economic Co-operation and Development that uses a retail sales tax (rather than a VAT) as its main consumption tax, according to the OECD, which consists of 38 member countries.
VAT rates vary by country. Most European nations charge roughly 20%, for example, though the rate ranges from an 8.1% low in Switzerland up to 27% in Hungary, according to the Tax Foundation.
The average state and local sales tax rate is 7.5% in the U.S, the Tax Foundation said.

Why VATs aren’t like tariffs, economists say

Value-added taxes are different than tariffs, economists explain.
Nations apply VATs equally, regardless of where a good was produced. Foreign nations apply the same tax on domestic goods and imported U.S. products.
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By comparison, foreign tariffs may put U.S. goods at a relative disadvantage: U.S. goods are hit with an import tax but there wouldn’t be an equivalent duty on domestic goods.
Put simply, VATs don’t discriminate based on product origin, while tariffs do, economists said.
“What’s confusing — and, to be honest, just misplaced — [about the White House stance] is a VAT isn’t discretionary: It applies to domestic output as well as imports,” said Bradley Saunders, a North America economist at Capital Economics. “It’s not protectionist.”

How VATs and U.S. sales taxes are different

The OECD considers retail sales taxes and VATs to be in the same category: “taxes on general consumption.”
While consumers bear the ultimate cost of each, the taxes are collected differently, economists said.
The end consumer pays U.S. sales tax when they purchase a product.  

By contrast, businesses pay VATs in stages across the supply chain, according to the business’ respective “value add.” Businesses get a tax break for their portion of the VAT, and the end consumer ultimately bears the tax cost, according to the International Chamber of Commerce.
VATs around the world are “border adjustable,” according to Eric Toder, a non-resident fellow at the Urban-Brookings Tax Policy Center.
That means a nation’s exports are exempt from value-added taxes, while imports (from the U.S., for example) are taxable, he wrote.
The World Trade Organization doesn’t view this as a trade barrier, economists said.

“The academic consensus is that adjusting VATs at the border — by levying VATs on imports but exempting exports — does not distort trade flows as long as imported goods are subject to the same VAT rate as domestic goods,” wrote Benzarti and Tazhitdinova of UC Santa Barbara. “For this reason, VATs, as they are currently implemented, are considered to be trade neutral and the [WTO] allows border adjustment of VATs.” More

Members of the U.S. armed forces qualify for special tax breaks and can leverage unique financial planning opportunities, advisors say.
During service, members of the armed forces can kickstart tax-free growth via Roth contributions to Thrift Savings Plan, or TSP, retirement accounts.
If you’re deployed in a combat zone, your income is tax exempt, which could be a chance for other tax strategies.

Mike Kemp | Tetra Images | Getty Images

Members of the U.S. armed forces qualify for special tax breaks, which can offer unique financial planning opportunities, experts say.
Typically, earnings are higher after military service because there are two sources of income: your new career and your military retirement benefits, said certified financial planner Patrick Beagle, owner and president of WealthCrest Financial Services in Springfield, Va. The firm specializes in military and federal employees. 

During service, it’s smart to make after-tax Roth contributions to a Thrift Savings Plan, or TSP, retirement accounts, he said. Roth deposits are after taxes, but the funds grow tax-free. 
“You’re probably making a mistake” if you skip Roth TSP contributions while serving during your lower-income years, said Beagle, who is also a retired Marine aviator.
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‘Tax-free’ combat zone income

Another planning opportunity happens while serving in a combat zone, said CFP Curtis Sheldon, who is also an enrolled agent at C.L. Sheldon and Company in Alexandria, Va. The firm specializes in working with active and retired military members. 
“For the vast majority of people, when you deploy to a combat zone, you have tax-free income,” and even a single day of service counts for the full month, he said. Your earnings are exempt from taxes during that period, including basic pay, bonuses, student loan repayments and more, according to the IRS. 

Typically, you should aim to receive more income during that period to maximize your tax-exempt income, experts say.
For example, you can defer your reenlistment bonus until you’re in a combat zone, and the earnings will be tax-free, Beagle said.

Weigh Roth conversions

While deployed in a combat zone, it’s also a “really, really good year” for higher-ranking individuals to do Roth conversions while temporarily in a lower tax bracket, Sheldon said. These service members may otherwise be higher earners and may have a larger pre-tax retirement account to covert.
Roth individual retirement account conversions transfer pretax or nondeductible IRA money to a Roth IRA, which begins future tax-free growth. The trade-off is investors owe upfront taxes on the converted balance.

Leverage the Savings Deposit Program 

Another benefit is the Department of Defense’s Savings Deposit Program, or SDP, which offers 10% annual interest on savings of up to $10,000 while service members are deployed in a combat zone.
To compare, the average interest rate for traditional banks was 0.41%, as of Mar. 17, according to the Federal Deposit Insurance Corporation. Meanwhile, the top 1% average rate savings account rate was 4.26%, as of Mar. 31, according to Deposit Accounts.
You can close the account after leaving a combat zone and use the money as a “slush fund” for living expenses to defer more Roth contributions into your TSP, Beagle said.
“There are all these different wickets,” he said. “You can pick and choose among all the [military] benefits” to maximize future investment returns. More

Since 1980, median home prices have increased much faster than median household incomes, according to the Urban Institute.
For some, that is putting home ownership out of reach.

FILE PHOTO: An “Open House” sign outside of a home in Washington, DC, US, on Sunday, Nov. 19, 2023. 
Nathan Howard | Bloomberg | Getty Images

When Maryland Governor Wes Moore was 8 years old, his mother told him she wanted to send him to military school to correct his behavior.
Yet it wasn’t until he was 13 that she finally did send him to a military school in Pennsylvania. He ran away five times in the first four days.

“That place ended up really helping me change my life,” said Moore while speaking about retirement security at a BlackRock conference in Washington, D.C., on March 12.
One obstacle — the tuition costs — prevented his mother from sending him sooner, he said.

Moore was able to attend the school thanks to help from his grandparents, who borrowed against the home they bought when they immigrated to the U.S., to help pay for the first year’s tuition.
“They ended up sacrificing part of their American dream so I could achieve my own,” Moore said.
“That’s what housing helps provide,” Moore said. “It’s not just shelter. It’s security; it’s an investment. It’s a chance you can tap into something if an emergency happens. It’s a chance that you now have an asset that you can hold onto, and you can pass off to future generations.”

After retirement funds, housing generally represents the second-most-valuable asset people have, Moore said.

Some now less likely to own homes than in 1980

Yet achieving that homeownership status can feel unattainable to prospective first-time buyers in today’s economy.
Around 30% of young Maryland residents are thinking of leaving the state because of high housing costs, Moore said.
Both renters and homeowners across the U.S. are struggling with high housing costs, according to a 2024 report from the Joint Center for Housing Studies of Harvard University. The number of cost-burdened renters — meaning those who spend more than 30% of their income on rent and utilities — climbed to an all-time high in 2022. At the same time, millions of prospective homebuyers have been priced out by high home prices and interest rates.
Many hopeful first-time home buyers may feel that it was easier for their parents and grandparents’ generations to reach home ownership status.
Research shows those feelings are justified.
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Since 1980, median home prices have increased much faster than median household incomes, according to recent research from the Urban Institute.
Across the country, today’s 35- to 44-years olds — who are in their critical homebuying years — are less likely to be homeowners than in 1980, according to the research.
For that age cohort, the homeownership rate has dropped by more than 10% compared to 45 years ago, the Urban Institute found. Because today’s 35- to 44-year-olds are also forming households at a lower rate, that number is likely understated, according to the research.

Ultimately, that can have lasting impacts on their ability to build wealth, said Jun Zhu, a non-resident fellow at the Urban Institute’s Housing Finance Policy Center.
“When you have a house, when the house appreciates, you’re going to earn home equity,” Zhu said. “Earning home equity is actually a very important way to earn wealth.”
Those 35- to 44-year-olds who are in lower income quartiles have seen the biggest declines in homeownership compared to their peers. That is driven in part by the fact that people who are married are more likely to be homeowners, while lower-income individuals are less likely to be married.
Education is also a factor in widening the homeownership gap, according to the Urban Institute, as a smaller share of heads of households who have the lowest incomes are getting college degrees.

Racial divide in homeownership rates persists

Separate research from the National Association of Realtors also points to a racial divide with regard to housing affordability.
In 2023, the latest data available, the Black homeownership rate of 44.7% saw the greatest year-over-year increase among racial groups but was still well behind the white homeownership rate of 72.4%. Other groups fell in between, with Asians having a 63.4% and Hispanics having a 51% homeownership rate.
Strong wage growth and younger generations reaching prime home buying age contributed to the increase in Black homeownership in 2023, said Nadia Evangelou, senior economist and director of real estate research at the National Association of Realtors.
Yet the Black homeownership rate has stayed below 50% over the past decade, Evangelou said, which means most continue to rent instead of owning. That ultimately limits their ability to grow their net worth and accumulate wealth.  
Policy changes could make it easier for Americans to buy their first home. That could include providing educational opportunities for low-income households, offering down payment assistance and encouraging housing production by reducing zoning restrictions or other regulatory barriers, according to the Urban Institute. More

A view of the Microsoft headquarters in Issy-les-Moulineaux, a suburb southwest of Paris, France, on Jan. 13, 2025.
Mohamad Salaheldin Abdelg Alsayed | Anadolu | Getty Images

Tariffs under the Trump administration have triggered concerns about the impact on demand and fears of a potential recession, roiling the stock market.
Amid the ongoing volatility, the pullback in several stocks with strong fundamentals presents a lucrative opportunity to build a position. Top Wall Street analysts are spotting attractive names with robust long-term growth prospects — and they are trading at compelling levels.

With that in mind, here are three stocks favored by the Street’s top pros, according to TipRanks, a platform that ranks analysts based on their past performance.
Microsoft
First on this week’s list is tech giant Microsoft (MSFT), which is considered to be one of the key beneficiaries of the ongoing artificial intelligence wave. MSFT stock is in the red so far this year due to pressures in the broader market and the weak quarterly guidance issued by the company.
Recently, Jefferies analyst Brent Thill reaffirmed a buy rating on MSFT with a price target of $550, saying that following the recent sell-off, the stock’s risk/reward profile looks attractive at 27-times the next 12 months’ earnings per share. Thill said that despite the recent underperformance, MSFT remains one of Jefferies’ favorite large caps. He sees multiple drivers for the stock to reboot, including the possibility of growth in Azure and M365 Commercial Cloud to stabilize or inflect as AI revenue becomes more significant.
The analyst noted Azure’s continued share gain against Amazon’s Amazon Web Services and solid AI-driven backlog growth, with MSFT seeing 15% backlog growth in the December quarter compared to Amazon’s and Alphabet’s Google Cloud’s 8% and 7% growth rates, respectively. For M365 Commercial Cloud, Thill expects Copilot to continue to experience a solid but gradual adoption that will become more material in Fiscal 2026.
Another driver highlighted by Thill was the continued expansion in MSFT’s operating margin despite significant AI investments. “MSFT’s margin in the mid-40s are still well above large cap peers in the mid 30s,” he said.

Finally, Thill contended that while Microsoft’s free cash flow (FCF) estimates have contracted by 20% since Q4 FY23, he sees the potential for positive revisions to FY26 estimates as capital expenditure growth starts to moderate and AI revenue grows.
Thill ranks No.677 among more than 9,400 analysts tracked by TipRanks. His ratings have been successful 57% of the time, delivering an average return of 7.5%. See Microsoft Ownership Structure on TipRanks.
Snowflake
Cloud-based data analytics software company Snowflake (SNOW) is this week’s second stock pick. The company delivered better-than-expected results for the fourth quarter of fiscal 2025 and issued a solid full-year outlook, driven by AI-related demand.
On March 23, RBC Capital analyst Matthew Hedberg reiterated a buy rating on Snowflake stock with a price target of $221. Following a meeting with the management, the analyst said that he has a “better appreciation for the company’s goal to be the easiest-to-use and most cost-effective cloud enterprise data platform,” for AI and machine learning (ML).
Hedberg views SNOW stock as an attractive pick, especially after the recent pullback, due to its superior management team, a $342 billion market opportunity by 2028, and the right architecture. He also highlighted other positives, including the strength of the core data warehousing and data engineering products and the progress made in AI/ML offerings.
“With 30% growth at a $3.5B scale, multiple idiosyncratic revenue drivers and margin improvement, SNOW remains one of our top ideas,” said Hedberg.
The analyst also highlighted that while Snowflake’s CEO Sridhar Ramaswamy is focused on product innovation, given his experience at Google and Neeva, he is also working equally as hard on improving the company’s go-to-market selling to both data analysts and data scientists.
Hedberg ranks No.61 among more than 9,400 analysts tracked by TipRanks. His ratings have been profitable 64% of the time, delivering an average return of 18.8%. See Snowflake Insider Trading Activity on TipRanks.
Netflix
Finally, let’s look at streaming giant Netflix (NFLX), which continues to impress investors with its upbeat financial performance and strategic initiatives. In fact, the company surpassed the 300 million paid membership mark in Q4 2024.
Recently, JPMorgan analyst Doug Anmuth reiterated a buy rating on Netflix with a price target of $1,150. The analyst noted that NFLX stock has outperformed the S&P 500 so far in 2025, reflecting optimism about the company’s 2025 revenue outlook, solid content slate and growing dominance in the streaming space.
Anmuth thinks that “NFLX should prove relatively defensive against macro headwinds,” given the robust engagement and affordability of the platform coupled with high engagement value. The analyst also highlighted that the company’s low-price ad tier at $7.99 per month in the U.S. makes the service widely accessible.
Aside from robust engagement, Anmuth expects Netflix’s 2025 revenue growth to be bolstered by organic subscriber additions and a rise in average revenue per member due to recent price hikes, with the higher prices expected to drive more than $2 billion in revenue from the U.S. and UK.  
The analyst also expects Netflix to gain from an attractive content slate in 2025, with key releases like The Residence, Harlan Coben’s Caught, Devil May Cry, The Clubhouse: A Year with the Red Sox, Black Mirror Season 7, and You Season 5. Overall, Anmuth has a bullish stance on NFLX due to multiple drivers, including expectations of double-digit revenue growth in 2025 and 2026, continued expansion in operating margin and a multi-year free cash flow ramp.
Anmuth ranks No. 82 among more than 9,400 analysts tracked by TipRanks. His ratings have been profitable 61% of the time, delivering an average return of 19.2%. See Netflix Options Trading Activity on TipRanks. More

If you’ve inherited an individual retirement account, costly mistakes could shrink your balance, experts say.
Since 2020, most non-spouse heirs must follow the “10-year rule,” and IRAs must be depleted by the 10th year after the original account owner’s death.
Starting in 2025, some of these beneficiaries also must take required minimum distributions, or they could face a 25% penalty.

Djelics | E+ | Getty Images

If you’ve inherited an individual retirement account, you may have big plans for the balance — but costly mistakes can quickly shrink the windfall, experts say.
Many investors roll pre-tax 401(k) plans into traditional IRAs, which trigger regular income taxes on future withdrawals. The tax rules are complicated for the heirs who inherit these IRAs.

The average IRA balance was $127,534 during the fourth quarter of 2024, up 38% from 2014, based on a Fidelity analysis of 16.8 million IRA accounts as of Dec. 31.
But some inherited accounts are significantly larger, and errors can be expensive, said IRA expert Denise Appleby, CEO of Appleby Retirement Consulting in Grayson, Georgia.
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Here are some big inherited IRA mistakes and how to avoid them, according to financial experts. 

What to know about the ’10-year rule’

Before the Secure Act of 2019, heirs could empty inherited IRAs over their lifetime to reduce yearly taxes, known as the “stretch IRA.”

But since 2020, certain heirs must follow the “10-year rule,” and IRAs must be depleted by the 10th year after the original account owner’s death. This applies to beneficiaries who are not a spouse, minor child, disabled, chronically ill or certain trusts.
Many heirs still don’t know how the 10-year rule works, and that can cost them, Appleby said.
If you don’t drain the balance within 10 years, there’s a 25% IRS penalty on the amount you should have withdrawn, which could be reduced or eliminated if you fix the issue within two years.

Inherited IRAs are a ‘ticking tax bomb’

For pre-tax inherited IRAs, one big mistake could be waiting until the 10th year to withdraw most of the balance, said certified financial planner Trevor Ausen, founder of Authentic Life Financial Planning in Minneapolis.
“For most, it’s a ticking tax bomb,” and the extra income in a single year could push you into a “much higher tax bracket,” he said.

Similarly, some heirs cash out an inherited IRA soon after receiving it without weighing the tax consequences, according to IRA expert and certified public accountant Ed Slott. This move could also bump you into a higher tax bracket, depending on the size of your IRA.
“It’s like a smash and grab,” he said.
Rather than depleting the IRA in one year, advisors typically run multi-year tax projections to help heirs decide when to strategically take funds from the inherited account.
Generally, it’s better to spread out withdrawals over 10 years or take funds if there’s a period when your income is lower, depending on tax brackets, experts say. 

Many heirs must take RMDs in 2025

Starting in 2025, most non-spouse heirs must take required minimum distributions, or RMDs, while emptying inherited IRAs over 10 years, if the original account owner reached RMD age before death, according to final regulations released in July.
That could surprise some beneficiaries since the IRS previously waived penalties for missed RMDs from inherited IRAs, experts say.
While your custodian calculates your RMD, there are instances where it could be inaccurate, Appleby explained.

For example, there may be mistakes if you rolled over a balance in December or there’s a big age difference between you and your spouse.
“You need to communicate those things to your tax advisor,” she said.
Generally, you calculate RMDs for each account by dividing your prior Dec. 31 balance by a “life expectancy factor” provided by the IRS.
If you skip RMDs or don’t withdraw enough in 2025, you could see a 25% IRS penalty on the amount you should have withdrawn, or 10% if fixed within two years.
But the agency could waive the fee “if you act quickly enough” by sending Form 5329 and attaching a letter of explanation, Appleby said.
“Fix it the first year and tell the IRS you’re going to make sure it doesn’t happen again,” she said. More

Signage on the door of Illumina Inc. offices in Hayward, California, US, on Wednesday, March 5, 2025.
David Paul Morris | Bloomberg | Getty Images

Company: Illumina, Inc. (ILMN)
Business: Illumina provides sequencing-and array-based solutions for genetic and genomic analysis. It offers products and services to customers in a range of markets, enabling the adoption of genomic solutions in research and clinical settings. Its DNA sequencing technology is based on its reversible terminator-based sequencing chemistry, known as sequencing by synthesis biochemistry. Its BeadArray technology combines microscopic beads and a substrate in a manufacturing process to produce arrays that can perform many assays simultaneously.
Stock Market Value: $12.67B ($80.00 per share)

Stock chart icon

Illumina in the past 12 months

Activist: Corvex Management LP

Ownership: ~2.5%
Average Cost: n/a
Activist Commentary: Corvex was founded in 2011 by Keith Meister, Carl Icahn’s former lieutenant who served as CEO and vice chairman of Icahn Enterprises. Corvex is a highly concentrated, fundamentally driven hedge fund that uses activism as a tool, but not a primary strategy. The firm’s preference is not to be an activist, with a proxy fight being a last resort. It would prefer to amicably be invited onto boards.
What’s happening
On March 25, Illumina announced that Keith Meister (founder, managing partner and chief investment officer of Corvex Management) will join the board on March 28. The company also said that Dr. Scott Gottlieb has been elected non-executive chair of the board and that Stephen MacMillan (chairman, president and CEO of Hologic), who joined the board in June 2023, will retire as a director.
Behind the scenes
Illumina (ILMN) is a technology company that sells sequencing machines and consumables required for genomic testing. This business saw a dramatic rise in demand during the Covid-19 pandemic. Revenue surged by about 40% from $3.2 billion to $4.5 billion between 2020 and 2021. In that period, earnings before interest, taxes, depreciation and amortization went from $800 million to $1.1 billion. The stock traded as high as $511 per share in August 2021. Today, revenue is at $4.3 billion, EBITDA is at $900 million and the stock closed Friday at $80.00.

Since Covid, it’s been nothing but bad news for Illumina. Initially, post-pandemic headwinds slowed the demand for sequencing machines as the urgent need for testing waned. But the biggest cause of the company’s underperformance was the costly spin-out, reacquisition and later re-spin of its Grail business. Illumina created Grail in 2015 and spun it out in 2016, retaining a 20% ownership. In September 2020, Illumina agreed to acquire Grail back for $8 billion. They closed the acquisition a year later despite not receiving the approval of the Federal Trade Commission or the European Union, which angered the European Commission. The European Commission ultimately blocked the deal and levied a significant fine. With pressure from Icahn who was an activist at Illumina at the time, the company eventually re-spun Grail in June 2024. However, that is not the end of Illumina’s struggles, as the new political environment has led to more challenges. The company has faced geopolitical setbacks for its Russia and China businesses. Additionally, biotech funding revolving around the uncertain future of the National Institutes of Health has furthered concerns. Once valued at $70 billion, Illumina is now valued at less than $13 billion.
The good news is that all the problems are in the rearview mirror. The pandemic’s impact on the market has long subsided, the Russia and China businesses have been priced out, and the Grail debacle has been resolved. What remains is a streamlined business with a renewed leadership team, including a new CEO, CFO and a refreshed board led by a new chairman. Illumina is now a company that is the market leader in selling gene-sequencing technology. The company controls over 80% of the global market and maintains an installed base of more than 20,000 machines. Illumina operates under a razor-and-blade business model, with the machines themselves having margins of approximately 30%, and the recurring consumable sales that drive sustained revenue have much higher margins at approximately 80%. Since the Grail spinoff was announced, Illumina’s share price has declined further. This is in part due to the one hiccup the company has left: transitioning to a new generation of sequencing technology — the NovaSeq X. This is a natural evolution for this type of business that should drive long-term growth but could result in short-term pressure to revenue.
Now Illumina has announced that it is adding Keith Meister (founder, managing partner and CIO of Corvex Management) to the board, to be appointed on March 28. Meister and Corvex are no strangers to the board room or biotech. In fact, Meister is currently on the board of GeneDx (WGS), a major client of Illumina having integrated its DRAGEN (Dynamic Read Analysis for Genomics) Bio-IT Platform. Corvex is a great investor, and Meister has created value as a director of many companies including Biogen, Motorola, Yum Brands and MGM. Moreover, as a long-term investor Corvex likely sees the short-term challenge to revenue during Illumina’s technology transition as an opportunity. We expect he will be a valuable director as the company goes through this transition.
Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments.
Disclosure: Scott Gottlieb is a CNBC contributor and is a member of the boards of Pfizer, genetic testing startup Tempus, health-care tech company Aetion Inc. and biotech company Illumina. He also serves as co-chair of Norwegian Cruise Line Holdings’ and Royal Caribbean’s “Healthy Sail Panel.” More

The more than 9 million student loan borrowers who are estimated to be late on their payments could experience “significant drops” in their credit scores, the Federal Reserve warns.
Some borrowers might see their scores fall an average of up to 171 points, according to the new report.

A student works in the library on the campus of American University in Washington, D.C., U.S., March 20, 2025.
Nathan Howard | Reuters

The more than 9 million student loan borrowers who are estimated to be late on their payments could experience “significant drops” in their credit scores during the first half of 2025, the Federal Reserve Bank of New York warns.
Some people with a student loan delinquency could see their scores fall by as much as 171 points, the Fed writes in a March 26 report. Credit scores, which impact people’s ability and costs to borrow, typically range from 300 to 850, with around 670 and higher considered good.

The expected drop was highest for borrowers who start with the best scores. Among those with scores under 620, the reported new delinquency could lead to an average 87-point decline.
“Although some of these borrowers may be able to cure their delinquencies,” the Fed writes, “the damage to their credit standing will have already been done and will remain on their credit reports for seven years.”
It’s been a long time since federal student loan borrowers have needed to worry about the consequences of missed payments, which can also include the garnishment of wages and retirement benefits. That’s because collection activity was suspended during the pandemic and for a while after. That relief period officially expired on Sept. 30, 2024.

As student loan delinquencies appear on credit reports again this year, borrowers are likely to face a cascade of financial consequences, said Doug Boneparth, a certified financial planner and the founder and president of Bone Fide Wealth in New York.
“This credit score penalty restricts their access to affordable financing, locking them into a cycle of elevated borrowing costs and fewer opportunities to rebuild their financial stability,” said Boneparth, who is a member of CNBC’s Advisor Council.

Student loan borrowers can protect their credit

Student loan borrowers struggling to make their payments have options to stay on track and protect their credit, consumer advocates say.
For one, finding an affordable repayment plan can lower your chances of falling behind on your bills. 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 monthly payment of zero.
The Education Department recently re-opened several IDR plan applications, following a period during which the plans were unavailable.
Borrowers can also apply for a number of deferments or forbearances, which can pause your payments for a year or more. It may show up on your credit report that you’re not currently making payments on your loan, but you shouldn’t be flagged as late, said higher education expert Mark Kantrowitz.
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Additionally if you’re already in default on your loans, you should consider rehabilitating or consolidating your debt to return to a current status, 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 website 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.
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. More

Despite economic pessimism, many Americans are still spending, some of which is driven by fear of future price hikes and ongoing uncertainty.
Behavioral scientists suggest volatility and fear are triggering impulsive, fear-driven purchases.
The S&P 500 fell 10% from recent highs in February, signaling Wall Street’s unease about the economy.

Consumer confidence in where the economy is headed hit a 12-year low this week, according to the Conference Board. A fresh reading out of University of Michigan today also showed a deterioration in overall sentiment with a 12% drop from February, marking the third month of decline.
Despite Americans’ concerns about the economy, they seem to be spending more. Roughly one in five Americans are shopping out of fear of future price hikes, which some experts refer to as doom spending.

Doom spending means making impulsive purchases largely driven out of fear over what the future may bring. In some cases, it’s a kind of retail therapy, but it can also be a strategy to get ahead of economic uncertainty.
“People are worried for a number of reasons,” Wendy De La Rosa, a Wharton professor who studies consumer behavior, told CNBC. “We as humans hate uncertainty and are averse to volatility. And so when there’s whiplash happening at a national level as to what tariffs are happening with which country and how it’s going to affect our domestic industries, that makes people really nervous.”
Consumer spending came in softer than expected in last month, but overall sales continued to grow steadily amid mounting fears of an economic slowdown and inflation.
It’s not just consumers who are concerned. Major companies, such as Walmart, Delta, and American Airlines, along with the Federal Reserve and Wall Street are all signaling uncertainty. The S&P 500 dropped 10% from record highs in February, suggesting investor fears over an economic slowdown.
Watch the video above to learn why Americans are spending more even in tough times and what this pattern means for the economy. More