Markus Andrews

President Joe Biden on Monday unveiled a new student loan forgiveness plan that could provide up to $20,000 in interest relief and debt cancellation for certain groups.
While forgiveness before 2026 won’t trigger a federal tax bill, borrowers could owe taxes on future debt cancellation, experts say.

US President Joe Biden speaks about student loan relief at Madison College in Madison, Wisconsin, on April 8, 2024. 
Andrew Caballero-reynolds | AFP | Getty Images

Tax treatment of student loan forgiveness

Student loan forgiveness is federally tax-free through 2025 — thanks to a provision from the American Rescue Plan Act of 2021. Biden wants to make that policy permanent, according to his 2025 fiscal year budget. But the future taxability of student loan forgiveness is unclear.
If Biden’s new plan is finalized as proposed and borrowers receive cancellation before 2026, the forgiven balance won’t incur federal taxes.
However, some borrowers could still see a state tax bill, according to Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.

Many states have conformed to federal rules on the taxability of student loan forgiveness. But borrowers shouldn’t assume there won’t be state liability, he said.
“You need to take that into account and understand what your state is going to do,” Lucas added.

Borrowers could owe taxes after 2025

If you’re slated to receive student loan forgiveness under an income-driven repayment plan after 2025, that’s not automatically tax-free, explained CFP Ethan Miller, founder of Planning for Progress in the Washington, D.C., area.
Biden’s proposal to cancel student loan interest could reduce balances. But if tax-free forgiveness isn’t extended, “some borrowers are potentially facing a pretty large tax bill down the line,” said Miller, who specializes in student loans.
For example, if you received $50,000 in forgiveness after 2025, and you’re in the 22% tax bracket, your federal tax liability could be $11,000.

Plus, federal income tax brackets are scheduled to rise after 2025 due to an expiring provision from the Tax Cuts and Jobs Act of 2017.
After 2025, the individual tax brackets will revert to 10%, 15%, 25%, 28%, 33%, 35% and 39.6%, which “could be a double whammy for some people,” Miller said. 
Depending on your situation, higher income from taxable student loan forgiveness could cause “a chain of [tax] consequences,” such as phaseouts for other tax breaks, Lucas said.

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TikTok has become one of the most popular sources for financial tips and advice, particularly among Generation Z.
“Cash stuffing,” the “100 envelope” method and the “no-spend” challenge are a few of the latest money saving trends going viral.
Rather than hop on the newest fad, which may be hard to sustain in the long run, establishing a routine is necessary for building wealth, experts say.

If you’re having money problems, someone on TikTok has a solution.
Between “cash stuffing,” the “100 envelope” method or the “no-spend” challenge, there’s no shortage of suggestions to better your financial standing.

“The gamification can be kind of fun,” said Ted Rossman, senior industry analyst at Bankrate. But like any other quick fix, these can be hard to maintain over time, he added.

How these savings challenges work

The “100 envelope” method suggests saving a dollar more each day for 100 days. On the first day you’ll set aside $1, then $2 the next day and so on, so by the end of the 100-day period, you will have more than $5,000 set aside.
The approach has proved so popular, there are now more than 1,000 specifically designed kits, trackers and binders dedicated to this money-savings trend for sale on Amazon.
More from Personal Finance:’Loud budgeting’ is having a moment Nearly half of young adults have ‘money dysmorphia’What to know before taking advice from TikTok
More young adults are also trying another envelope method, or “cash stuffing,” to stay on budget and out of debt.

The premise is simple: Spending money is divided up into envelopes representing your monthly expenses, such as groceries and gas. When the cash in one envelope is spent, you’re either done spending in that category for that month, or you need to borrow from another envelope.
Alternatively, the “no-spend” challenge advocates eliminating all nonessential purchases altogether for a week, a month or even a full year, and putting the money that would go otherwise go to Starbucks coffees, dinners out and new clothes toward a long-term financial goal.

‘Walk before you run’

“I would definitely stress walking before you run,” Rossman said.
Rather than hop on the latest extreme fad, which may be hard to sustain, “it comes back to setting a budget and setting expectations,” he said.
Budgeting can help to balance immediate, short-term and long-term needs, data from The Pew Charitable Trusts found, and automatic savings can reduce the effort required to rebuild savings.
Rossman advises having money regularly transferred from your paycheck to a savings account. “You’re less likely to miss what you don’t see,” he said.

Establishing such a routine is necessary for building wealth, other experts also say.
There’s no secret to successful money habits, added Matt Schulz, chief credit analyst at LendingTree and author of “Ask Questions, Save Money, Make More.”
“With diets or with money, sometimes these fads catch fire, but the truth is that success with eating healthy or saving money is just about doing the same boring things consistently over and over again over time,” Schulz said.
“It may not make for great TikTok content, but it really is the wisest way to go about doing things,” he added.

A better way to save

TikTok’s latest savings trends seem like a good idea “with a relatively low ceiling,” Schulz said, however, “if there’s ever been a time when you shouldn’t stick your money in a binder, it’s today when you can get 4% to 5% or more back in these high yield savings accounts.”
After a series of interest rate hikes from the Federal Reserve, some top-yielding online savings account rates are now paying even more than 5%, according to Bankrate.com — well above the rate of inflation.
For example, if you have $5,000 in a high-yield savings account earning 5%, you’ll make roughly $250 in interest in a year.

Other downsides of keeping cash

Stashing cash not only forfeits the best returns in decades, it also leave you vulnerable to theft and could forgo the protections that come with consumer banking.
Whether and to what extent you are covered in case of a burglary may depend on your home insurance policy, whereas banks are covered by the FDIC, which insures your money for up to $250,000 per depositor, per account ownership category.

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The U.S. had 550 “million-dollar” cities, or areas where the typical home is worth more than $1 million, in February, according to a new analysis by Zillow.
The boost in high-value areas is a reflection of tight supply and high demand, according to Skylar Olsen, chief economist at Zillow.
Naples, Florida, boasts the most expensive home for sale in the U.S., which hit the market in February for $295 million.

Jon Lovette | Stone | Getty Images

There is a record number of areas in the U.S. where the “typical” home is worth $1 million or more.
In February, the country had 550 “million-dollar” cities, or areas where the “typical” home value is $1 million or more, according to a new analysis by Zillow. That is a gain of 59 cities from 2023, and edges out the previous record of 522 such cities when home values peaked in 2022.

The boost in million-dollar cities is a result of the mortgage lock-in effect, which deterred homeowners with extremely low rates from listing their properties for sale, said Skylar Olsen, chief economist at Zillow. The dynamic is keeping supply limited in some markets and elevating sale prices for those few available properties.

Some places have lost ‘million-dollar city’ status

California has the most million-dollar cities, with 210. That is 12 more than a year ago and more than the next five runner-up states — New York, New Jersey, Florida, Massachusetts and Colorado — combined, Zillow found.

Even though there are more million-dollar cities this year, the record amount is connected to how the lock-in effect is affecting an area’s supply, according to Olsen.
“The seller is as sensitive to the interest rate [as buyers],” she said.
Meanwhile, some areas lost the “million-dollar” status. In places where many homeowners already had interest rates between 6% and 7%, the lock-in effect is not as strong.
Such places are seeing an increase in supply with more sellers willing to put homes on the market, Olsen said.
“In those places where we’ve lost million-dollar cities … they’re not as locked in, and they have a lot more of that new construction that helps that picture, too,” she said.

Florida lost three million-dollar cities — Siesta Key, Santa Rosa Beach and Sanibel — while Texas lost Sunset Valley and Volente, two areas near Austin.
But it is hard to say if that is a trend, Channel said. Florida and Texas are both states that are still homes to high-cost, luxury markets, with 32 and 14 million-dollar cities, respectively, in February, per Zillow data.
Naples, Florida, also boasts the most expensive home for sale in the U.S., which hit the market in February for $295 million.

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Bank customers who have trust accounts may see their FDIC insurance coverage limits lowered due to new changes that went into effect April 1.
Here’s what you need to know to make sure your deposits are fully insured.

JGI/Jamie Grill

If you have more than $250,000 in deposits at a bank, you may want to check that all of your money is insured by the federal government.
The Federal Insurance Deposit Corporation, or FDIC, implemented new requirements for deposit insurance for trust accounts starting April 1.

While the FDIC’s move is intended to make insurance coverage rules for trust accounts simpler, it may push some depositors over FDIC limits, according to Ken Tumin, founder of DepositAccounts and senior industry analyst at LendingTree.

As part of its National Financial Literacy Month efforts, CNBC will be featuring stories throughout the month dedicated to helping people manage, grow and protect their money so they can truly live ambitiously.

The FDIC is an independent government agency that was created by Congress following the Great Depression to help restore confidence in U.S. banks.
FDIC insurance generally covers $250,000 per depositor, per bank, in each account ownership category.
If you have $250,000 or less deposited in a bank, the new changes will not affect you.

How FDIC coverage of trust accounts has changed

Under the new rules, trust deposits are now limited to $1.25 million in FDIC coverage per trust owner per insured depository institution.

Each beneficiary of the trust may have a $250,000 insurance limit for up to five beneficiaries. However, if there are more than five beneficiaries, the FDIC coverage limit for the trust account remains $1.25 million.
“For those who do go above $1.25 million under the old system, they definitely should be aware that changed,” Tumin said.

That may cause coverage reductions for certain investments that were established before these changes. For example, investors with certificates of deposit that are over the coverage limit may be locked into their investment if they do not want to pay a penalty for an early withdrawal.
“If you’re in that kind of shoes, you have to work with the bank, because you might not be able to close the account or change the account until it matures,” Tumin said.
The FDIC is also now combining two kinds of trusts — revocable and irrevocable — into one category.
Consequently, investors with $250,000 in a revocable trust and $250,000 in an irrevocable trust at the same bank may have their FDIC coverage reduced from $500,000 to $250,000, according to Tumin.
“That has the potential of causing loss of coverage, too,” Tumin said.

The agency is also revising requirements for informal revocable trusts, also known as payable on death accounts. Previously, those accounts had to be titled with a phrase such as “payable on death,” to access trust coverage limits. Now, the FDIC will no longer have that requirement and instead just require bank records to identify beneficiaries to be considered informal trusts.
“The bank no longer has to have POD in the account title or in their records as long as the beneficiaries are listed somewhere in the bank records,” Tumin said.
To amplify FDIC coverage beyond $250,000, depositors have several other options in addition to trust accounts.
That includes opening accounts at multiple FDIC-insured banks; opening a joint account for two people, which would bring the total coverage to $500,000; or opening accounts with different ownership categories, such as a single account and joint account.

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The IRS has released an “important update” for Direct File, the agency’s free tax filing program.
Direct File users can now automatically import key return verification details from the IRS, which has been the top mistake before filing, a Treasury official said.
The pilot is available for certain taxpayers in 12 states and will remain open for rejected returns until April 20.

D3sign | Moment | Getty Images

With one week until the April 15 federal tax deadline, the IRS has released an “important update” for Direct File, the agency’s free tax filing program.
Since March 12, the pilot program has been fully open for certain filers in 12 states, and Direct File now allows users to import key details needed to verify returns before filing.

When e-filing your taxes, you validate your return before filing by inputting the previous year’s adjusted gross income or the prior year’s temporary pin. Tax software typically adds this info for returning customers, but first-time users must add it manually.
This key step has been the main issue preventing Direct File returns from being successfully filed, according to a Treasury official.
But as of Monday, Direct File users can now import these verification details from the IRS, which could minimize the common error. Taxpayers can only access details from their own IRS account, which has identity verification, a Treasury official said.
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Direct File will remain open for rejected returns until April 20, a Treasury official said.

Who qualifies for the Direct File pilot

Another common reason for abandoned Direct File returns has been tax situations not covered by the pilot, such as Forms 1099, according to a Treasury official.
“Direct File eligibility is limited to those with simple tax returns this filing season,” Deputy Secretary of the Treasury Wally Adeyemo said during a press call in March. “But a large percentage of Americans qualify.”
The IRS Direct File pilot states include Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington and Wyoming.

The pilot will only accept Form W-2 wages, Social Security retirement income, unemployment earnings and interest of $1,500 or less. This excludes filers with contract income reported via Form 1099-NEC, gig economy workers or self-employed filers.
To qualify, you must claim the standard deduction, which is $13,850 for single filers and $27,700 for married couples filing jointly for 2023.
Direct File only accepts a few credits: the earned income tax credit, child tax credit and credit for other dependents. The software also accepts deductions for student loan interest and educator expenses.
In March, the Treasury Department estimated that one-third of federal income tax returns could use Direct File this season and 19 million taxpayers may currently be eligible.
The agency hopes to see 100,000 filings this season, a senior administrative official said in March. That works out to roughly 0.5% of those eligible filers. Roughly 60,000 taxpayers have used Direct File so far and the agency expects volume to increase ahead of the deadline, according to a Treasury official.

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President Joe Biden’s new plan to “cancel runaway interest” on student loans may reach as many as 25 million borrowers.
It is the provision that might prove to be the most wide-reaching of the president’s revised relief program, which he hopes will stand up to any legal challenges this time.

U.S. President Joe Biden speaks as he announces a new plan for federal student loan relief during a visit to Madison Area Technical College Truax Campus, in Madison, Wisconsin, U.S, April 8, 2024. 
Kevin Lamarque | Reuters

Interest provision may erase up to $20,000 per borrower

Consumer advocates have long criticized the fact that interest rates on federal student loans may exceed 8%, which can make it tough for borrowers who fall behind or are on certain payment plans to reduce their balances.
More than 25 million federal student borrowers owe more than they originally borrowed, according to the Biden administration.

It estimates that, if its new plan is enacted as proposed, borrowers will get up to $20,000 of unpaid interest on their federal student debt forgiven, regardless of their income.

Certain low- and middle-income borrowers may benefit even more.
Single people who earn $120,000 or less, and married borrowers making $240,000 or under, could have the entire amount of interest that has accrued on their debt since they entered repayment canceled under Biden’s plan.
Borrowers would need to be enrolled in an income-driven repayment plan to qualify but shouldn’t have to apply for the relief.
“Student debt interest capitalization has been keeping families from accessing their version of the American Dream,” said Jaylon Herbin, director of federal campaigns at the Center for Responsible Lending. “Erasing that debt will lessen the burden of student loan debt on millions of borrowers and allow them to pay off their loans in a timely manner.”

Who may benefit from new forgiveness plan

In addition to the cancellation of interest, Biden’s new plan is also expected to forgive the debt of certain groups of borrowers, including those who:

Are already eligible for debt cancellation under an existing government program but haven’t yet applied
Have been in repayment for 20 years or longer on their undergraduate loans, or over 25 years on their graduate loans
Attended schools of questionable value
Are experiencing financial hardship

It’s not entirely clear yet how financial hardship will be defined, but it could include those burdened by medical debt or high child care expenses, the Biden administration said.

Biden originally attempted to cancel people’s student debt through executive action, but he’s now turned to the rulemaking process. The next step in that procedure is for the Biden administration to issue a proposed rule on its plan, which will be followed by a public comment period.
The president hopes to begin forgiving student debt before the November election. More

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President Joe Biden announced a new student loan forgiveness plan Monday, which could benefit as many as 30 million people, according to estimates.
Biden’s Plan B targets five specific groups of borrowers.
Here’s who could qualify for the new relief effort.

1. Borrowers with ‘runaway interest’

More than 25 million borrowers owe more than they originally borrowed in federal student loans because of accrued interest charges, according to the Biden administration.
As part of this plan, those borrowers could get up to $20,000 of unpaid interest on their debt forgiven, regardless of income. Certain low- and middle-income borrowers, if they’re enrolled in an income-driven repayment plan, could have the entire interest balance that has accrued on their federal loan debt since they entered repayment canceled.
Anyone enrolled in the Saving on a Valuable Education Plan, or SAVE, or any other income-driven repayment plan would be eligible without having to apply.

As part of its National Financial Literacy Month efforts, CNBC will be featuring stories throughout the month dedicated to helping people manage, grow and protect their money so they can truly live ambitiously.

2. Borrowers eligible for forgiveness programs, who haven’t applied

Consumer advocates and borrowers have complained that the government’s debt forgiveness programs can be hard to know about and to access.

Biden’s new plan is also expected to cancel debt for borrowers who are otherwise eligible for relief through Public Service Loan Forgiveness or SAVE or other income-driven repayment plans, but have not successfully applied.
The Department of Education will review the accounts of borrowers to identify who could be eligible for this type of relief, which would go into effect automatically, the administration said.

3. Borrowers who entered repayment over 20 years ago

Another 2.5 million borrowers would benefit from the forgiveness of student loans that have been held for two decades or longer.
Borrowers with undergraduate debt would qualify for forgiveness if they first entered repayment on or before July 1, 2005, and borrowers with any graduate school debt would qualify if they first entered repayment on or before July 1, 2000, the administration said. Both direct loans and consolidated loans are eligible for relief. 

4. Borrowers who enrolled in ‘low-value’ colleges

Graduates with loans from “low-value” institutions or programs would also be eligible for loan forgiveness.
Under this part of the plan, borrowers who attended institutions or programs that closed or “failed to provide sufficient value” — meaning that graduates were left no better off than someone with a high school diploma — could apply for relief.
“Low-value” institutions are generally colleges that lost their eligibility to participate in the Federal Student Aid program or were denied recertification because they cheated or took advantage of students, according to the Biden administration.
Along these same guidelines, the Education Department has already canceled the student loans of more than 1 million students who attended certain for-profit schools, including Corinthian Colleges and ITT Technical Institute.

5.  Borrowers experiencing ‘hardship’

While harder to quantify, “millions of borrowers could be eligible for relief if they are experiencing hardship in their daily lives that prevent them from fully paying back their loans now or in the future,” the administration said. This piece of the plan would cancel student debt for borrowers who are at high risk of defaulting on their student loans or families burdened with other expenses like medical debt or child care.
With higher debt burdens, Black and Latino borrowers will benefit disproportionately from this relief, the White House also said.
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[This stream is set to start at 2:15 p.m. ET.]
President Joe Biden will announce on Monday the details of his new student loan forgiveness plan, which could affect tens of millions of Americans.

Immediately after the Supreme Court rejected Biden’s first attempt at wide-scale education debt cancellation, the president said he would seek to forgive the loans another way.
Despite its smaller scope than Biden’s first education debt relief plan, this new aid package could still lead to at least partial forgiveness for 25 million Americans, the Biden administration said.
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The plan, if enacted as proposed, would cancel up to $20,000 in unpaid interest for millions of borrowers.
In addition, the program is expected to forgive the debt of certain groups of borrowers, including those who:

Are already eligible for debt cancellation under an existing government program but have not yet applied
Have been in repayment for 20 years or longer on their undergraduate loans, or more than 25 years on their graduate loans
Attended schools of questionable value
Are experiencing financial hardship

The U.S. Department of Education could begin forgiving the debt as soon as this fall.

Student loan forgiveness and the presidential election

Biden wants to make good on his 2020 campaign promise to forgive student debt ahead of the November election.
Almost half of voters in a recent survey, or 48%, said canceling student loan debt is an important issue to them in the 2024 presidential and congressional elections. SocialSphere, a research and consulting firm, polled 3,812 registered voters, including 2,601 Gen Z and millennial respondents, in mid-March.
Forgiving student debt could especially help Biden with young voters, a demographic he has been struggling with. About 70% of Gen Z respondents said student debt cancellation was important to them in the election, that same survey found. More than half, or 53%, of respondents in that generation said they or someone in their household has student debt.

The issue is a chance for Biden to differentiate himself from his likely Republican opponent Donald Trump, who has a record of opposing debt relief for students.
While in office, the former president called for the elimination of the popular Public Service Loan Forgiveness program, signed into law by President George W. Bush in 2007. Trump also sided with the Supreme Court in its ruling to strike down Biden’s plan.
“Today, the Supreme Court also ruled that President Biden cannot wipe out hundreds of billions, perhaps trillions of dollars, in student loan debt, which would have been very unfair to the millions and millions of people who paid their debt through hard work and diligence; very unfair,” Trump said at a campaign event in June 2023.  More