Investing

Hiring and quitting slowed in November, while layoffs remain historically low, according to the U.S. Labor Department’s monthly Job Openings and Labor Turnover Survey.
This means job security is strong for existing workers, while the unemployed may have trouble finding a new gig.
Companies may be encouraged in 2024 if the Federal Reserve starts cutting interest rates.

Maskot | Maskot | Getty Images

U.S. Department of Labor data issued Wednesday suggests a two-tiered job market has emerged, in which workers enjoy strong job security while the unemployed may have trouble finding a new gig.
“There’s a bifurcated labor market,” said Julia Pollak, chief economist at ZipRecruiter. “There are haves and have nots.”

Hiring has slowed, but so have layoffs

Companies hired nearly 5.5 million people in November, the fewest since 2017, according to the monthly Job Openings and Labor Turnover Survey. The hiring rate — the number of hires during the month as a percent of employment — was 3.5% in November, the lowest since 2014.
These comparisons exclude the early days of the Covid-19 pandemic, in March 2020 and April 2020.
More from Personal Finance:Expert predictions for interest rates in 2024How investors can prepare for potential interest rate cuts in 2024Why 2024 could be the year student loan borrowers finally get forgiveness
Further, the quits rate — a barometer of workers’ willingness or ability to leave jobs — declined to 2.2% in November, according to JOLTS data. That’s “still solid” but not as strong as its pre-pandemic high point in 2019, wrote Daniel Zhao, lead economist at career site Glassdoor.
Meanwhile, layoffs continue to hover near historic lows, contrasting with weaker hiring and job turnover. The layoff rate was unchanged at 1% in November. It had never dipped to that level, or below, before March 2021.

What this all means: Hiring and job hopping have slowed but companies are still loath to let go of their existing workers, amounting to greater job security for the average worker relative to past years.
The average worker’s odds of being let go are “unusually low,” Pollak said. “You can sit pretty.”
However, the hiring processes may be “pretty slow and cautious” for the unemployed and for job seekers, Pollak added.
“Expect to do more interviews and face a little bit more resistance in that process,” she said.

Weaker data isn’t ‘flashing a red flag yet’

The labor market has been cooling gradually from red-hot levels in 2021 and 2022 as the U.S. economy reemerged from its pandemic-era shutdown.
The Federal Reserve raised borrowing costs to rein in the economy and labor market to tame persistently high inflation. While the central bank seems poised to start reducing interest rates in 2024, the aggregate effect of its policy seems to be weighing on the job market, economists said.
That said, there doesn’t seem cause for concern just yet, they added. Data suggests the economy is heading for a “soft landing,” a Goldilocks scenario in which the Fed tames inflation without triggering a recession.

“Soft quits (& hires) are not flashing a red flag yet, but they’re certainly not pointing to an overheated job market,” Zhao wrote.
The unemployment rate, which was 3.7% in November, is also low by historical standards.  
Companies may be encouraged if the Fed starts cutting interest rates and ramps up hiring, Pollak said.
There are some “glimmers of hope.” Job openings increased in the interest-rate-sensitive construction and durable goods manufacturing sectors in November, for example, suggesting there’s rising confidence about potential future growth and investment, she added.
Of course, there’s risk the labor market could cool further from here.
“Increasingly JOLTS signals to me that we may be edging past the point of a soft landing” and into a labor market cooler than 2019 levels, Zhao said.Don’t miss these stories from CNBC PRO: More

If you’re still on the fence about partaking in Dry January, there’s another incentive to consider: the financial savings.
“Drinking alcohol is expensive,” said Casey McGuire Davidson, a sobriety coach.
Davidson found herself with an extra $500 in her first month without alcohol. Eight years later, she has saved more than $48,000.

Gu Studio | E+ | Getty Images

When Tracye Polson gets home from work, she pours herself a glass of Chardonnay. “It’s really about a ritual, and relaxing,” said Polson, 64, a social worker in Jacksonville, Florida.
This month, she’ll need to find other ways unwind — she’s trying Dry January. Polson was largely motivated to forgo alcohol for 31 days for health reasons. She has survived breast cancer and has high cholesterol.

But she’s also looking forward to spending less in the coming weeks. The bottles of wine she buys cost about $20 each, and drinks out on the weekends also add up.
More from Personal Finance:This strategy can help you meet New Year’s resolution goalsStudent loan borrowers won’t face missed payments penaltiesFewer students are enrolling in college
If you’re still on the fence about partaking in Dry January, the financial savings are a notable incentive to consider.
“Drinking alcohol is expensive,” said Casey McGuire Davidson, a sobriety coach. “Whether you’re opening a bottle of wine at home or having cocktails out at a bar, the money adds up quickly.”
When Davidson stopped drinking in 2016, she found herself with an extra $500 in her first month. Eight years later, she estimates that she has saved more than $48,000.

“My husband always comments on what a cheap date I am now that I no longer drink,” Davidson said.
Between 15% and 19% of people have participated in Dry January over the past couple of years, according to research by Morning Consult.

One month can lead to ‘lasting change’

Even a month without drinking can have long-term benefits on your wallet and health, experts say.
People in Britain who participated in Dry January were drinking less than they used to even six months after the challenge, a 2016 study in Health Psychology found.
“It is a great way for people to be mindful about how much they are drinking,” said certified financial planner and physician Carolyn McClanahan, founder of Life Planning Partners in Jacksonville, Florida. McClanahan, a member of CNBC’s Financial Advisor Council, is also trying Dry January.
“Engaging in a month-long challenge like Dry January often serves as a catalyst for lasting change,” Davidson added.
Many of her clients, she said, are concerned about what they’re spending on alcohol, “while others don’t even want to add up the money because they don’t really want to know.”
You can estimate how much your drinking habit costs you on the U.S. Department of Health and Human Services website, with its alcohol spending calculator.
Four drinks a week at $10 a pop — roughly the typical price for a glass of wine at a bar or restaurant — would cost $2,080 a year. Seven drinks a week at that price point would be a $3,640 annual expense. Meanwhile, the norm for a glass of wine in the Bay Area is now $17, while a $20 cocktail in New York is not unusual.

Throughout the month, it can be motivating to keep a tally of the money you are not spending, Davidson said. On the app I’m Done Drinking, you can get a breakdown of how much you’re saving — in dollars and calories.
“It provides a tangible representation of progress,” Davidson said.

Savings go beyond the cost of alcohol

The savings of stopping drinking or cutting back go far beyond the alcohol itself, said Danielle Dick, a psychologist and the director of the Rutgers Addiction Research Center.
“When you’re under the influence, you may be more likely to spend money in other reckless ways,” Dick said. For example, people may make impulsive online purchases when they’re inebriated, she said.

Alena Frolova | Moment | Getty Images

“It’s likely that practicing Dry January will also cut back on restaurant meals, saving substantial dollars,” added CFP Cathy Curtis, founder and CEO of Curtis Financial Planning in Oakland, California.
Curtis, who is also a member of CNBC’s FA Council, is not doing Dry January. She and her husband, Rob, spent the new year in wine country in California.
Still, she said, “the older I get, the more mindful I am about alcohol consumption because I realize it is not good for my health.” “Damp Drinking,” which focuses on moderating alcohol consumption, has been trending on TikTok.
Indeed, “the less alcohol you drink, the lower your risk for cancer,” the Centers for Disease Control and Prevention states on its website. Many studies have also found that participation in Alcoholics Anonymous lowered health-care costs.
“For individuals who are heavier drinkers, reducing substance use over time could reduce many health-related expenses,” Dick said.
CNBC FA Council member Ivory Johnson, a CFP and founder of Delancey Wealth Management in Washington, D.C., put it another way: “Getting sick is a lot more expensive than a bottle of bourbon,” he said.Don’t miss these stories from CNBC PRO: More

The Federal Reserve’s period of policy tightening appears to be over, opening the door to lower borrowing costs in the year ahead.
Bankrate’s chief financial analyst Greg McBride says most types of consumer loans will be cheaper by the end of 2024.
From mortgage rates and credit cards to auto loans and savings accounts, here are his predictions for where rates are headed.

The Federal Reserve’s effort to bring down inflation has so far been successful, a rare feat in economic history.
The central bank signaled in its latest economic projections that it will cut interest rates in 2024 even with the economy still growing, which would be the sought-after path to a “soft landing,” where inflation returns to the Fed’s 2% target without causing a significant rise in unemployment.

“Rates are headed lower,” said Tim Quinlan, senior economist at Wells Fargo. “For consumers, borrowing costs would fall accordingly.”
More from Personal Finance:Americans are ‘doom spending’ The first step to setting an annual budgetThis strategy can help you meet New Year’s resolution goals
Most Americans can expect to see their financing expenses ease in the year ahead, but not by much, cautioned Greg McBride, chief financial analyst at Bankrate.
“We are in a high interest rate environment, and we’re going to be in a high interest rate environment a year from now,” he said. “Any Fed cuts are going to be modest relative to the significant increase in rates since early 2022.”
Although Fed officials indicated as many as three cuts coming this year, McBride expects only two potential quarter-point decreases toward the second half of 2024. Still, that will make it cheaper to borrow.

From mortgage rates and credit cards to auto loans and savings accounts, here are his predictions for where rates are headed in the year ahead:
Prediction: Credit card rates fall just below 20%
Because of the central bank’s rate hike cycle, the average credit card rate rose from 16.34% in March 2022 to nearly 21% today — an all-time high.
Going forward, annual percentage rates aren’t likely to improve much. Credit card rates won’t come down until the Fed starts cutting and even then, they will only ease off extremely high levels, according to McBride.
“The average rate will remain above the 20% threshold for most of the year,” he said, “and eventually dip to 19.9% by the end of 2024 as the Fed cuts rates.”
Prediction: Mortgage rates decline to 5.75%
Thanks to higher mortgage rates, 2023 was the least affordable homebuying year in at least 11 years, according to a report from real estate company Redfin.
But rates are already significantly lower since hitting 8% in October. Now, the average rate for a 30-year, fixed-rate mortgage is 6.9%, up from 4.4% when the Fed started raising rates in March of 2022 and 3.27% at the end of 2021, according to Bankrate.
McBride also expects mortgage rates to continue to ease in 2024 but not return to their pandemic-era lows. “Mortgage rates will spend the bulk of the year in the 6% range,” he said, “with movement below 6% confined to the second half of the year.”
Prediction: Auto loan rates edge down to 7%
When it comes to their cars, more consumers are facing monthly payments that they can barely afford, thanks to higher vehicle prices and elevated interest rates on new loans.
The average rate on a five-year new car loan is now 7.71%, up from 4% when the Fed started raising rates, according to Bankrate. However, rate cuts from the Fed will take some of the edge off of the rising cost of financing a car, McBride said, helped in part by competition between lenders.
McBride expects five-year new car loans to drop to 7% by the end of the year.
Prediction: High-yield savings rates stay over 4%
Top-yielding online savings account rates have made significant moves along with changes in the target federal funds rate and are now paying more than 5% — the most savers have been able to earn in nearly two decades — up from around 1% in 2022, according to Bankrate.
Even though those rates have likely peaked, “yields are expected to remain at the highest levels in over a decade despite two rate cuts from the Fed,” McBride said.
According to his forecast, the highest-yielding offers on the market will still be at 4.45% in the year ahead. “It will still be a banner year for savers when those returns are measured against a lower inflation rate,” McBride said.
Don’t miss these stories from CNBC PRO:

Subscribe to CNBC on YouTube. More

Monday – Friday, 5:00 – 6:00 PM ET

Fast Money Podcast
Full Episodes

Investor Steve Eisman of “The Big Short” fame is questioning the level of bullishness on Wall Street — even with the market’s tepid start to the year.
From enthusiasm surrounding the “Magnificent Seven” technology stocks to expectations for multiple interest rate cuts this year, Eisman believes there’s little tolerance for things going wrong.

“Long term, I’m still very bullish. But near term I just worry that everybody is coming into the year feeling too good,” the Neuberger Berman senior portfolio manager told CNBC’s “Fast Money” on Tuesday.
On the year’s first day of trading, the tech-heavy Nasdaq fell 1.6% percent, the S&P 500 fell 0.6%, and the Dow eked out a gain. The major indexes are coming off a historically strong year: The Nasdaq rallied 43%, while the S&P 500 soared 24%. The 30-stock Dow was up nearly 14% in 2023.
“The market climbed a wall of worry the whole year. So, now here we are a year later, and everybody including me has a pretty benign view of the economy,” Eisman said. “It’s just that everybody is coming into the year so bullish that if there are any disappointments, you know, what’s going to hold the market up?”
Eisman notes that fewer rate hikes than expected in 2024 could emerge as a negative short-term catalyst. The Federal Reserve has penciled in three rate cuts this year, while fed funds futures pricing suggests even more trimming. Eisman thinks these expectations are too aggressive.
“The Fed is still petrified of making the mistake that [former Fed Chief Paul] Volcker made in the early ’80s where he stopped raising rates, and inflation got out of control again,” said Eisman. “If I’m the Fed and I’m looking at the Volcker lesson, I say to myself ‘What’s my rush? Inflation has come in.'”

Yet, Eisman suggests it’s still a wait-and-see situation.
“If you had to lay your life on the line, I’d say one [cut] unless there’s a recession. If there’s no recession, I don’t see any reason why the Fed needs to be aggressive at cutting rates,” he said. “If I’m in [Fed chief Jerome] Powell’s seat, I pat myself on the back and say ‘job well done.'”

‘Housing stocks are justified’

Eisman, who’s known for predicting the 2007-2008 housing market collapse and profiting from it, appears to be warming up to homebuilding stocks.
The investor said on “Fast Money” in October it was a group he was avoiding. The SPDR S&P Homebuilders ETF, which tracks the group, is up 25% since that interview and 57% over the past 52 weeks.
“The housing stocks are justified in the sense that the homebuilders have great balance sheets. They’re able to buy down rates to their customers, so that the customers can afford to buy new homes,” he said. “There’s a shortage of new homes.”
However, Eisman skips housing among his top 2024 top plays. He particularly likes areas of technology and infrastructure.
Disclaimer More

Retirees can expect to see a Social Security cost-of-living adjustment starting this month.
Other factors may also influence how much benefit income they receive in 2024.

Adamkaz | E+ | Getty Images

If you’re a retiree who relies on Social Security benefits for income, you will see some changes in 2024.
You will get a benefit boost to adjust for inflation. But just how much extra money you see will depend on the size of your Medicare Part B premiums and any money for taxes withheld from your check.

Here are four factors that will influence how much Social Security benefits you receive in the new year.

1. You will get a 3.2% cost-of-living adjustment

Social Security benefits will go up 3.2% starting in January due to an annual cost-of-living adjustment.
That will amount to an increase of more than $50 per month on average for retirement benefits, according to the Social Security Administration.
The increase is much lower than the 8.7% COLA that went into effect in 2023. That prompted a benefit boost of more than $140 per month on average, the Social Security Administration said when that increase was announced.
The maximum benefit for a retired worker who claims at full retirement age will go up to $3,822 per month in 2024, up from $3,627 per month in 2023.

The average benefit for all retired workers will be $1,907 in 2024, up from $1,848 in 2023, according to the Social Security Administration.

2. Your Medicare Part B premiums will be higher

One factor that will affect exactly how much beneficiaries receive is their Medicare Part B premium, which is typically deducted directly from Social Security checks.
Medicare Part B serves as medical insurance and covers doctor and other provider services, outpatient care, home health care, durable medical equipment and some preventive services.
Standard monthly premiums are slated to rise by $9.80 per month to $174.70 in 2024, from $164.90 per month in 2023.
However, people with higher incomes will pay more as a result of what is called income-related monthly adjustment amounts, or IRMAA.
You generally can’t have your Medicare Part B premiums adjusted, with one exception, according to certified financial planner Tim Steffen, director of advanced planning at financial services company Baird.
“If something has materially changed in your situation … you can appeal your Medicare premium,” Steffen said.
That applies to events that have caused your income to go down since 2022, such as a divorce, the death of a spouse, the loss of a pension or starting retirement.

3. You may face an earnings test

If you claim Social Security between age 62 and your full retirement age, your benefits will be reduced for starting early. If you also continue to work, you may be subject to what is known as the retirement earnings test if you earn over a certain threshold.
In 2024, the earnings exempt from the retirement earnings test will go up to $22,320, from $21,240 in 2023. For every $2 in earnings above that limit, $1 in benefits will be withheld.
The good news is those withheld benefits are applied to your monthly benefits once you reach full retirement age.
Importantly, there is a different earnings test threshold for the year you turn full retirement age.
In 2024, this will go up to $59,520 for the months before you reach your full retirement age, compared to $56,520 in 2023. In the year you turn full retirement age, $1 in benefits is withheld for every $3 in earnings above the limit.

The earnings test is an important factor to consider when deciding whether to claim retirement benefits early, according to Joe Elsasser, a CFP and president of Covisum, a provider of Social Security claiming software.
The new higher threshold — almost $60,000 — for the year you turn full retirement age also presents an opportunity, he said.
For example, if you turn full retirement age in July, you may earn about $10,000 per month prior to your birthday and not be subject to the earnings test if you start benefits Jan. 1, Elsasser said.

4. You may pay taxes on your benefit income

Social Security benefit income may be subject to federal taxes.
The rate at which that income is taxed is based on your combined income. That is calculated by adding half your benefits with your adjusted gross income and nontaxable interest.
You may pay taxes on up to 50% of your benefits if your combined income is between $25,000 and $34,000 for individual tax filers, or between $32,000 and $44,000 for couples who are married and file jointly.
Up to 85% of your benefits may be taxable if your individual combined income is more than $34,000 and you file individually, or if you’re married with more than $44,000.

Notably, these thresholds do not change from year to year. However, as benefit income increases each year with COLA, more of that becomes subject to taxes over time.
More beneficiaries may be liable for federal income taxes on their benefit income this tax season due to the 8.7% COLA for 2023, according to research from The Senior Citizens League. The nonpartisan senior group is advocating for the tax thresholds to be updated and annually adjusted so seniors do not have to pay as much taxes on their benefit income.
“Certainly, taxation has become a growing concern,” said Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League.
To avoid a big bill at tax time, retirees may opt to have money withheld from their monthly checks.
How will the 3.2% Social Security cost-of-living adjustment for 2024 affect you? If you would be willing to speak on the record for a story, email lorie.konish@nbcuni.com.Don’t miss these stories from CNBC PRO: More

Borrowers could see relief from President Joe Biden’s Plan B for student loan forgiveness this year.
But far fewer people stand to benefit this round, and legal challenges are still expected.

U.S. President Joe Biden speaks on the student debt relief plan as Secretary of Education Miguel Cardona (R) listens in the South Court Auditorium at the Eisenhower Executive Office Building on October 17, 2022 in Washington, DC.
Alex Wong | Getty Images

How Plan A, Plan B student loan forgiveness compares

Nearly 40 million Americans would have gotten relief from Biden’s original student loan forgiveness plan.
The president’s Plan B is looking much narrower. That’s because the justices ruled in June that the first plan, which covered more than 90% of federal student loan borrowers, was too far-reaching.
“Can the Secretary use his powers to abolish $430 billion in student loans, completely canceling loan balances for 20 million borrowers, as a pandemic winds down to its end?” wrote Chief Justice John Roberts in the majority opinion for Biden v. Nebraska. “We can’t believe the answer would be yes.”

The new forgiveness policy will include only a small share of borrowers, said Luke Herrine, an assistant professor of law at the University of Alabama.
“I think it would be easier to justify in front of a court that is skeptical of broad authority,” Herrine said in an earlier interview with CNBC.

The Biden administration seems focused on still delivering relief to specific groups of borrowers, according to a recent paper issued by the U.S. Department of Education. Those are:

Borrowers with current balances greater than what they originally borrowed
Those who entered into repayment on their undergraduate student loans 20 or 25 years ago
Students who attended programs of questionable value
Borrowers eligible for existing relief programs, including Public Service Loan Forgiveness, who just haven’t applied or perhaps didn’t know about those options
Debtors in financial hardship

Altogether, it’s possible somewhere between 4 million and 10 million borrowers will be eligible for the revised forgiveness program, said higher education expert Mark Kantrowitz. It’s hard to know this figure, though, until the final rule is published, he cautioned.
There’s another key difference between the plans.
Biden first tried to cancel student debt with an executive order in August 2022 and had promised borrowers the relief within six weeks of them completing their paperwork. This time he’s turning to the rulemaking process. That procedure is lengthier, typically involving a public comment period and other time-consuming steps.

Borrowers could see cancellation this year

Kantrowitz anticipates that the proposed rule for the relief will be published by March. At that point, there will likely be a 30-day public comment period.
There may be many comments from the public, which could slow things down, but the final rule will probably be published in the Federal Register no later than November, Kantrowitz said.
Normally, due to the timeline of regulatory changes, that would mean the relief would go into effect on July 1, 2025.
More from Personal Finance:This strategy can help you meet New Year’s resolution goalsStudent loan borrowers won’t face missed payments penaltiesFewer students are enrolling in college
However, there’s good reason to believe the Biden administration may try to speed things up, Kantrowitz said.
“Given the political significance of Plan B, it would not be surprising if the U.S. Department of Education decides to implement the new regulations sooner, before the election,” he said.

More legal challenges are ‘very likely’

It’s “very likely” there will again be Republican lawsuits seeking to block the new relief, Kantrowitz said, “which could add delays.”
“This will set up a sharp contrast between Democrats and Republicans ahead of the elections,” he said.

This will set up a sharp contrast between Democrats and Republicans ahead of the elections.

Mark Kantrowitz
higher education expert

Former President Donald Trump sided with the Supreme Court.
“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 last year.
Voters, however, support forgiving at least some student loan debt by a 2-to-1 margin, according to a Politico/Morning Consult poll. Less than a third oppose the policy. More

The new Free Application for Federal Student Aid soft launched over the weekend.
However, the form is only available for short periods of time for now as the U.S. Department of Education works to “resolve minor issues.”
Even if students are able to submit a completed 2024–25 FAFSA form, that information won’t be sent to schools until late January, the Education Department also said, which could potentially delay financial aid award offers from colleges.

A new Free Application for Federal Student Aid soft launched over the holiday weekend with much anticipation after a long delay.
However, for now, the 2024–25 FAFSA form is only available for short periods of time as the U.S. Department of Education works to “resolve minor issues,” according to a department spokesperson.

This soft launch period and pauses will allow for “updates to the form as needed,” the department said. Still, “thousands of people successfully completed their application while we monitored performance in-real time.”
More from Personal Finance:The first step to setting an annual budgetThis strategy can help you meet New Year’s resolution goalsFewer students are enrolling in college
Higher education expert Mark Kantrowitz aimed to test out the new site over the weekend, to no avail.
“I have not been able to submit the form, and I’ve heard from no students who have been able to submit the form,” he said Monday.
Indeed, the form was only available briefly over the holiday weekend: a 30-minute window on Dec. 30, a 30-minute window on Dec. 31, and a two-hour window on Jan. 1, according to the Department of Education.

As of Tuesday, the site remained open for a longer stretch and more than 30,000 applications were successfully submitted, the Department said. During that time, Kantrowitz was also able to submit a form, he said.

Some 17 million students file the FAFSA each year

A plan to simplify the FAFSA has been years in the making. In 2020, the Consolidated Appropriations Act was passed to streamline the process and overhaul dozens of systems, some of which have not been updated in almost 50 years. Those changes are finally going into effect.
In ordinary years, the FAFSA form is used by more than 17 million students and roughly 5,500 colleges and universities in all 50 states, according to the Department of Education.

They had to have something available even if it wasn’t ready for prime time.

Kalman Chany
author of The Princeton Review’s “Paying for College”

The FAFSA serves as the gateway to all federal aid money, including federal student loans, work study and especially grants — which have become the most crucial kind of assistance as college costs soared because they typically do not need to be repaid.

What FAFSA delays mean for college-bound students

Kalman Chany, a financial aid consultant and author of The Princeton Review’s “Paying for College,” advises students and families not to panic if they cannot file the FAFSA during the soft launch.
“If you are having access issues, it is better to wait,” he said. “They had to have something available even if it wasn’t ready for prime time.”
If students do submit a completed 2024–25 FAFSA form early this year, that information won’t be sent to schools until late January, the Department of Education also said, “so you will have ample time to fill out the form and do not need to rush to complete the form during the soft launch.”
Because of the postponement, colleges might still be able to get financial aid award offers done by late March or early April, according to Kantrowitz. “Otherwise, it will be a complete disaster,” he said.
“Families will not be able to get financial aid offers in a timely manner. Already, students who applied early action or early decision do not have award offers.”

What’s changed with the new FAFSA

Not only has the timing changed, but the simplified form now also uses a calculation called the “Student Aid Index” to estimate how much a family can afford to pay.
Under the new system, more low- and moderate-income students will have access to federal grants, but the changes will reduce eligibility for some wealthier families.
And, as part of the FAFSA simplification, families will no longer get a break for having multiple children in college at the same time, effectively eliminating the “sibling discount.”

For now, the new FAFSA also relies on old consumer price index figures from 2020, which don’t account for the recent runup in inflation. That could mean many students “will get less financial aid than they deserve,” Kantrowitz said.
“It is a pretty big deal,” he said. “We are talking about thousands of additional dollars that families will have to pay for college.”
All families of four in this application cycle with adjusted available income of more than $35,000 will be affected by the failure to make inflationary adjustments, with middle- and higher-income students the hardest hit, according to Kantrowitz.
There will be less of an effect on lower-income students whose expected family contribution was already $0.  
For example, a typical family in New York with adjusted available income of $100,000 could be expected to contribute $12,943 instead of $9,162 toward their annual college costs — a difference of nearly $4,000 in aid, according to calculations by Kantrowitz.
Subscribe to CNBC on YouTube.
Don’t miss these stories from CNBC PRO: More

A simplified Free Application for Federal Student Aid finally became available over the weekend.
However, there are some “issues” with the soft launch, according to the U.S. Department of Education.
Even if students do successfully submit a completed 2024–25 FAFSA form, that information won’t be sent to schools until late January, the Education Department also said, which could potentially delay financial aid award offers from colleges.

A simplified Free Application for Federal Student Aid is finally online after a significant delay.
However, as part of a “soft launch,” the new FAFSA form has only been periodically available. It’s likely few, if any, of the millions of students applying to college for the 2024-25 academic year have been able to successfully submit an application, according to higher education expert Mark Kantrowitz.

“I am convinced that nobody has been able to submit the form,” he said.
“Congress required the FAFSA to be available before Jan. 1, 2024. They missed that deadline,” Kantrowitz said.
More from Personal Finance:This strategy can help you meet New Year’s resolution goalsStudent loan borrowers won’t face missed payments penaltiesFewer students are enrolling in college
“Leading up to and as part of the soft launch, we have identified some minor issues,” the U.S. Department of Education said in a statement Sunday . “We are aware of these issues and are working to resolve them.”
For now, Kalman Chany, a financial aid consultant and author of The Princeton Review’s “Paying for College,” advises students and families not to panic. “If you are having access issues, it is better to wait,” he said.

“They had to have something available even if it wasn’t ready for prime time.”

Even if students do submit a completed 2024–25 FAFSA form early this year, that information won’t be sent to schools until late January, the Department of Education also said, “so you will have ample time to fill out the form and do not need to rush to complete the form during the soft launch.”
With the delayed timeline, colleges might still be able to get financial aid award offers done by late March or early April, according to Kantrowitz. “Otherwise, it will be a complete disaster,” he said. “Families will not be able to get financial aid offers in a timely manner. Already, students who applied early action or early decision do not have award offers.”

What’s changed with the new FAFSA

Not only has the timing changed, but the simplified form now also uses a calculation called the “Student Aid Index” to estimate how much a family can afford to pay.
Under the new system, more low- and moderate-income students will have access to federal grants, but the changes will reduce eligibility for some wealthier families.
And, as part of the FAFSA simplification, families will no longer get a break for having multiple children in college at the same time, effectively eliminating the “sibling discount.”

They had to have something available even if it wasn’t ready for prime time.

Kalman Chany
author of The Princeton Review’s “Paying for College”

For now, the new FAFSA also relies on old consumer price index figures from 2020, which don’t account for the recent runup in inflation. That could mean many students “will get less financial aid than they deserve,” Kantrowitz said.
“It is a pretty big deal,” he said. “We are talking about thousands of additional dollars that families will have to pay for college.”
All families of four in this application cycle with adjusted available income over $35,000 will be affected by the failure to make inflationary adjustments, with middle- and higher-income students the hardest hit, according to Kantrowitz. There will be less of an effect on lower-income students whose expected family contribution was already $0.  
For example, a typical family in New York with adjusted available income of $100,000 could be expected to contribute $12,943 instead of $9,162 toward their annual college costs — a difference of nearly $4,000 in aid, according to calculations by Kantrowitz.
Subscribe to CNBC on YouTube. More