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Unable to come up with the cash for steep college tuition bills all at once, many families opt to pay the tab over time.
That option can become expensive if students fall behind, the Consumer Financial Protection Bureau finds.

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Unable to come up with the cash for steep college tuition bills all at once, many families opt to pay the tab over time. Such plans can be helpful for families trying to spread out college costs.
However, a new report by the Consumer Financial Protection Bureau warns of a number of risks associated with these payment plans, including snowballing charges and aggressive collection practices.

It is important to carefully review the terms before signing up for these plans, experts say.
“Tuition payment plans offered by schools may look like a good option, but this report shows student borrowers can end up paying high fees, be forced to sign away their legal rights or even have their transcript withheld by their school,” said Rohit Chopra, the CFPB’s director, in a statement.

Nearly 4 million students use payment plans

Nearly all colleges offer some sort of tuition payment plan, the CFPB found. Close to 4 million students may use the option each term, according to bureau estimates.
While colleges market the plans as an alternative to student loans, families should understand they’re in effect taking on debt when they sign up for them, the bureau says.
Under the plans, tuition and other education expenses are typically spread out into several payments over a semester or academic year.

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The plans can be administered directly by the school, or by a third-party payment processor. In cases of the latter, families may not always know with whom to communicate if they’re struggling to meet a bill or just have questions about the plan’s terms, said Elaine Rubin, director of corporate communications at Edvisors.
“Students often are confused on how to resolve issues with the payment plan and may not understand the full role of the third-party servicer,” Rubin said.
Most college payment plans are interest-free, but there can be enrollment fees and other charges involved, the CFPB found.

Higher education expert Mark Kantrowitz has also noticed how the plans can become costly.
“If the family misses a payment, some tuition payment plans may be converted into private student loans with unfavorable terms,” he said.

Risks rise for those who fall behind

The CFPB’s report outlines the risks to students with these plans if they fall behind on payments. The penalties, it points out, can be more severe than with federal student loan delinquencies.
Late fees can be steep, with some colleges and payment processors dinging people more than $100. (The average late penalty was $30.)

At least 1 in 3 colleges reserve the right to withhold students’ transcripts as a debt collection practice. Some institutions also report late payments to credit bureaus.
“In some cases, students could risk removal from classes, meal plans and campus housing when they miss a payment on a tuition payment plan,” the CFPB warned. More

Life Changes

A new provision allows money saved in a 529 plan to be converted into a Roth individual retirement account tax-free after 15 years, up to a limit of $35,000.
“It becomes a no-brainer at this point,” says Marshall Nelson, a wealth advisor.

To be sure, 529 college savings plans already had a lot going for them.
Now, thanks to “Secure 2.0,” a slew of measures affecting retirement savers, they’re about to be even more attractive.

Starting in 2024, savers can roll unused money from 529 plans over to Roth individual retirement accounts free of income tax or tax penalties. Among other limitations, the 529 account must have been open for 15 years and account holders can’t roll over contributions made in the last five years. Rollovers are subject to the annual Roth IRA contribution limit, and there’s a $35,000 lifetime cap on 529-to-Roth transfers.
“It becomes a no-brainer at this point,” said Marshall Nelson, wealth advisor at Crewe Advisors in Salt Lake City.

The benefits of a 529 plan

These plans have been steadily gaining steam for a number of reasons.
In some states, you can get a tax deduction or credit for contributions. Earnings grow on a tax-advantaged basis and, when you withdraw the money, it is tax-free if the funds are used for qualified education expenses such as tuition, fees, books, and room and board, or even apprenticeship programs.
A few states also offer additional benefits, such as scholarships or matching grants, to their residents if they invest in their home state’s 529 plan.

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Further, you can now put some of the funds toward your student loan tab: up to $10,000 for each plan beneficiary, as well as another $10,000 for each of the beneficiary’s siblings.
And yet, total investments in 529s fell to $411 billion in 2022, down nearly 15% from $480 billion the year before, according to data from College Savings Plans Network, a network of state-administered college savings programs.
“Last year, we saw a pretty noticeable reduction in contribution behavior,” said Chris Lynch, president of tuition financing at TIAA. Regular contributions to a 529 college savings plan took a back seat to paying more pressing bills or daily expenses.

We’re going to see a spike in 529 usage.

Marshall Nelson
wealth advisor at Crewe Advisors

Plus, there was a major sticking point: Many would-be college students are rethinking their plans altogether. Some are opting out entirely or considering a local and less expensive in-state public school or community college. 
Now, 529s offer more flexibility, even for those who never enroll in college, Lynch said.
“A point of resistance that potential participants have had is the limitation around, what happens if my kid gets a scholarship or decides they’re not going to college.”
In such cases, you could transfer the funds to another beneficiary, or withdraw them and pay taxes and a penalty on the earnings. If your student wins a scholarship, you can typically withdraw up to the amount of the scholarship penalty-free.

The added benefit of being able convert any leftover funds into a Roth IRA tax-free after 15 years, up to a limit of $35,000, “helps to eliminate that point of resistance,” he said.
“We’re going to see a spike in 529 usage,” Nelson predicted.
Even if someone in their mid-20s put $35,000 in a Roth IRA and just left it alone, that could be close to $1 million 40 years down the road, he said.
“It’s something I see catching on,” Nelson added. “Now they have the option to use that money to supplement retirement; that’s a huge win.” More

Amid mounting concerns over rising interest rates and inflation levels Bridgewater Associates’ founder Ray Dalio said he prefers cash and does not want to own bonds.
The billionaire investor pointed out that when debt accounts for a substantial share of a country’s economy, the situation “tends to compound and accelerate.”
Dalio says the biggest mistake that most investors make is “believing that markets that performed well are good investments, rather than more expensive.”

Ray Dalio, billionaire and founder of Bridgewater Associates LP, speaks during the Milken Institute Conference
Bloomberg | Bloomberg | Getty Images

As concerns mount over rising interest rates and inflation levels, billionaire investor Ray Dalio says he prefers to hold cash for now, not bonds.
“I don’t want to own debt, you know, bonds and those kinds of things,” the founder of Bridgewater Associates said when asked how he would deploy capital in today’s investment environment.

“Temporarily, right now, cash I think is good … and the interest rates are fine. I don’t think [it] will be sustained that way,” Dalio told an audience at the Milken Institute Asia Summit in Singapore on Thursday.
Dalio’s comments come as the yield on the 30-day U.S. Treasury bill climbs above 5% while investors can get 4% on certificates of deposit and high-yield savings accounts.

Dalio says the biggest mistake that most investors make is “believing that markets that performed well are good investments, rather than more expensive.”
When asked how a new industry watcher should deploy capital, Dalio’s advice was: Be in the right geographies, diversify, pay attention to the implications of disruptions and pick asset classes that are creating new technologies and using them “in the best possible way.”

Rising debt

Touching on how to address the rising global debt, the hedge fund manager pointed out that when debt accounts for a substantial share of a country’s economy, the situation “tends to compound and accelerate … because you have to have interest rates that are high enough for the creditor and not so high that they are harming the debtor.”

“We’re at that turning point of acceleration. But the real problem comes when individuals or investors don’t hold the bonds, because it comes as a supply-demand, one man’s debts or another man’s assets,” he explained.
Dalio cautioned that investors will sell their bonds if they are not receiving real interest rates that are high enough.
“The supply-demand [imbalance] isn’t just the amount of new bonds. It’s the issue of ‘do you choose to sell the bonds?'” he explained.

When there’s a sell-off in bonds, prices fall and yields rise, as they have an inverse relationship. As a result, borrowing costs will increase and drive up inflationary pressure, thereby posing an uphill task for central banks.
“When the interest rates go up, the central bank then has to make a choice: Do they let them go up and have the consequences of that, or do they then print money and buy those bonds? And that has inflationary consequences,” Dalio explained.
“We’re seeing that dynamic happen now. I personally believe that the bonds longer term are not a good investment,” he stressed. More

IRS Commissioner Danny Werfel ordered the agency to immediately stop processing new claims for the employee retention credit.
The ERC, which was created to support small businesses during the Covid-19 pandemic, can be worth thousands of dollars per employee.
It has sparked a flood of specialist firms falsely promising businesses they qualify for the complicated tax break.

IRS Commissioner Danny Werfel speaks at a Senate Finance Committee hearing in Washington, D.C., on April 19, 2023.
Al Drago | Bloomberg | Getty Images

IRS increasingly alarmed by ‘unscrupulous actors’

“The IRS is increasingly alarmed about honest small business owners being scammed by unscrupulous actors, and we could no longer tolerate growing evidence of questionable claims pouring in,” Werfel said.
The IRS has received approximately 3.6 million claims over the course of the program and the current open inventory has more than 600,000 claims, most of which have been received over the past 90 days.

As of July 1, 2023, the IRS criminal investigation division has initiated 252 investigations involving more than $2.8 billion of potentially fraudulent ERC claims. Some 15 of the 252 investigations have resulted in federal charges and six of the 15 have resulted in conviction, Werfel said.
“We want businesses to step back and talk to a trusted tax professional, not a promoter out looking to take a big chunk of a refund,” he said.
The agency is working on a settlement program for small businesses that may have wrongly received the refund. More

Tipping at full-service restaurants fell to the lowest level since the start of the pandemic, according to a recent report.
Cash-strapped consumers with tip fatigue are pushing back, experts say.

Tipping 20% at a sit-down restaurant is still the standard in the U.S., according to most etiquette experts. Diners disagree.
After holding steady for years, tipping at full-service restaurants fell to 19.4% in the second quarter of 2023, according to online restaurant platform Toast’s most recent restaurant trends report, notching the lowest average since the start of the pandemic.

“Tip fatigue” is largely to blame, the report found.

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“During Covid, everyone was feeling generous,” said Eric Plam, founder and CEO of San Francisco-based startup Uptip, which aims to facilitate cashless tipping. 
“The problem is that it reached a new standard that we all couldn’t really live with,” he added, particularly when it comes to tipping prompts at a wider range of establishments, a trend also referred to as “tip creep.”
With more opportunities to tip and predetermined point-of-sale options that can range from 15% to 35% for each transaction, gratuity became less about rewarding good service, he said.
Now, consumers are pushing back.

Inflation, surcharges weigh on diners

Two-thirds of Americans have a negative view about tipping, according to a recent report by Bankrate, especially when it comes to contactless and digital payment prompts. 
Higher prices due to persistent inflation have also left more consumers feeling cash-strapped.
Further, the increasing use of surcharges has played a role, according to Toast. Fees for restaurant employee health insurance, credit card transactions and even tap water make diners want to leave less on the total tab, Plam said. “They don’t need to tip as much if they’re covering health care,” he said. “That’s the quick calculation.”
These days, fewer consumers also said they “always” tip when dining out compared with last year, according to Bankrate, or for other services, such as ride-hailing services, haircuts, food delivery, housekeeping and home repairs.

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Yet, since transactions are increasingly cashless, having a method to tip workers in the service industry earning minimum or less than minimum wage is critical, Plam added.
Under federal law, employers can pay workers as little as $2.13 per hour — much less than the minimum wage — if the tips they receive bring them up to a baseline salary. (Some states are now increasing the hourly minimum wage for tipped employees or eliminated tipping wages altogether.)
For restaurant workers, tips can boost wages by about 90%, according to data provided to CNBC from payroll platform Gusto.
Still, tips are down slightly from a year ago, Gusto also found.
“What we are seeing is a settling at a lower level in the wake of the post-pandemic surge,” said Luke Pardue, an economist at Gusto. 
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Supplemental Security Income provides monthly benefits aimed at keeping beneficiaries out of poverty.
But the program’s asset limits have not been adjusted for inflation in decades.
Washington lawmakers are renewing a push to change that.

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A federal program that provides monthly income to elderly, blind and disabled Americans to provide for their basic needs has not been updated in about 40 years.
On Tuesday, Washington lawmakers renewed a push to update rules associated with the program known as Supplemental Security Income, or SSI.

The proposal, called the SSI Savings Penalty Elimination Act, would raise the program’s asset limits to $10,000 for an individual and $20,000 for couples, up from $2,000 and $3,000, respectively.
The reintroduced proposal is by Sens. Sherrod Brown, D-Ohio, and Bill Cassidy, R-La.
“It’s an easy fix, encourages work, allows savings and gets people out of poverty,” Cassidy said Tuesday during a Capitol Hill event.
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Today, SSI has about eight million beneficiaries. The program is managed by the Social Security Administration. The average monthly benefit is $585 for individuals and the most people may receive is $794 — less than the minimum wage, Brown noted.

“Right now, arbitrary and outdated restrictions prevent these Americans from saving money for emergencies,” he said. “And they punish people who want to do the right thing and save money.”

Asset limits hamper beneficiary savings

Emily Demko, 18, of Athens County, Ohio, has Down syndrome and, in addition to being an artist, works three jobs at two local restaurants.
But the asset limits for the monthly SSI checks she relies on means she cannot take on extra hours when asked at the Applebee’s where she works. If she sells one of her paintings, she may have to cut back on work at her other jobs.
“I want to live a full life, make money, save money and [be] independent without losing Social Security,” Demko said at Tuesday’s Capitol Hill event.
Going over SSI’s cap on savings and other assets would mean she may be deemed ineligible for benefits, have to start the application process over or pay back the extra money, her mother, Margaret Demko, noted.

“Increasing the asset limit to an appropriate up-to-date amount would undo so many of these burdens,” she said.
The creation of the SSI program more than 50 years ago was an important development that missed a crucial detail: regular adjustments for inflation, noted Cassidy.
That has forced beneficiaries to choose between saving up for an emergency or losing their safety net, he said.
“Everyone who can work should be working,” Cassidy said, while touting the asset limit increase.

I think we can agree all Americans should have the ability to sock away a few dollars for an unexpected financial emergency.

Jenn Jones
vice president of financial security and livable communities at AARP

While the proposal has bipartisan support in both the Senate and the House, it remains to be seen how far lawmakers may be able to push the proposal.
Organizations such as AARP and JPMorgan Chase expressed their support for the change.
SSI’s “draconian” asset limits have prevented some older Americans from qualifying for the program, even though they have low incomes, noted Jenn Jones, vice president of financial security and livable communities at AARP.

“I think we can agree all Americans should have the ability to sock away a few dollars for an unexpected financial emergency, and SSI beneficiaries are no exception,” Jones said.
At JPMorgan Chase, SSI’s strict asset limits make employees who receive benefits worry that receiving a bonus or raise may put them over the cap on earnings, noted Bryan Gill, global head of the office of disability inclusion at the firm.
When that happens, those employees often cut back on their hours to make sure they stay within the program’s required thresholds.
“And they often cannot participate in our 401(k) program, where JPMorgan provides matching contributions to help with wealth accumulation,” Gill said. More

The federal government provided states with nearly $24 billion in stabilization funds to keep child care services afloat as part of the American Rescue Plan Act of 2021.
However, more than 70,000 child care providers who benefited are likely to close after the program expires this month, shutting down care for 3.2 million kids, a think tank estimates.
Experts say that systemic change, such as broader parental leave and more public funding for child care, must be involved for child care to improve at a larger scale.

Lauren Rosenberg, right, of Portland, Maine, and her nanny, left, set out toys for Rosenberg’s children.
Portland Press Herald | Portland Press Herald | Getty Images

Child care is already scarce and expensive — and the stakes are about to get higher.
The federal government provided states with nearly $24 billion in stabilization funds to keep child care services afloat as part of the American Rescue Plan of 2021.

That program expires at the end of this month.
More than 70,000 child care providers who benefited are likely to close as a result of lost funding, according to estimates from The Century Foundation, a liberal think tank. That would affect 3.2 million kids and slash $10.6 billion in revenue from lost worker productivity as parents reduce hours or leave jobs in the scramble to find new care.
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Researchers came to these figures based on data from a survey of 12,000 early childhood educators from all states and settings — including faith-based programs, home providers, Head Start programs and child care centers — as well as data from the U.S. Department of Health and Human Services Office of Child Care.
“Quality, affordable child care is already scarce, and the child care workforce is already badly underpaid and under great stress,” said Lauren Hipp, national director for early learning at advocacy group MomsRising. “As pandemic child care relief runs out, all that is likely to get worse.”

The share of working mothers with young children is at historic levels, exceeding other working-age women’s labor participation growth from 2020, The Hamilton Project found. However, experts are concerned that this loss of child care options will pull more people, especially women, back out of the workforce.

Child care ‘is a public good’

Experts say that systemic change, such as broader parental leave and more public funding for child care, must be involved for child care to improve at a larger scale.
Child care “is a public good just as much as having clean water, having a strong education system, having access to health care,” said Hipp. “The access to child care has an immediate impact on everyone in society.”
Child care providers want to be able to support families but can’t make it work on the amount they make, she added. The hourly wage of a child care worker in 2022 was $13.71 per hour or $28,520 annually, according to the U.S. Bureau of Labor Statistics.
“If you work in a preschool private child care center versus a kindergarten classroom, that wage differential is huge,” said Taryn Morrissey, a public policy professor at American University. “The wage difference is quite large because the K-through-12 education sector has public financing.”

If you have two kids under 5, in most parts of the country, you’re really struggling.

Taryn Morrissey
Child and family policy researcher

Teachers in elementary, middle and high schools generally make higher salaries. While kindergarten and elementary school teachers roughly earned $61,620 last year, high school teachers made $62,360, the U.S. Department of Labor has found.Plus, teachers enjoy an array of benefits, such as health insurance and retirement plans, while oftentimes early care and education workers do not, she added.
Moreover, parents often deal with early child care costs when they are at the lowest earning years of their careers, without low-interest loans or subsidies to lean on, said Morrissey.
The national annual cost of child care was about $10,853 for one child in 2022, the organization Child Care Aware of America found. In 2023, 67% of parents reported spending 20% or more of their household income on child care, Care.com found.

“If you have two kids under 5, in most parts of the country, you’re really struggling,” Washington, D.C.-based Morrissey added.
While child care issues financially affect women in particular in both the short term and long term — including in a loss in wages and retirement savings — the economy also takes a hit. When parents don’t have access to affordable, reliable child care, the U.S. loses about $57 billion a year in economic productivity and revenue, according to a report from Council for a Strong America.
“All of these factors mean that it impacts and is important to people who do or do not have children,” said Hipp.

Use the benefits you have available

Your workplace may have some options to help you find care, such as backup care providers or on-site child care. Other companies offer benefits to help finance child care costs. Some companies provide employees with a dependent-care flexible spending account, or FSA, allowing households to set aside up to $5,000 in pretax dollars from a paycheck.
If you are expecting, you may have access to workplace and state programs for paid leave that can give you and your partner time at home, stretching your time to find a caregiver.
Workplace benefits, including parental leave, may be a resource for many workers. In 2022, 35% of organizations offered employees paid maternity leave, according to the Society for Human Resource Management, and 27% have paid paternity leave. Those figures are down from 2020 rates of 53% and 44%, respectively.

Outside of workplace benefits, 13 states and the District of Columbia offer paid family leave for workers, said Katherine Gallagher Robbins, senior fellow of The National Partnership for Women and Families. Those states are California, Colorado, Connecticut, Delaware, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, Oregon, Rhode Island and Washington.
“Make sure you are taking advantage of the policies that you do have in place and where they do exist,” she added.

Cast a wide net for care

With fewer child care providers available, families might need to get creative and consider different options in their area, experts say. That might include talking with other parents about starting a child care co-op or sharing a nanny.
Some states and cities offer universal preschool programs where kids can enroll into the public education system before the age of 5, added Morrissey.
Washington, D.C., and six states have implemented universal preschool, such as Florida, Iowa, Oklahoma, Vermont, West Virginia and Wisconsin, the National Institute for Early Education Research found. Washington, D.C., is the only jurisdiction to provide universal preschool at ages 3 and 4, the institute notes.

Hispanolistic | E+ | Getty Images

Georgia, Illinois, Maine and New York have universal preschool policies but have yet to put them in practice. Meanwhile, California, Colorado, Hawaii and New Mexico passed laws to provide universal preschool in the past year.
Also consider signing up on waitlists at child care centers early, experts say. While putting your child on the waitlist oftentimes does not guarantee a spot, it is a line of security worth having.

Lean on your community

Additionally, think about ways you can lean on your community or support system to help care for your child, experts say.
Some families are asking for care help from friends and family members, or even relocating to be closer to family. Others are working multiple jobs or adjusting their work schedules, according to Care.com.
“There’s a reason that there’s a proverb ‘it takes a village to raise a child,'” said Hipp.  More

Life Changes

The Biden administration recently announced it would forgive $39 billion in student debt for hundreds of thousands of borrowers as a result of fixes to the lending system’s income-driven repayment plans.
Wendee Goles found out she qualified.
“I wake up in the morning, and the first thing I think is, ‘I don’t have a student loan’ and I cry,” Goles, 53, said.

Wendee Goles
Courtesy: Wendy Goles

In July, Wendee Goles saw headlines that the Biden administration planned to cancel the student loans of more than 800,000 people. Even though she seemed to fit the description of eligible borrowers — those who had made payments for decades through an income-driven repayment plan — she didn’t get her hopes up.
Ever since Goles graduated from the School of The Art Institute of Chicago in the early 2000s, her student debt was a constant source of anxiety. Her original loan balance of around $50,000 had only grown over the years because she wasn’t able to make consistent payments. Even when she tried to, the interest still accrued faster. Along the way, she got confusing information from her loan servicers, and her lender was always changing.

Goles resigned herself to the fact that her education debt, and its myriad consequences, would always be a part of her life.
“I knew I was going to take this debt to my grave,” said Goles, 53, a painter and educator.

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But on Aug. 18, when she signed into her loan account, she was in shock: Her balance had gone from $60,000 to $0.
“It was incredible,” Goles said. “My face hurt from smiling.”
The Biden administration announced this summer that it would automatically forgive $39 billion in federal student debt for hundreds of thousands of borrowers. The news, separate from President Joe Biden’s proposed sweeping forgiveness plan that was eventually struck down by the Supreme Court, was a result of fixes to the lending system’s income-driven repayment plans. Under those plans, people are supposed to get their loans forgiven after 20 years or 25 years of payments, but in many cases that wasn’t happening.

The debt relief grants many borrowers, like Goles, a chance to see another way of living.

Balancing life dreams and monthly bills

Goles has a studio in the basement of her house in Villa Park, Illinois, where she works anywhere from five hours to five months on a single painting. Her favorite piece is the one she did of her father, who died in 2019. “I captured something in him that was very special to me,” she said. “It’ll never be for sale.” Her paintings have been privately commissioned and appeared in galleries.
She began drawing at 13 and never stopped, eventually moving to painting, puppetry and set design.

Artist Wendee Goles’ painting of her father, Greg, from 2008. He died in 2019.
Artist: Wendee Goles

“I don’t think I can focus in life except for that,” she said. “It takes me somewhere else.”
Still, Goles’ monthly student loan bill, which was last around $450, meant that she always had to balance trying to make it as an artist and raising two children with working other jobs.
For close to 20 years, she waited tables. She currently works as a sales representative at a manufacturing company.
“Job stress was always a big deal,” she said.

I feel like I’m just starting my life.

Wendee Goles

Whenever Goles found herself with extra cash, she threw it at her student debt. Her balance seemed only to rise, and so some relatives suggested she just stop paying it. But she was scared of the risks. Goles knew she wanted to be able to help her children financially as they got older. “I didn’t want my credit to be affected,” she said. At times, she put thousands toward her student debt in one payment.
As a result, most of her life she never had any savings. “It was scary,” she said. “Jobs come and go.”
When medical bills for the family came in, she only sent back partial payments. And so her student debt led to medical debt.
When her husband lost his job a little before 2008, it was an especially hard time. (They eventually couldn’t afford their house and had to move.) She put her student debt into forbearance, and it grew faster from interest.

Student debt ‘factored into every decision’

Arrows pointing outwards

Goles’ painting of a fisherman.
Artist: Wendee Goles

The debt was constantly on her mind.
“It factored into every decision I made,” Goles said. “How much can I spend on groceries? Can we go on vacation?”
Although it was hard to believe at first, she’s finally coming around to the idea that she doesn’t have student debt any more.
She and her husband recently celebrated by getting dinner at a fancy restaurant, where they ordered steaks and mango margaritas.
“I wake up in the morning, and the first thing I think is, ‘I don’t have a student loan,’ and I cry,” Goles said.

In the following months, however, a more somber truth has set in.
She can only start salting away money now, in her 50s. At this point, she doesn’t know if she’ll be able to retire.
She’s also thought about how much her student debt and the job stress she faced limited her as an artist. Often, she didn’t have enough cash to buy certain art supplies. On many nights, when she got home from waiting tables, she was too tired to paint.
“I feel like I’m just starting my life,” Goles said. More