Investing

The Biden administration announced on Friday it would soon begin forgiving the student loans of borrowers who have been in repayment for a decade or more and originally took out $12,000 or less.
To qualify for the relief, borrowers will also need to be enrolled in administration’s new Saving on a Valuable Education, or SAVE, plan.
Borrowers could see the relief as early as next month.

US President Joe Biden speaks at Montgomery County Community College in Blue Bell, Pennsylvania, on January 5, 2024.
Mandel Ngan | AFP | Getty Images

The Biden administration announced on Friday it would soon begin forgiving the student loans of borrowers who have been in repayment for a decade or more and originally took out $12,000 or less.
To qualify for the relief, which could come as early as next month, borrowers will also need to be enrolled in the administration’s new Saving on a Valuable Education, or SAVE, plan.

“Borrowers enrolled in SAVE who are eligible for early forgiveness will have their debts cancelled immediately starting next month, with no action on their part,” the U.S. Department of Education said.
The Department also said it was kicking off an outreach and email campaign to get as many eligible borrowers as possible to sign up for its SAVE plan, so that they may benefit from this relief too. As of early January, 6.9 million borrowers were enrolled in what the administration has billed to student loan borrowers as “the most affordable repayment plan ever created.”
“Today’s announcement will help struggling borrowers who have been making loan payments for years, including many who never graduated from college,” said Under Secretary James Kvaal said in a statement. “Giving borrowers with smaller loans a faster path to being debt free will help many borrowers avoid financial distress and have peace of mind.”
Under the SAVE plan, the usual timeline for student loan borrowers to get forgiveness is 20 years or 25 years. The 10-year period applies to those who took out $12,000 or less in undergraduate or graduate postsecondary studies. More

A Vanguard spokeswoman told CNBC that the asset management giant has no plans to create a bitcoin ETF of its own, or to even offer funds from other issuers on its trading platform.
Vanguard is one of two dominant players in the U.S. ETF market.
Its chief rival BlackRock has entered the bitcoin space, with the iShares Bitcoin Trust (IBIT) launching Thursday.

Pavlo Gonchar | Lightrocket | Getty Images

More than a dozen financial firms are involved in new bitcoin exchange-traded funds that began trading Thursday, but one of the biggest fund issuers and money managers in the world still won’t touch cryptocurrency.
A Vanguard spokeswoman told CNBC that the asset management giant has no plans to create a bitcoin ETF of its own, or to even offer funds from other issuers on its trading platform.

“While we continuously evaluate our brokerage offer and evaluate new product entries to the market, spot Bitcoin ETFs will not be available for purchase on the Vanguard platform. We also have no plans to offer Vanguard Bitcoin ETFs or other crypto-related products,” the statement said.
“Our perspective is that these products do not align with our offer focused on asset classes such as equities, bonds, and cash, which Vanguard views as the building blocks of a well-balanced, long-term investment portfolio,” the statement continued.
Vanguard is one of two dominant players in the U.S. ETF market. Its chief rival BlackRock has entered the bitcoin space, with the iShares Bitcoin Trust (IBIT) launching Thursday.
Vanguard, headquartered just outside Philadelphia, has earned a reputation for being a low cost, and more conservative investment manager. Under its founder, Jack Bogle, Vanguard helped to drive down costs for investors starting in the 1970s by introducing passive stock index funds that tracked broader markets and, on average, outperformed highly paid active managers. It also constantly lowered its fees.
Bogle died in 2019 and Vanguard now oversees more than $8 trillion in assets but still operates using many of its founder’s more cautious beliefs.Don’t miss these stories from CNBC PRO: More

The U.S. Securities and Exchange Commission on Wednesday approved the first U.S. spot bitcoin exchange-traded funds.
However, bitcoin can be volatile and it’s important to consider your risk tolerance and goals before adding to your portfolio, experts say.

Recep-bg | E+ | Getty Images

The U.S. Securities and Exchange Commission on Wednesday approved the first U.S. spot bitcoin exchange-traded funds. But experts urge caution before piling into the long-awaited ETFs.
The agency signed off on 11 bitcoin ETF applications, including funds from BlackRock, Fidelity, Ark Invest, WisdomTree and Grayscale. The new investment provides more access to everyday investors.

“It’s a big step forward for bitcoin,” said Bryan Armour, director of passive strategies research for North America at Morningstar, who has analyzed the new assets. But there are things to consider before rushing to purchase bitcoin ETFs.
“Fear of missing out is a poor investment strategy,” he added.
The SEC decision was highly anticipated, and the price of bitcoin briefly topped $49,000, the highest level since December 2021, as the first bitcoin ETFs began trading Thursday.

Loading chart…

Bitcoin remains ‘highly volatile’

While the bitcoin ETF approval is a landmark event, it’s important to consider your goals and risk tolerance before purchasing, experts say.
“Bitcoin carries unique risks, and it’s highly volatile,” Armour said, noting its variability of returns has been significantly higher than the stock market over the past five years.

“When I started building a position, I bought at 1% [allocation] at a time and I’m maxing out at 3%,” said certified financial planner Ivory Johnson, founder of Delancey Wealth Management in Washington, D.C. He is also a member of CNBC’s Financial Advisor Council.
With a small bitcoin allocation in your portfolio, there’s room for significant upside potential while minimizing downside risk, he said.
“While we approved the listing and trading of certain spot bitcoin ETP [exchange-traded product] shares today, we did not approve or endorse bitcoin,” SEC Chair Gary Gensler said in a statement Wednesday. “Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.”

‘Better than anything else on the market’

While bitcoin carries risk, if you want to add exposure, experts say the new bitcoin ETFs could be worth considering compared to owning bitcoin directly or bitcoin futures ETFs.
“These spot bitcoin ETFs are better than anything else on the market,” said Armour, referring to other bitcoin investing options. Of course, you should also consider where to buy assets and any custodian risks.
The new ETFs may be cheaper than previous fund options, such as the ProShares Bitcoin Strategy ETF (BITO) — the first bitcoin futures ETF, with an expense ratio of 0.95%. The Grayscale Bitcoin Trust (GBTC) charged 2.0% before converting to a spot bitcoin ETF, and now has fees of 1.5%.
If you’re unsure about purchasing bitcoin ETFs on the first day of trading, you can wait and see what happens, Armour said. The funds “gathering assets” are “more likely to stick around and have the cheapest trading costs,” he said.

Don’t miss these stories from CNBC PRO: More

The five major GOP presidential candidates still in the race — Donald Trump, Ron DeSantis, Vivek Ramaswamy, Nikki Haley and Asa Hutchinson — all oppose student loan forgiveness.
“Why should a truck driver have to pay for somebody that got a degree in zombie studies?” DeSantis said at an Iowa event in early August. “It doesn’t make sense.”

Former South Carolina Governor Nikki Haley, Florida Governor Ron DeSantis and former biotech executive Vivek Ramaswamy pose together onstage at the third Republican candidates’ U.S. presidential debate of the 2024 U.S. presidential campaign hosted by NBC News at the Adrienne Arsht Center for the Performing Arts in Miami, Florida, U.S., November 8, 2023. 
Mike Segar | Reuters

Outstanding student loan debt in the U.S. exceeds $1.6 trillion, and burdens Americans more than credit card or auto loan debt. The average loan balance at graduation has tripled since the 1990s to $30,000 from $10,000. Additionally, about 7% of student loan borrowers are now more than $100,000 in debt.
Voters 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.
Here’s what the GOP presidential contenders say about student debt forgiveness.

Donald Trump

Former U.S. President and Republican presidential candidate Donald Trump campaigns in Mason City, Iowa, U.S. January 5, 2024. 
Rachel Mummey | Reuters

Former President Donald Trump has a long record of opposing debt cancelation. Trump also sided with the Supreme Court in its ruling striking 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.

Ron DeSantis

Vivek Ramaswamy

In a written statement to CNBC last summer, the tech entrepreneur said America had a bad habit “of paying people to do the exact opposite of what we want them to do: More [dollars] to stay at home than to work, more [dollars] to be a single mother than married, more [dollars] for those who fail to repay loans than those who do.”
Ramaswamy added that the Supreme Court’s ruling to block forgiveness “helps reverse that trend.”

Nikki Haley

The former South Carolina governor and U.S. ambassador to the United Nations under Trump tweeted last June that “a president cannot just wave his hand and eliminate loans for students he favors, while leaving out all those who worked hard to pay back their loans or made other career choices.”
“The Supreme Court was right to throw out Joe Biden’s power grab,” Haley wrote.

Asa Hutchinson

A former governor of Arkansas, Asa Hutchinson, called Biden’s broad forgiveness plan “a misuse of executive authority,” in a 2022 statement.
“Shifting the burden from those who willingly took out a loan to all taxpayers is inconsistent with the American ideal of personal responsibility,” Hutchinson said.
Don’t miss these stories from CNBC PRO: More

A new provision allows employers to match workers’ student loan payments with contributions to their retirement plans.
Here’s what to know.

Abraham Gonzalez Fernandez | Moment | Getty Images

Student debt often makes it harder for people to save for retirement. But that may soon change.
A provision in the Secure 2.0 Act of 2022, which had a delayed effective date of Jan. 1, 2024, allows employers to match workers’ student loan payments with contributions to their retirement plans.

“Many employees paying off their student loans are having trouble saving for the future,” said Mary Moreland, executive vice president of human resources at Abbott, a medical device and health-care company whose 401(k) matching program for student borrowers led the way to the new policy. “Now employers can help.”
Outstanding student loan debt in the U.S. exceeds $1.6 trillion, and burdens Americans more than credit card or auto loan debt. The average loan balance at graduation has tripled since the 1990s to $30,000 from $10,000. Additionally, about 7% of student loan borrowers are now more than $100,000 in debt.
More from Personal Finance:Why workers’ raises are smaller in 2024 — and may not go up from hereRocky FAFSA rollout leaves millions of students, families frustratedTax filing season kicks off Jan. 29. Here’s what taxpayers need to know
Nearly half of student loan borrowers said their debt affected how much they were able to salt away in their retirement plans, according to a recent Morning Consult survey of about 500 borrowers between the ages of 18 and 39.
Here’s what borrowers should know about the new benefit.

It may take time before your employer offers it

When in 2016 Abbott began to develop its 401(k) match to student loan payments, which it dubbed “Freedom 2 Save,” “there was no other program like it,” Moreland said. The company requested and received a private ruling from the IRS to allow it to launch the benefit in 2018.
“Other companies expressed interest in developing similar programs, but they weren’t able to because only Abbott had the private letter ruling,” she added. “Secure 2.0 now makes it possible for other employers to implement this type of program with no special dispensation required.”
Still, since the broader law just went into effect, it may take some time before the matching program takes off across employers, said higher education expert Mark Kantrowitz.

Workers interested in the nascent benefit should ask their company’s human resources department about it, he said: “If several people ask for it, they will start thinking about it.”
Moreland recommends employees who hope to see the benefit adopted at their company also share Abbott’s “Freedom 2 Save” blueprint, available on its website, when they make the case.
“In the blueprint you’ll find details on how our program works and a guide for how to develop and implement a program of your own,” Moreland said.

How the student debt 401(k) match works

At Abbott, eligible employees who put at least 2% of their pay toward their student loan debt will get a 5% company contribution into their 401(k) each year.
But companies can decide on their own numbers, Kantrowitz said.

In most cases, employers will likely decide whether to match either your student loan payments or your retirement contributions, but not both, Kantrowitz said. If your employer currently has a 401(k) match in effect, it is unlikely to raise that rate, even if it establishes the benefit.
“Employees do not actually need to prove that they are making payments on their student loan,” Kantrowitz added. “They simply need to sign a document attesting that they are making the payments.”
The law allows employers to match workers’ payments on both federal and private loans.
One thing to keep in mind is your contributions to your 401(k) are pretax and reduce your taxable income, and so pausing these payments to focus on paying down your debt may leave you with a slightly larger tax obligation.
Don’t miss these stories from CNBC PRO: More

Nearly one-third, or 31%, of Gen Z are living with their parents because they can’t afford to buy or rent their own space, according to a recent report.
The year 2023 was the least affordable homebuying year in more than a decade.
For parents, supporting grown children can be a substantial drain when their own financial security is at risk. However, there are also economic benefits to living in multigenerational households.

These days, housing affordability is a struggle for nearly everyone.
But for young adults just starting out, soaring home prices and sky-high rents have become one of the greatest obstacles to making it on their own.

Nearly one-third, or 31%, of Generation Z adults live at home with parents because they can’t afford to buy or rent their own space, according to a recent report by Intuit Credit Karma that polled 1,249 people age 18 and older. Gen Z is generally defined as those born between 1996 and 2012, including a cohort of teens and tweens.
More from Personal Finance:Why workers’ raises are smaller in 2024Consumers are racking up more ‘phantom debt’Did you break your New Year’s money resolutions already?
“The current housing market has many Americans making adjustments to their living situations, including relocating to less-expensive cities and even moving back in with their families,” said Courtney Alev, Intuit Credit Karma’s consumer financial advocate.
Overall, the number of households with two or more adult generations has been on the rise for years, according to a Pew Research Center report. Now, 25% of young adults live in a multigenerational household, up from just 9% five decades ago.  
Finances are the No. 1 reason families are doubling up, Pew also found, due in part to ballooning student debt and housing costs.

It’s the least affordable housing market in years

Between home prices and mortgage rates, 2023 was the least affordable homebuying year in at least 11 years, according to a separate report from real estate company Redfin.
Now, the average rate for a 30-year, fixed-rate mortgage is hovering near 6.6%, down from recent highs but still twice what it was three years ago.
“Given the expectation of rate cuts this year from the Federal Reserve, as well as receding inflationary pressures, we expect mortgage rates will continue to drift downward as the year unfolds,” said Sam Khater, Freddie Mac’s chief economist.
“While lower mortgage rates are welcome news, potential homebuyers are still dealing with the dual challenges of low inventory and high home prices that continue to rise.”

Of course, housing isn’t the only issue. Millennials and Gen Z face financial challenges their parents did not as young adults. On top of carrying larger student loan balances, their wages are lower than their parents’ earnings when they were in their 20s and 30s.
“At the end of all that, you are not left with a whole lot of money to spend on a down payment,” said Laurence Kotlikoff, economics professor at Boston University and president of MaxiFi, which offers financial planning software.

For parents, supporting grown children can be a drain

Even if they don’t live at home, more than half of Gen Z adults and millennials are financially dependent on their parents, according to a separate survey by Experian.
For parents, however, supporting grown children can be a substantial drain at a time when their own financial security is in jeopardy. 
Not surprisingly, parents are more likely to pay for most of the expenses when two or more generations share a home. The typical 25- to 34-year-old in a multigenerational household contributes 22% of the total household income, Pew found. 
From buying groceries to paying for cellphone plans or covering health and auto insurance, parents are spending more than $1,400 a month, on average, helping their adult children make ends meet, another report by Savings.com found.
“It has to go both ways,” Kotlikoff said.
Overall, there can be an economic benefit to these living arrangements, Pew found, and Americans living in multigenerational households are less likely to be financially vulnerable. “If you are in financial union, make the best of it,” Kotlikoff said.
Subscribe to CNBC on YouTube.Don’t miss these stories from CNBC PRO: More

The Bitwise Bitcoin ETF (BITB) has the lowest expense ratio of all the funds poised to launch Thursday, at 0.20%.
Bitwise and other funds have waivers that forego all or part of the fees for a period of time.
Crypto-focused asset managers like Grayscale have the highest fees.

CFOTO | Future Publishing | Getty Images

The bitcoin exchange-traded funds launching Thursday after the SEC’s long-awaited approval come at a wide variety of price points, with signs that a fee war is already underway.
The Bitwise Bitcoin ETF (BITB) has the lowest expense ratio of all the new bitcoin funds, at 0.20%. Several other funds are close behind, including the Ark21Shares Bitcoin ETF (ARKB) at 0.21% and the iShares Bitcoin Trust (IBIT) at 0.25%.

The Bitwise fund also has a temporary waiver that will eliminate the fee entirely for six months on the first $1 billion of assets. Other proposed funds have similar waivers, meaning early adopters of the bitcoin ETFs will have little or zero management cost for a brief time.

Bitcoin ETF fee comparison

Fund
Ticker
Fee

Bitwise Bitcoin ETF
BITB
0.20%*

Ark 21Shares Bitcoin ETF
ARKB
0.21%*

Fidelity Wise Origin Bitcoin Fund
FBTC
0.25%*

iShares Bitcoin Trust
IBIT
0.25%*

VanEck Bitcoin Trust
HODL
0.25%

Franklin Bitcoin ETF
EZBC
0.29%

WisdomTree Bitcoin Fund
BTCW
0.30%*

Invesco Galaxy Bitcoin ETF
BTCO
0.39%*

Valkyrie Bitcoin Fund
BRRR
0.49%*

Hashdex Bitcoin ETF
DEFI
0.94%

Grayscale Bitcoin Trust
GBTC
1.5%

Source: SEC filings; * indicates temporary waiver for part or all of the management fee

The fees for bitcoin funds are higher than many broad stock index funds, with the SPDR S&P 500 ETF Trust (SPY) charging less than 0.10%. But the pricing is in-line with or even below the biggest commodity funds, as SPDR Gold Shares (GLD) and the United States Oil Fund (USO) charge 0.40% and 0.60%, respectively.
Fund managers make money by charging fees on the assets under management. ETF fees have been trending lower over time, and some asset managers have shown a willingness to run a new fund at a loss in order to attract more assets and maximize revenue long-term. The fees are taken out of a fund’s asset pool, and investors are not billed individually.
The low prices before the launch show that the battle to lower fees is already in effect for crypto funds. For example, Ark 21Shares, Valkyrie and Invesco Galaxy and others had shown higher fees initially but lowered them in subsequent filings. Even Bitwise dropped its proposed fee to 0.20% from 0.24%, which was already the lowest of the initial batch.
“I think the level of competition was maybe higher than expected. I think there were a couple of issuers like Ark for example that signaled potentially higher fees, and once the rubber sort of met the road, they all came in pretty low,” said Bryan Armour, director of passive strategies research for North America at Morningstar.

Much cheaper than options before

The fees will be a big change from the other bitcoin fund options already on the market. For example, BITO has an expense ratio of 0.95%, while the previously over-the-counter Grayscale Bitcoin Trust (GBTC) charged 2%.
“I think it’s great for investors, especially in the vein of what’s currently available in the market,” Armour added.
Grayscale is cutting its fee on GBTC as part of the conversion of that product to an ETF, but only to 1.5%. That is the highest of any fund slated to launch by a wide margin.
The fund’s 10-year track record and existing size of about $29 billion could give it an advantage over new entrants. The high fee could also be a bet that current GBTC shareholders are not willing to sell their shares and move to a cheaper fund because that could create a tax bill that could offset the benefits of the lower fees.
“We believe the product’s management fee reflects its value, as investors and the broader capital markets will benefit from GBTC’s large asset base, strong liquidity, and ten-year track record,” Edward McGee, Grayscale CFO, said in a statement.
Other crypto-focused asset managers are also charging a relative premium. The second-highest published fee is from the Hashdex Bitcoin ETF (DEFI), which is a strategy change of an existing bitcoin futures fund, at 0.94%. Valkyrie is charging 0.49% for its fund BRRR, though it is offering a temporary waiver.
Grayscale CEO Michael Sonnenshein said Thursday on CNBC’s “Squawk Box” that his firm’s experience in dealing with crypto helped to justify the higher price point.
“We’re a crypto specialist. We’ve weathered all different types of speed bumps and advancements within the crypto ecosystem. For a lot of these asset managers and issuers, this is the first time they’re going to be dealing with the complexities that go into running these types of products,” Sonnenshein said. More

Gary Gensler, chairman of the US Securities and Exchange Commission (SEC), during an interview in Washington, DC, US, on Thursday, July 27, 2023. 
Andrew Harrer | Bloomberg | Getty Images

Securities and Exchange Commission Chair Gary Gensler’s statement on why the agency has approved the listing and trading of a group of spot bitcoin ETFs indicates that he is still hostile to the cryptocurrency in general.
Gensler was faced with the difficult task of explaining why the SEC has reversed its position on bitcoin ETFs. He said that circumstances “have changed.”

They changed because the SEC lost a key court case last August: The U.S. Court of Appeals for the D.C. Circuit held that the commission failed to adequately explain its reasoning when it turned down Grayscale’s proposed bitcoin ETF.
Gensler was forced to give in, but not on all fronts.
For starters, he is engaged in several ongoing legal battles with the crypto community. In large part, the conflicts are based on his claim that most crypto assets are securities that come under the purview of the SEC. 
In his statement, Gensler gave no indication he was changing his approach on this topic:
“Nor does the approval signal anything about the Commission’s views as to the status of other crypto assets under the federal securities laws or about the current state of non-compliance of certain crypto asset market participants with the federal securities laws. As I’ve said in the past, and without prejudging any one crypto asset, the vast majority of crypto assets are investment contracts and thus subject to the federal securities laws.” 

Will bitcoin ETFs make Wall Street — wirehouses and financial advisors — more willing to recommend the cryptocurrency to clients and allow it to trade on their platforms? 
Possibly, but Gensler made it clear that broker-dealers will have to adhere to existing rules: 
“Further, existing rules and standards of conduct will apply to the purchase and sale of the approved [exchange traded products]. This includes, for example, Regulation Best Interest when broker-dealers recommend ETPs to retail investors, as well as a fiduciary duty under the Investment Advisers Act for investment advisers.”
Regulation Best Interest requires broker-dealers to act in the best interest of their retail customers when making investment recommendations. These recommendations must be “suitable” for the client. 
That is a potential investment minefield for investment advisors, and it’s likely to keep many advisors away from recommending bitcoin for some time. 
Finally, Gensler couldn’t help taking a parting shot at bitcoin in general: 
“Though we’re merit neutral, I’d note that the underlying assets in the metals ETPs have consumer and industrial uses, while in contrast bitcoin is primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing. While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin.” More