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The share of people who said not being financially literate cost them more than $10,000 is up from 11% in 2021, according to a new report.
Most respondents say it cost them under $500, if at all.
Advocates say research shows the importance of teaching personal finance in the classroom before students reach adulthood and face a multitude of financial decisions.

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When it comes to money matters, what you don’t know can hurt you.
A report from the National Financial Educators Council shows that 38% of individuals in a recent survey said their lack of financial literacy cost them at least $500 in 2022, including 15% who said it set them back by $10,000 or more. That’s up from about 11% in 2021.

The majority (68%) of respondents said poor financial literacy cost them somewhere from zero to $499.
The average cost was $1,819, according to the survey, which was conducted Oct. 23 through Dec. 5 among about 3,000 adults across the country. That 2022 figure is nearly $500 higher than the average $1,389 in 2021.
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“A lot of people come out of [school] without having been taught financial literacy in any detail,” said certified financial planner Denis Poljak, a partner with the Poljak Group Wealth Management at Steward Partners in Shreveport, Louisiana.
“They end up just … learning from their mistakes,” Poljak said.

U.S. adults have big gaps in their financial knowledge

Financial literacy — which generally means understanding money topics ranging from income, budgeting, saving and investing, as well as how interest rates work and why credit scores matter — is lacking among many U.S. adults, studies show.
For instance, adults correctly answered, on average, 50% of the 28 basic money questions in the 2022 TIAA Institute-GFLEC Personal Finance index, the sixth annual barometer of financial literacy. Worse, the share of respondents (23%) who couldn’t correctly answer more than seven is higher than its been than any other year in the survey.
The problem, say experts, is the lack of knowledge can affect everything from how much you save — whether for emergencies or the long term (i.e., retirement) — to how much debt you take on and under what terms.

Financial literacy is ‘a key tool in the toolkit’

Advocates of financial literacy say the teaching needs to start before teens reach their high school graduation. As of last year, 24 states require personal finance coursework by grade 12, according to the nonprofit Council for Economic Education. 
“There’s good data showing people make better decisions when they have financial literacy,” said Nan Morrison, CEE president and CEO.

For example, Morrison said, you’ll likely have a better credit score and be less likely to default on a loan if you have some personal finance know-how. A 2015 study from the Financial Industry Regulatory Authority’s Investor Education Foundation bears that out: Three years after personal finance education was implemented in Georgia, Texas and Idaho, all three states saw severe delinquency rates go down and credit scores rise. 
Additionally, in 2021, individuals who scored above the median on a seven-question financial literacy quiz were more likely to make ends meet, according to the FINRA foundation’s latest financial-capability study. Specifically, they spent less than their income (53% versus 35%) and had three months’ worth of emergency funds at higher levels (65% versus 42%).
They also were more likely to have calculated their retirement savings needs (52% versus 29%) and to have opened a retirement account (70% versus 43%), according to the study.
“To me, the bottom line is that to live the life you want to live, you need to understand how to manage money,” Morrison said. “It’s not the only important thing, but it’s a key tool in the toolkit.”

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A record amount of funds flowed into money market accounts as the year ended. Those funds could be the fuel for a major stock rally.
The Investment Company Institute said money market accounts held a record $4.814 trillion in the week ended Jan. 4.
But strategists say investors may hold back from putting more money into stocks, since sentiment is sour and money markets are now generating more return than they have been in years.

Dollar banknotes.
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Investor cash holdings are near record highs, and that could be good news for stocks since there is a wall of money ready to come right back into the market.
But the question is this: Will those investors return any time soon, especially with sentiment still so sour and stocks at risk of a major selloff?

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Total net assets in money market funds rose to $4.814 trillion in the week ended Jan. 4, according to the Investment Company Institute. That eclipses the prior peak of $4.79 trillion during May 2020, back in the earlier months of Covid-19.
These sums include money market fund assets held by retail and institutional investors.
The level of assets in these money market funds has come off the highs since the start of the year, but Wall Street has already noticed the cash pile.
“It’s a mountain of money!” wrote Bank of America technical research strategist Stephen Suttmeier. “While this seems contrarian bullish, higher interest rates have made holding cash more attractive.”

Staying in a holding pattern while earning income

Investors, worried about earnings and interest rates, may be willing to wait before they put more money into stocks. At the same time, money market funds are actually generating a few percentage points of income for the first time in years.

That means investors may be finding a safer way to generate some return while they wait for the right moment to invest. Consider that sweep accounts, where investors hold unused cash balances in their brokerage accounts, can park those amounts in money market mutual funds or money market deposit accounts.
Cresset Capital’s Jack Ablin said the change in behavior toward money markets reflects a bigger shift in the investing environment.
“Cash is no longer trash. It’s paying a reasonable interest and so it makes the hurdle higher over which the risky assets have to jump to generate an additional return,” Ablin said.
Julian Emanuel, senior managing director at Evercore ISI, said the surge into money markets was a direct result of selling stocks at year end.
“If you look at the flow data for the middle of December, liquidations were on the order of March 2020,” he said. “In the short-term, it was a very contrarian buy signal. To me this was people basically selling the market at the end of the year, and they just parked it in the money market funds. If the selling continues, they’ll park more.”

In search of relatively safe yield

Emanuel said anecdotally, he is seeing signs of investors moving funds from their lower paying savings accounts to their brokerage accounts, where the yields can be close to 4%.
Be aware that money market accounts issued by banks are insured by the Federal Deposit Insurance Corporation, while money market mutual funds are not.
Still, with December’s inflation rising at a 6.5% annual rate, higher prices for consumers are chiseling away at any gains.
Ablin said the change in investor attitudes about money market funds and also fixed income came with Federal Reserve interest rate hikes. Since last March, the Fed has raised its fed funds target rate range from zero to 0.25% to 4.25% to 4.50%. Those money market funds barely generated interest prior to those rate hikes.
For instance, Fidelity Government Money Market Fund has a compounded effective yield of 3.99%. The fund generated a 1.31% return in 2022.
Ablin said bonds have become attractive again for investors seeking yield.
“We like the fact that the bond market is finally carrying its own weight after years and years,” he said. “From that perspective, you would expect a rebalance away from equities into bonds. They’ve essentially been fighting equities with one hand tied behind their back for 10 years or more.”

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Treasury Secretary Janet Yellen said the U.S. would likely hit its $31.4 trillion debt ceiling on Thursday.
The debt ceiling is the amount of money the U.S. is authorized to borrow to pay its bills. Since the cost of government operations generally exceeds federal tax revenues, the U.S. must raise money by selling Treasury bonds. The government can’t do this after hitting the debt ceiling.
If the U.S. ultimately can’t pay its bills, it will default on its debt. That’s only happened once in U.S. history — and seemingly by mistake. Another default would mean likely recession and financial crisis, economists said.

The U.S. may be about to hit its debt ceiling.
Treasury Secretary Janet Yellen said last week that the U.S. would likely hit the ceiling Thursday. Absent steps taken by Congress, the event may “cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability,” she wrote in a letter to new House Speaker Kevin McCarthy, R-Calif.

Here’s what the debt ceiling is, and what makes it so important for consumers.

What is the debt ceiling?

The debt ceiling is the amount of money the U.S. Treasury is authorized to borrow to pay its bills.
Those obligations include Social Security and Medicare benefits, tax refunds, military salaries and interest payments on outstanding national debt.
The current ceiling is about $31.4 trillion. Once it’s hit, the U.S. is unable to increase the amount of its outstanding debt — and paying its bills becomes trickier.
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“Not unlike many households, the government is reliant on debt to fund its obligations,” said Mark Hamrick, a senior economic analyst at Bankrate. “And like many households, it doesn’t have sufficient income to fund its expenses.”
The debt ceiling wouldn’t be an issue if U.S. revenues — i.e., tax proceeds — exceeded its costs. But the U.S. hasn’t run an annual surplus since 2001 — and has borrowed to fund government operations each year since then, according to the White House Council of Economic Advisers.

Why is the debt ceiling an issue right now?

While the U.S. is expected to reach its $31.4 trillion borrowing cap on Thursday, this in and of itself isn’t the major issue.
The Treasury has temporary options to pay bills: It can use cash on hand or spend any incoming revenues, such as those during tax season, which starts Jan. 23.
It can also use so-called “extraordinary measures,” which free up money in the short term. The Treasury will start using such measures this month, Yellen said. They include a redemption or suspension of investments in certain federal retirement and disability funds. The funds would be made whole later.
These maneuvers are meant to prevent a potential calamity: a default.

A default would occur if the U.S. runs out of money to meet all its financial obligations on time — for instance, missing a payment to investors who hold U.S. Treasury bonds. The U.S. issues bonds to raise money to finance its operations.
The U.S. has defaulted on its debt just once before, in 1979. A technical bookkeeping glitch resulted in delayed bond payments, an error that was quickly rectified and only affected a small share of investors, the Treasury said.
However, the U.S. has never “intentionally” defaulted on its debt, CEA economists said. This outcome is the one Yellen warned would cause “irreparable harm.” The scope of negative shockwaves is unknown since it hasn’t happened before, economists said.  
“The fallout is serious,” said Mark Zandi, chief economist at Moody’s Analytics.
“It would create chaos in financial markets and completely undermine the economy,” he added. “The economy would go into a severe recession.”

Fallout: Frozen benefits, a recession, pricier borrowing

An exact default date is difficult to pinpoint, due to the volatility of government payments and revenues. But it’s unlikely to happen before early June, Yellen said.
Congress can raise or temporarily suspend the debt ceiling in the interim to avert a debt-ceiling crisis — something lawmakers have done many times in the past. But political impasse calls their ability or willingness to do so into question this time around.   

[A default] would create chaos in financial markets and completely undermine the economy.

Mark Zandi
chief economist at Moody’s Analytics

If the U.S. were to default, it would send several negative shock waves through the U.S. and global economies.
Here are some of the ways it could affect consumers and investors:
1. Frozen federal benefits
Tens of millions of American households might not get certain federal benefits — such as Social Security, Medicare and Medicaid, and federal aid related to nutrition, veterans and housing — on time or at all, the CEA said. Government functions such as national defense may be affected, if the salaries of active-duty military personnel are frozen, for example.
2. A recession, with job cuts
Affected households would have less cash on hand to pump into the U.S. economy — and a recession “would seem to be inevitable” under these circumstances, Hamrick said. Recession would be accompanied by thousands of lost jobs and higher unemployment.
3. Higher borrowing costs
Investors generally view U.S. Treasury bonds and the U.S. dollar as safe havens. Bondholders are confident the U.S. will give their money back with interest on time.
“It’s sacrosanct in the U.S. financial system that U.S. Treasury debt is risk-free,” Zandi said.
If that’s no longer the case, ratings agencies would likely downgrade the U.S.’ sterling credit rating, and people will demand much higher interest rates on Treasury bonds to compensate for the additional risk, Zandi said.
Borrowing costs would rise for American consumers, since rates on mortgages, credit cards, auto loans and other types of consumer debt are linked to movements in the U.S. Treasury market. Businesses would also pay higher interest rates on their loans.
4. Extreme stock market volatility
Of course, that’s assuming businesses and consumers could get credit. There might also be a “severe” financial crisis if the U.S. government is unable to issue additional Treasury bonds, which are an essential component of the financial system, Hamrick said.
“A default would send shock waves through global financial markets and would likely cause credit markets worldwide to freeze up and stock markets to plunge,” the CEA said.
Even the threat of a default during the 2011 debt ceiling “crisis” caused Standard & Poor’s (now known as S&P Global Ratings) to downgrade the credit rating of U.S. and generated considerable market gyrations. Mortgage rates rose by 0.7 to 0.8 percentage points for two months, and fell slowly thereafter, the CEA said.

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With most pandemic-era eviction protections having expired and rents rising, the number of tenants coming home to find notices on their doors is picking up.
Behind on your rent or facing displacement? Here’s what housing experts recommend you do.

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Between rents rising and most pandemic-era eviction bans having expired, the number of tenants coming home to find notices on their doors is picking up.
In just the first week of January, the Eviction Lab at Princeton University has counted more than 9,300 evictions in the nine states and the 32 cities it monitors.

In New York City alone, nearly 4,400 families and tenants have been removed from their apartments since January 2022, when a ban on evictions lifted.
“We’ve seen in recent months an increase in eviction filings in the areas we track, sometimes back towards pre-pandemic averages and sometimes worse,” said Jacob Haas, research specialist at the Eviction Lab. “Eviction can be a traumatic, destructive experience for the families that face it.”
If you are behind on your rent or facing displacement, here’s what housing experts recommend you do.

Familiarize yourself with tenant rights

Although it’s a tough time for tenants with rents soaring, the pandemic has also ushered in a new set of protections. It’s worth researching and familiarizing yourself with any rights to which you may be entitled, experts say.
In certain cities, for example, landlords are now limited in how much they can raise your rent. If you’re facing eviction because of an increase that was illegal, it’s worth knowing: You may be able to bring this up in housing court, or with your landlord.

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In some places, you’re entitled to a set amount of notice with an eviction, such as at least 90 days in specific cases in Portland, Maine. During the school year, educators and families with school-age children recently got new eviction protections in Oakland, California.
Meanwhile, if your landlord has raised your rent above a certain amount, you could be eligible in a few cities, including Seattle and Portland, Oregon, to get some of your moving costs covered.

Work with a lawyer

If your landlord has moved to evict you, housing advocates recommend that you try to get a lawyer as soon as possible.
One study in New Orleans found that more than 65% of tenants with no legal representation were evicted, compared with just 15% of those who had a lawyer with them at their hearing.
You can find low-cost or free legal help with an eviction in your state at Lawhelp.org.

In a growing number of cities and states, including Washington, Maryland and Connecticut, tenants facing eviction have a right to counsel. You can find a longer list of those places at civilrighttocounsel.org.

Consider your options for rent

Most rental assistance programs that opened during the pandemic are now closed, but some are still accepting applications.
On the National Low Income Housing Coalition’s website, you can find a state-by-state guide of relief options and their status.
It’s not a strategy experts recommend, but some tenants are using their credit cards to cover their rent. Few landlords or property managers accept plastic, so you’d have to find a third-party processor, such as Plastiq or PayPal.
But this option should only be used in dire situations, said Ted Rossman, a senior industry analyst at CreditCards.com.
“The biggest potential issue is carrying a balance and paying interest on your rent,” Rossman said. “This can make an already sizable expense much more substantial.”
Instead, he recommends tenants ask their landlord for an extension or payment plan. Other ways to come up with rent can include borrowing from family members and friends, or from your retirement plan, Rossman said. 

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Inflation peaked in 2022 at its highest levels since the early 1980s.
However, consumers saw prices fall for certain items, largely in consumer electronics, used cars and beef.
Prices for rental cars and trucks have followed a similar trajectory.

Zachary Zirlin / Eyeem | Eyeem | Getty Images

In a year of soaring inflation across the broad U.S. economy, some corners of the consumer market did the opposite: They deflated in price.
The largest declines, on a percentage basis, were concentrated in categories like consumer electronics, beef, and cars and trucks, according to the consumer price index.

Here are the goods that deflated the most in 2022.

Consumer electronics

Anita Kot | Getty

Several consumer electronics topped the list: smartphones; televisions; “other” video goods excluding TVs; and computers, peripherals, and smart home assistants. Their respective prices fell by 22.2%, 14.4%, 8.6% and 5.8% in 2022.
Consumer electronics generally fall in price over time, as measured by the CPI and other inflation metrics. That’s largely been the trend since 2006, according to CPI data for information technology, hardware and services, for example.
The pandemic era was an exception, as households upgraded and bought new tech devices amid stay-at-home orders, thereby buoying demand while important parts like semiconductor chips were in short supply.
Consumers might find the idea of this broad deflation trend odd, though, when sticker prices for popular items like smartphones, televisions and computers don’t seem to have fallen.

The deflationary dynamic is more a measurement quirk than a reflection of what consumers pay out of pocket, according to economists. The U.S. Bureau of Labor Statistics adjusts technology prices for quality — improvements in microchips, software and screen resolution, for example — that gives the illusion of a falling price on paper.
In other words: Better quality for the same money yields deflation in the eyes of federal statisticians.
“You’re getting more bang for your buck,” said Tim Mahedy, senior economist at KPMG. “You’re still paying $800 for an iPhone, but your iPhone is a lot better.”
This economic modeling is known as a “hedonic quality adjustment.” The BLS uses this method for consumer appliances, electronics and apparel items, for example.
That measurement dynamic coincides with weaker demand, which is partly a function of consumers not having to stay indoors as they did during the pandemic era, and the easing of supply shortages.
“It has been the same story for past 20 years,” Andrew Hunter, senior U.S. economist at Capital Economics, said of the general deflationary trend for consumer electronics. “It now looks to be returning over the past six months or so.”
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Used cars and trucks, rental vehicles

A used car dealership in New York on Jan. 19, 2022.
Pablo Monsalve | View Press | Corbis News | Getty Images

Prices for used cars and trucks were among the first to spike as inflation took hold in early 2021. The category inflated by 37.3% that year — the most of any item outside of energy commodities like gasoline and fuel oil, according to the consumer price index.
Now, used car and truck prices are in retreat. They deflated by 8.8% in 2022. Only prices for smartphones and TVs fell at a faster rate.
Prices for rental cars and trucks have followed a similar trajectory. They declined 4.9% in 2022, after spiking 36% the prior year.
A shortage of semiconductor chips — a key vehicle component — brought the global production of new vehicles to a halt during the pandemic. Car inventories collapsed to record lows, sending vehicle prices soaring in 2021.

You’re getting more bang for your buck. You’re still paying $800 for an iPhone, but your iPhone is a lot better.

Tim Mahedy
senior economist at KPMG

The supply shortage pushed more buyers into the used vehicle market, driving up prices. Those buyers included rental car companies, which needed to restock fleets they had culled earlier in the pandemic as consumer demand tanked.
Supply shortages ran headlong into burgeoning demand from American travelers who wanted to hit the road in 2021 as Covid vaccines rolled out but travel outside U.S. borders was somewhat constrained.
Now, however, global auto production has increased as supply chains are normalizing, economists said. That’s led prices for used vehicles to decline.
“Rental car companies were buying — and now completely stopped buying — used vehicles,” said Mark Zandi, chief economist at Moody’s Analytics.
Higher interest rates have also crimped consumer demand.

Beef, bacon

Black Angus cows at a farm in Pleasureville, Kentucky.
Bloomberg | Bloomberg | Getty Images

Uncooked beef steaks, beef roasts, and other types of beef and veal fell in price last year — 5.4%, 3.5% and 6.7%, respectively.
Meanwhile, bacon prices declined 3.7%.
That occurred as consumers saw overall grocery prices move the opposite way, swelling by nearly 12% in 2022, according to CPI data.
The beef pricing trend is largely a result of U.S. drought conditions and the associated economics of beef production, said Amy Smith, vice president at Advanced Economic Solutions, a consulting firm specializing in food economics.
Over 78% of the U.S. was experiencing some level of drought as of Dec. 6, according to the U.S. Department of Agriculture. About 69% of the U.S. cattle herd is in those drought-stricken areas, an increase of 33 percentage points over a year earlier, the USDA said.  
This is important because drought shrinks pasture and forage areas; at the same time, corn and wheat prices have been high, making it expensive to supplement pasture feeding with animal feed, Smith said.  
As a result, many farmers have opted to slaughter cows early for beef production, increasing the available supply of beef and reducing prices at the grocery store, Smith said.
The USDA described cattle slaughter in the first half of 2022 as an “aggressive culling,” predominantly due to “pasture conditions and increased operating costs.” The pace of beef-cow slaughter in July was the fastest recorded since the USDA started tracking data in 1986.
Meanwhile, lower bacon prices are partly due to a higher domestic supply of pork amid reduced exports to other nations, Smith said. The USDA estimates total U.S. pork exports at 6.3 billion pounds in 2022, down 10% from 2021.

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Even with plentiful free checking options, some consumers are still paying fees, a new Bankrate.com survey finds.
Here’s how much you stand to lose and steps you can take to save.

Even with broad availability of free checking services, more than a quarter of checking account holders — 27% — are paying fees every month.
For consumers who aren’t taking advantage of free checking, those fees add up to an average of $24 per month, or $288 per year, according to a new survey from Bankrate.com. The personal finance site conducted its online survey Dec. 7-12 and included 3,657 adults, of whom 3,069 have a checking account.

The charges come from routine services or ATM and overdraft fees, the research finds. The average overdraft fee costs $29.80, Bankrate’s research has found, while the average nonsufficient funds fee is $26.58.
The annual sums may not sound like a lot, said Sarah Foster, analyst at Bankrate.com, but can add up to a hefty $5,000 if you stick with your checking account for 17 years, as the average consumer tends to do.
Nixing bank fees is an easy way to free up a little more money in your budget, especially amid high inflation and with expectations of a recession on the rise. Paying those extra costs may weaken consumers’ budgets and make them more vulnerable if a downturn does happen.
“It’s just an important and really an easy way to make sure you’re not spending more money than you have to,” Foster said.
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Which generations spend the most on checking fees

Younger people are most susceptible to paying fees, Bankrate.com’s survey found.
Gen Z, who range in age from 18 to 26, comes in at the top of the list, with 46% of that generation’s checking account holders paying monthly fees. That cohort pays about $25 per month, Bankrate.com found.
Millennials, who are ages 27 to 42, come in next, with 42% of account holders paying monthly checking fees, Bankrate.com found. They typically pay the most compared with other generations, at $28 per month, the study found.
Older cohorts — Gen Xers, who are between 43 and 58, and baby boomers, ages 59 to 77 — are less likely to pay checking account fees. That includes just 22% of Gen X and 14% of baby boomer checking account holders, who pay $17 and $22 per month, respectively.
More than half of Gen Z — 56% — and millennial — 52% — account holders say they are sacrificing recession preparedness due to the monthly fees they pay. In comparison, 46% of Gen X and 35% of baby boomers said the same.
The monthly fees are setting consumers back on goals including paying down debt, saving for emergencies or for major goals such as buying a house or car or paying for college, or setting money aside for retirement, the survey found.

Gauge the true cost of your checking account

To know what you’re truly paying for your checking account, you should keep tabs on your statements at least monthly, according to Bruce McClary, senior vice president at the National Foundation for Credit Counseling.
Start with the basics — looking at your transactions to make sure they’re accurate, he said. Then evaluate your transactions and withdrawals and any account maintenance fees that come up.
If you feel that you’re being charged in error, that should prompt a conversation with your bank, McClary said.
Keep in mind there may be adjustments your bank or credit union may be willing to make. If you let your financial institution know about your personal situation, they may be willing to forgive certain fees, particularly a first-time charge, Foster said.
“There’s no guarantee it will work, but it just never hurts to reach out,” Foster said.

‘Shop around for opportunities’

Also evaluate whether there are fees you can avoid, such as by eliminating out-of-network ATM withdrawals or by maintaining a required minimum balance.
Where you can, try to find free savings and checking services, McClary said.
“Shop around for opportunities,” McClary said. “If your bank or credit union isn’t offering them, this could be an opportunity to move your business elsewhere where it might be more affordable.”
Opening a new account at another institution may seem arduous, particularly if it requires an in-office visit and physically moving cash, Foster said. But the savings over time may more than make up for the hassle.
“While switching a bank can be a pretty annoying step, it can help you build wealth in the long run if it means not paying for a service that you can get for free elsewhere,” Foster said.
And if you find you’re not happy with your new account, you can always move your money somewhere else, she said.

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In the new student loan repayment proposal rolled out by the Biden administration, certain borrowers could see their monthly payments drop significantly.
Some borrowers will have $0 monthly payments.

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In the new student loan repayment plan proposal rolled out Jan. 10 by the Biden administration, more borrowers could see their monthly payments drop to $0.
The new option revises one of the four existing income-driven repayment plans, which cap borrowers’ bills at a share of their discretionary income with the aim of making the debt more affordable to pay off.

Instead of paying 10% of their discretionary income a month, under the proposal, the Revised Pay As You Earn Repayment Plan, or REPAYE, borrowers would be required to pay 5% of their discretionary income toward their undergraduate student loans.
The new REPAYE plan could officially be available July 1, 2024, according to higher education expert Mark Kantrowitz. That estimate accounts for a 30-day public comment period on the proposed regulation and then a window before new rules can go into effect. But some parts of the plan could be implemented sooner, he said.
Here’s what borrowers need to know.

More people will have $0 payments

Under the current REPAYE plan, discretionary income is calculated as money earned over 150% of the federal poverty guideline. And so, single borrowers begin to make payments based on income over roughly $21,900, based on 2023 guidelines, said Kantrowitz.
Under the new plan, borrowers wouldn’t need to make payments based on income earned until it hit 225% of the federal poverty guideline, or about $32,800, Kantrowitz said.

He provided an example of how monthly bills could change with the overhauled option.
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Previously, a borrower who made $40,000 a year would have a monthly student loan payment of around $151. Under the revised plan, their payment would drop to $30.
Someone who earned $90,000 a year, meanwhile, could see their monthly payments shrink to $238 from $568, Kantrowitz calculated.
Those who earn under around $32,800 will have $0 monthly payments.

Undergraduate borrowers benefit most from the change

The new option should be available to borrowers with undergraduate and graduate student loans, although undergraduate borrowers will have lower payments.
Those with Parent Plus loans won’t be eligible to enroll in the overhauled plan.

Defaulted loans are typically ineligible for income-driven repayment plans.
Yet under the new proposal, those who have fallen behind may be able to sign up for the income-based repayment plan, another one of the income-driven repayment plan options.

Borrowers will need to enroll

Once the new REPAYE plan is available, borrowers can call their student loan servicer to enroll in the option, or apply at StudentAid.gov.
“Any new plan will likely take quite some time to implement, so borrowers will have plenty of time to learn about how it might work,” said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers.

There’s a 10- or 20-year payment timeline

After 20 years of payments on undergraduate student loans, any leftover debt is forgiven on the current REPAYE plan. The revised option preserves that timeline.
Plus, under the Biden administration’s proposal, those with original student loan balances of $12,000 or less may get their loans forgiven after just 10 years.

Forgiven student debt may come with a tax bill

It’s unclear whether debt forgiven at the end of the repayment timelines will be taxable at the federal level.
Debt forgiveness used to trigger a tax bill under income-driven repayment plans. But a recent law ended that policy until at least 2025, and experts expect it to become permanent.
It’s also possible that some states will consider the forgiven debt taxable.

What’s going on with the payment plan pause?

The pandemic-era relief policy suspending federal student loan bills and the accrual of interest has been in effect since March 2020. 
For now, the Education Department is leaving things a little open-ended when it comes to the timing of payments resuming.

It has said the bills will be due again only 60 days after the litigation over its student loan forgiveness plan resolves and it’s able to start wiping out the debt.
If the Biden administration is still defending its policy in the courts by the end of June, or if it’s unable to move forward with forgiving student debt by then, the payments will pick up at the end of August, it has said.
The Supreme Court will start hearing arguments on legal challenges to the plan Feb. 28.

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Whether they’re leaving due to layoffs or in search of greener pastures, there’s a good chance some departing workers will be leaving a 401(k) behind.
While you generally have three options for handling an old 401(k), some are better than others, experts say.
Here are the rules to know if you’re leaving your job and were participating in a 401(k).

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Whether you’re leaving your job by choice or not, don’t forget about your 401(k) plan.
As workers continue quitting their jobs at an elevated rate and some companies embark on layoffs — including Amazon, Salesforce and Goldman Sachs — there’s a good chance some departing workers will be leaving an employer-sponsored retirement plan behind.

While not everyone has a 401(k) or similar workplace retirement plan, those who do may want to be familiar with what happens to their account when they leave a job and what the options are — and aren’t.

You have three basic choices for an old 401(k)

Broadly speaking, you have several options for your old 401(k). You may be able to leave it where it is, roll it into your new workplace plan or an individual retirement account, or cash it out — although experts generally caution against the third move.
Cashing out “is the least desirable option,” said Eric Amzalag, a certified financial planner and owner of Peak Financial Planning in Canoga Park, California.
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For starters, he said, you’d face paying taxes on the distribution — unless it’s post-tax money you put in a Roth 401(k). With some exceptions, you’ll typically also pay a 10% tax penalty if you’re younger than age 59½, which is when withdrawals from 401(k)s and other retirement accounts can begin.

“If the account size is large, it could push the individual into a high tax bracket, causing the funds to be taxed at a higher and disadvantageous rate,” Amzalag said.

Keep track of money left in a former employer’s 401(k)

Perhaps the easiest thing you can do is leave your retirement savings in your former employer’s plan, if it’s permitted. Of course, you can no longer contribute to the plan. Nor will you be able to take a loan from that account as you can when you’re an active employee in the 401(k).
However, while this might be the easiest immediate choice if it’s available, it could lead to more work in the future.
Basically, finding old 401(k) accounts can be tricky if you lose track of them. While congressional legislation known as Secure 2.0, enacted in December, includes a provision for a retirement account “lost and found,” the Labor Department gets two years to create it. Some large 401(k) plan administrators — Fidelity Investments, Vanguard Group and Alight Solutions — also have teamed up to offer their own lost and found.

Also be aware that if your account is small enough, you may not be able to keep it at your ex-employer even if you want to.
If the balance is between $1,000 and $5,000, your ex-employer can roll over the amount to an IRA. (Secure 2.0 changed that upper limit to $7,000, effective for distributions made after 2023.)
If the balance is less than $1,000, the plan can cash you out — which can lead to a tax bill and an early-withdrawal penalty.

Consider a rollover to a new workplace plan or an IRA

Another option is to transfer the balance to another qualified retirement plan, such as the 401(k) at your new employer, assuming the plan allows it.
“The main advantage of this option is consolidation of your accounts and less to keep track of,” said CFP  Justin Rucci, an advisor with Warren Street Wealth Advisors in Tustin, California.
You also could roll it over to an IRA, which may provide more investment choices — but also may come with higher fees, which can eat away at your nest egg.

Be aware that if you have a Roth 401(k), it can only be transferred to another Roth account. This type of 401(k) and IRA involves after-tax contributions, which means you don’t get a tax break up front as you do with traditional 401(k) plans and IRAs.
However, the Roth money grows tax-free and is untaxed when you make qualified withdrawals down the road.

Watch out for 401(k) ‘exit costs’

No matter what you choose to do with your old workplace retirement account, be aware of some of the potential “exit costs” related to it.
For example, while any money you put in your 401(k) is always yours, the same can’t be said of employer contributions.
Vesting schedules — the length of time you must stay at a company for its matching contributions to be 100% yours — range from immediately to up to six years. Any unvested amounts generally are forfeited when you leave your company.

Also, if you have taken a loan from your 401(k) and haven’t repaid it when you leave your company, there’s a good chance your plan will require you to repay the remaining balance fairly quickly. Otherwise, your account balance will be reduced by the amount owed — called a “loan offset” — and considered a distribution.
In simple terms, unless you are able to come up with that amount and put it in a qualifying retirement account by the following year’s tax-return deadline, it is considered a distribution that may be taxable. And, if you are under age 59½ when you leave the job, you may pay a 10% early-withdrawal penalty.
About a third of employer plans allow former employees to continue paying the loan after they leave the company, according to Vanguard. This makes it worthwhile to check your plan’s policy.

There may be reasons to avoid an IRA rollover

It’s worth talking to a financial advisor before moving your old 401(k). In addition to portfolio considerations such as investment choices and fees, there may be planning consequences.
For example, there’s something called the Rule of 55: If you leave your job in or after the year you turn age 55, you can take penalty-free distributions from your current 401(k). If you move the money to an IRA, you generally lose the ability to tap the money before age 59½ without paying a penalty.
Additionally, if you are the spouse of someone who plans to roll over their 401(k) balance to an IRA, be aware that you would lose the right to be the sole heir to that money. With the workplace plan, the beneficiary must be you, the spouse, unless you sign a waiver allowing it to be someone else.
Once the money lands in the rollover IRA, the account owner can name anyone a beneficiary without their spouse’s consent.

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