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The more than three-year-long pause on federal student loan payments is slated to finally conclude within months.
Consumer advocates and borrowers are worried about the transition, which will unfold while student loan forgiveness is still tied up at the Supreme Court.

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Richelle Brooks’ budget is already tight. She doesn’t know what she’s going to do when federal student loan payments resume in the fall.
The single mother of two has seen all her expenses rise over the last few years amid high inflation. “I go grocery shopping and spend $300 or $400 for food that’ll last two weeks in my house,” said Brooks, 35. Her mother recently moved in with her because she doesn’t earn enough as an office manager to afford the rents in Los Angeles, where they live.

Although Brooks earns around $100,000 as a high school principal, her student loan balance is at nearly $240,000. She’s already calculated what her new payment will be.
“With an extra $600 a month, where is that going to come from?” Brooks said.
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Millions of other people are likely asking a similar question.
The more than three-year-long pause on federal student loan payments is slated to finally conclude within months. The Biden administration is preparing borrowers for their payments to resume by September, even while its loan forgiveness program is halted as the Supreme Court debates its validity. The debt ceiling deal passed by Congress also includes a provision officially terminating the pandemic-era relief policy and making it harder for the U.S. Department of Education to extend it.

“The emergency period is over, and we’re preparing our borrowers to restart,” Education Secretary Miguel Cardona said at a Senate hearing last month.

Average borrower saved $15,000 due to payment pause

Former President Donald Trump first announced the stay on federal student loan bills and the accrual of interest in March 2020, when the coronavirus pandemic hit the U.S. and crippled the economy. The pause has since been extended eight times.
Nearly all people eligible for the relief have taken advantage of it, with less than 1% of qualifying borrowers continuing to make payments on their education debt, according to an analysis by higher education expert Mark Kantrowitz.
As a result of the policy, the average borrower likely saved around $15,000 in student loan payments, Kantrowitz said. The typical monthly bill is just under $350 a month.

‘There will be some initial chaos’

Because there’s no lending precedent for borrowers getting such a long reprieve from their bills, there is little evidence to inform what will happen when the payments resume.
But Kantrowitz expects most borrowers to adjust pretty quickly.
“There will be some initial chaos, but it should settle down within a few months,” he said.
However, Education Department Undersecretary James Kvaal warned earlier this year that if the administration is unable to deliver on President Joe Biden’s plan to forgive up to $20,000 in student debt for borrowers, delinquency and default rates could skyrocket.

There will be some initial chaos, but it should settle down within a few months.

Mark Kantrowitz
higher education expert

During previous natural disasters, borrowers were offered shorter forbearances, and many fell behind when their payments resumed, Kvaal said in a court filing.
″[T]he one-time student loan debt relief program was intended to avoid” that problem, he added.

‘Borrowers are not ready to resume payments’

House Speaker Kevin McCarthy applauded the provision in the debt ceiling agreement that officially ends the stay on bills by September, saying the Biden administration “can [no] longer use Covid as an excuse to pause student loan repayments.”
“It also requires borrowers to be responsible for paying off their student loans once again,” McCarthy wrote on Twitter.
Yet consumer advocates say the troubles for student loan borrowers are far from over.
“Borrowers are not ready to resume payments,” said Persis Yu, deputy executive director at the Student Borrower Protection Center. “Even if the risk from the virus has diminished, the financial fallout has not.”

Before the public health crisis, when the U.S. economy was enjoying one of its healthiest periods in history, there were still problems plaguing the federal student loan system and some experts compared it to the 2008 mortgage crisis
Only about half of borrowers were in repayment in 2019, according to an estimate by Kantrowitz. Around 25% — or more than 10 million people — were in delinquency or default, and the rest had applied for temporary relief measures for struggling borrowers, including deferments or forbearances.
“I think they may be in a worse position,” Yu said, of those people. “Which is why President Biden’s debt relief program is so critical.”
The Biden administration announced a new program last year that will give defaulted borrowers the chance to get into current standing. However, “the administration has barely begun doing outreach” on the program, Yu said.

The Education Department did not immediately respond to a request for comment.
Yu is also worried about the recent turnover and layoffs among student loan servicers, which faced criticism and complaints from advocates, regulators and borrowers long before Covid.
During the payment pause, three companies that managed the loans — Navient, the Pennsylvania Higher Education Assistance Agency (also known as FedLoan) and Granite State — all said they’d be ending their relationship with the government. As a result, around 16 million borrowers will have a different company to deal with by the time payments resume, or not long after.
“It is critical for folks to understand that the student loan system is not prepared to return to repayment,” Yu said. “We are relying on brand new servicers and expecting them to help millions of borrowers through a byzantine system all at once.”

Some borrowers face hard financial choices

Half of Paul Berlet’s monthly income goes to his rent.
The sixth-grade English teacher earns a little under $50,000 a year, and pays $1,200 a month for his one-bedroom apartment in Wilmington, Delaware.
To be able to afford his student loan payment in September, Berlet plans to cut back on how much food he buys. Although he’ll technically be able to come up with the extra $250 a month by doing so, he doesn’t believe he should have to make these kinds of decisions.
“There’s no reason somebody should need to take out loans to be a teacher,” said Berlet, 23. “But to be able to serve my own community, I needed to put myself in debt.”

Starting in the fall, he expects to return to the diet he had eaten as a broke college student.
“When I go grocery shopping now, I’m able to buy fresh ingredients, vegetables, a piece of salmon if I want it,” he said. “But that will go away, and I’ll be back to [instant rice] and beans.”
Brooks also doesn’t believe she should have to be hundreds of thousands of dollars in debt for her education.
Her parents didn’t attend college, she said. Her mother was a waitress for much of her life; her father wasn’t around. To finance her degrees, she turned to government loans.

I’ll be back to minute rice and beans.

Paul Berlet
student loan borrower

“By attaining an education, I was working to better myself and get out of poverty,” Brooks said.
Her student debt has made that mission difficult. And she worries the consequences will continue.
Her daughter, Mariah, will start college herself in three years. During the pause on student loan payments, Brooks has been able to put aside $150 a month for Mariah’s education.
But starting in September, she won’t be able to do that anymore. More

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Company: NRG Energy (NRG)

Business: NRG Energy is an integrated power company involved in producing and selling electricity and related products and services to residential, commercial, industrial and wholesale customers. It generates electricity using natural gas, coal, oil, solar, nuclear and battery storage.
Stock Market Value: $7.6B ($33.30 per share)

Activist: Elliott Management

Percentage Ownership:  > 13.0%
Average Cost: n/a
Activist Commentary: Elliott is a very successful and astute activist investor, particularly in the technology sector. Its team includes analysts from leading tech private equity firms, engineers and operating partners – former technology CEO and COOs. When evaluating an investment, the firm also hires specialty and general management consultants, expert cost analysts and industry specialists. The firm often watches companies for many years before investing and has an extensive stable of impressive board candidates.

What’s happening?

On May 15, Elliott sent a letter to NRG. The firm called on the company to implement a plan that includes appointing five new independent board members it has identified and making operational and strategic improvements, including a review of Vivint Smart Home.
This is not Elliott’s first foray with NRG. In January 2017, the firm filed a 13D on NRG with a plan centered around operational improvements and portfolio actions. Elliott saw a company with an attractive collection of generation and retail assets that had lost its focus as it expanded beyond its core merchant power and retail electricity businesses, which led to an uncompetitive cost structure, an overleveraged balance sheet and a complex asset portfolio. As part of its plan, Elliott suggested that NRG focus on its core businesses by reducing costs, monetizing non-core assets to simplify its portfolio and paying down debt. NRG conducted a four-month business review that targeted initiatives, including $1.065 billion of total cost and margin improvement, $2.5 billion to $4.0 billion of asset divestitures and $13 billion of debt reduction. In February 2017, Elliott settled with the company for the replacement of two directors, including the chairman, with a longtime director (since 2003) taking over the chairman role. Elliott exited their 13D six months later with a 103.5% return versus 7.5% for the S&P 500. One year later, one of their directors resigned from the board. Two years after Elliott wrapped up the engagement, the other director resigned.

Since the end of the firm’s engagement, NRG has reversed much of its progress and has underperformed the S&P Utilities Index by 44% and integrated power peers by 53%, which can largely be attributed to various operational failures and a loss of strategic direction. NRG missed two years of financial guidance in 2021 and 2022 after struggling with repeated plant outages and demonstrating an inability to manage through extreme weather events. Perhaps more impactive to its dismal performance was the company’s acquisition of Vivint (a home security business), completed on March 10. This acquisition prompted a 20% decline in NRG’s market cap over the first week and begs the question of why the company would make such a large bet on a strategy that many other firms have already failed to execute successfully.
Missteps aside, Elliott thinks that the company’s retail franchise is a crown jewel that has been a market leader in Texas for over 20 years and there remain several opportunities to get back on track. Now Elliott is back with a plan that is remarkably similar to its 2017 plan: improve operations, refresh the board, and fix strategy and capital allocation. Elliott calls on the company to adopt an operationally focused strategy of improving reliability, reducing costs and meeting financial commitments. The firm thinks that this could lead to at least $500 million of recurring, EBITDA-accretive cost reductions by 2025. Additionally, Elliott believes that NRG should conduct a strategic review of its home services strategy, including Vivint, and focus on the core integrated power business. The company should also establish a new capital allocation framework to return at least 80% of free cash flow to shareholders, with any growth investments focused on the generation and retail businesses. Elliott states that this plan would allow the company to return $6.5 billion of excess capital (~85% of the current market cap) to shareholders over the next three years. Elliott believes that this plan could create over $5 billion of value, driving the stock price to upward of $55 per share.
To effectively oversee this plan, Elliott believes that the board needs new independent directors with expertise in the power and energy industry. Elliott has identified five candidates that it believes will help implement the foregoing operational and strategic changes. The board and management currently consist of the same chairman Elliott agreed to in 2017, five (out of 10) of the same directors from before Elliott’s 2017 engagement and the same CEO as from before the firm’s engagement. Elliott does not come out and say that the company needs a new CEO, but the firm certainly dances around it in the May 15 letter: It notes that the company “must restore the credibility of the management team.” “The Board should also evaluate the management team’s ability to drive high-performance operations on a sustained basis.” “Strong management will be key to the success of the Repower NRG Plan,” and “significant changes are needed.”
One of the biggest, but under-recognized benefits of shareholder activism is that activists often not only create value during their engagement, but they also put the company on the right trajectory to sustain shareholder value over the long term. The latter did not happen here, and now Elliott is realizing the difference between giving someone a fish and teaching them to fish. Or, to use a more business-like analogy, the difference between “clock building” and “time telling” as explained by author Jim Collins in the book “Built to Last.” “Searching for a single great idea on which to build success is time telling; building an organization that can generate many great ideas over a long period of time is clock building. Enduring greatness requires clock building,” Collins wrote. In 2017, Elliott’s campaign was about time telling. To achieve the kind of long-term value the firm appears to be aiming for this time around, it is going to have to build a clock.
They will have time to make this happen. Elliott has only recommended directors instead of nominating them, which signals amicable engagement, but it cannot formally nominate directors until Dec. 29 and has until Jan. 28, 2024 to make nominations. The amount of change that is needed to sustain long-term value as Elliott alludes to in its letter will take more than just replacing two directors this time, so an early settlement might not be in the cards.
It should be noted that activists have historically not been that successful the second time around when they go back to the well. A 2019 study conducted by 13D Monitor concluded that when activists file a second campaign at the same company, they have an average return of 16.78% versus 28.56% for the S&P 500 the second time around. That’s compared to an average return of 46.54% versus 6.25% the first time they engaged.
Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments. More

Pride Month merchandise is displayed at a Target store on May 31, 2023 in San Francisco, California. 
Justin Sullivan | Getty Images

Even before Pride month was underway, it seems as if it was open season on companies celebrating the LGBTQ community.
One by one, companies have come under an expanding attack. Anheuser-Busch, Target, Kohl’s and VF Corp.’s North Face brand have all felt the vitriol of this latest push from the right. And the list keeps growing. These companies have been branded as “woke capitalists” — and worse — as critics urged boycotts of these companies’ products. Bud Light came into the crosshairs after it struck a partnership with trans influencer Dylan Mulvaney, while North Face received backlash for an ad featuring drag queen Pattie Gonia. Target and Kohl’s have been criticized for Pride-themed clothing.

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While it’s too early to say how successful these efforts will be in lowering sales at the companies recently drawn into this attack, damage has been done to the stocks already. And some on Wall Street expect that to continue with analysts recently downgrading Target’s and Anheuser-Bush’s ratings, citing in part the ongoing controversy.
“The main reason boycotts generally are effective is because they threaten the reputation of the company by putting the company in a negative media spotlight, and companies don’t want to have negative attention of any kind drawn to them,” said Brayden King, a professor of management and organizations, who has studied how boycotts impact company stock prices, in an interview.
King’s research focused on 133 separate boycotts launched between 1990 and 2005, in a study that was published in 2011. About a quarter of the 177 companies targeted by these actions offered a concession to protestors.
“They often concede to boycotter’s demands, not because they feel that there’s sales pressure on them, but rather because they don’t want to continue to be a target of negative media attention,” he said.
King’s research found that the stock of a company will fall about 1% each day of national print media coverage. But once the issue falls out of the daily news cycle, the stock generally recovers.

Why Bud Light is an outlier

King sees Anheuser-Busch’s situation as an outlier because the controversy has harmed its sales. The company has been under fire for more than two months. Over that time, its stock is down more than 18%.

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Anheuser-Busch InBev shares hit a 52-week high of $67.09 on March 31.

“With 7 weeks of data, the consumer backlash at Bud Light seems quite durable,” said Cowen analyst Vivien Azer, in a research note Friday. “This is not a surprise to us, given how violent the responses were to Bud Light on social media. Indeed, in each of the last five weeks, we have seen Miller Lite and Coors Light gain over 200 bps of market share from Bud Light (where market share fell 390 bps most recently).”
Cowen’s consumer research suggests Molson Coors will be able to maintain the market share it’s gaining.
“Relative to Miller Lite and Coors Light, the Bud Light brand seems to skew to white consumers, men, younger consumers and lower-income consumers. The income bias toward Bud Light, we believe, is a key factor in driving the durable market share gains to TAP,” Azer explained.
Molson Coors shares are up 24% over the past two months, as analysts have spotlighted the market share gains it’s making.
Bud Light has tried to win back customers with a $15 off rebate program on Budweiser, Bud Light, Bud Select and Bud Select 55. While shoppers will need to put out money for the purchases on the front end, once the rebate is processed, the product is essentially free, according to Azer.
Will this be enough to soothe angry consumers? She’s unconvinced.
“Recall there were consumers that were happy to destroy beer they had already purchased,” she said.

Budweiser beer in the brewery section at a Walmart Supercenter on March 02, 2023 in Austin, Texas. 
Brandon Bell | Getty Images

There are several factors contributing to the impact the Bud Light boycott is having on sales that are specific to the beer category, according to King. He said, the first is that a bar, restaurant or music venue could remove the product, which takes the decision away from consumer. Then, there is the social nature of drinking.
“When you’re purchasing something in private, there’s nobody looking over your shoulder to hold you accountable,” King said. However, beer may be purchased to drink with friends so there could be more social pressure, he said.

Companies on edge

The situation with Bud Light may have put companies more on edge. Target has carried Pride month apparel for years, but when confronted with pushback this year, the retailer moved product in some stores to other areas or removed it all together, citing concerns for worker safety. But this decision also carries a risk. Target could wind up offending both sides of the issue.
“The fact that a small group of extremists are threatening disgusting and harsh violence in response to Target continuing its long-standing tradition of offering products for everyone should be a wake-up call for consumers and is a reminder that LGBTQ people, venues, and events are being attacked with threats and violence like never before,” said Sarah Kate Ellis, president and CEO of GLAAD, a LGBTQ media advocacy group, in a written statement.
The group has pushed for Target to put the Pride merchandise back on the sales floor and online, and do what it can to protect workers in the stores. Target has also received bomb threats from those claiming to support the LGBT community, who wanted the merchandise retured to the store, according to media reports.

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Target’s stock hit a 52-week low on Thursday.

Target’s stock has fallen about 10% since news broke on May 24. But shares were already trending lower after the retailer’s earnings report showed weakness in parts of its business.
Meanwhile, both VF Corp. and Kohl’s shares seemed to be bouncing back on Friday. After recovering some lost ground, the North Face parent is down about 9% since it launched its “Summer of Pride” ad on May 23. Kohl’s shares rose nearly 12% on Friday, recouping nearly all of the ground it lost. But the stock sank as low as $17.89 on Thursday, its lowest level since May 22, 2020.

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VF Corp. shares traded as low as $16.77 on Thursday.

Target’s stock sank to a 52-week low of $126.75 on Thursday, following a downgrade by JPMorgan to neutral. While analyst Christopher Horvers cited a weakening consumer as the primary reason that he expects tougher times ahead for the discount retailer, the recent controversies were mentioned as a factor in the decision. Horvers slashed his price target to $144 from $182.
Meanwhile, Wells Fargo analyst Edward Kelly said the recent pullback in the stock’s price might have been seen as a buying opportunity prior to this issue.
“The current stock price could have been a good entry point, but it’s hard to step in front of the current uncertainty,” Kelly wrote in a research note Thursday.
Kelly said that he has seen “early evidence of some near-term financial impact.” Among the factors he cited was Placer.ai data that showed foot traffic at Target stores was soft in the week ended May 28.
“Traffic has been a key bright spot for TGT as it struggled with margin issues, and a slowdown would be negative. It remains to be seen how long any impact would last,” Kelly said.

Issues give brands ‘powerful gravitational pull’

Even with the risk, companies will continue to tie brands to social issues because it fosters a deeper relationship with customers.
“If you build your argument to consumers only on the stuff, only on the features, only the functional utility of what it is that you do, then competitors can come in and offer that, just a copy of that, and claim that  they have a better mousetrap,” said Americus Reed, a professor of marketing at the University of Pennsylvania, in an interview Wednesday on CNBC’s “Power Lunch.”

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Kohl’s shares on Thursday hit a low of $17.89, the stock’s lowest level since May 22, 2020, when it traded as low as $17.19.

“So a bit of … why it is so attractive to align with purpose and these sorts of issues is that … it gives you an opportunity to link more deeply with consumers,” Reed said. Even though it can go awry, the upside can be powerful because the connection “has powerful gravitational pull,” he said.
In fact, those strong relationships are usually why boycotts fail to hurt a company’s sales longer term, according to King. He said research has shown that for every consumer that stops buying a product another shopper will begin a “buycott” by purchasing items to show their support for the opposite side of the issue.
Still, with threats coming from both sides of the issue, and stocks suffering sharp selloffs, companies may proceed a bit more cautiously.
“They may internally continue to embrace those values as important to their culture and identity, but externally they may be more risk adverse in terms of how they communicate those values,” King said.
—CNBC’s Christopher Hayes contributed to this report. More

To help spark interest in college, the State University of New York is sending acceptance letters to 125,000 graduating high school students.
But college enrollment may have reached its peak, some experts say.
Not only are fewer students interested in pursuing a degree after high school, but the population of college-age students is also shrinking.

Graduates of Baruch College participate in a commencement ceremony at Barclays Center in Brooklyn, New York, June 5, 2017.
Bebeto Matthews | AP

In the days ahead, 125,000 graduating high school seniors will receive automatic acceptance letters from the State University of New York, Gov. Kathy Hochul announced Thursday.
“Access to quality higher education is an engine for social mobility and we are taking comprehensive steps to ensure that college is affordable and accessible for students from all backgrounds,” New York’s governor said in a statement.

Nationwide, college enrollment has noticeably lagged since the start of the Covid-19 pandemic, when a significant number of students decided against a four-year degree in favor of joining the workforce or completing a certificate program without the hefty price tag or zoom screen.
But a downturn in enrollment was in the works long before 2020.
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“The enrollment crisis didn’t start with the pandemic, it accelerated with the pandemic,” said Hafeez Lakhani, founder and president of Lakhani Coaching in New York. “This is the fuel on the fire.”
In fact, undergraduate enrollment in the U.S. topped out at roughly 18 million students over a decade ago, according to the National Center for Education Statistics.

Today, there are more than 2.5 million fewer students enrolled in college, Doug Shapiro, executive director of the National Student Clearinghouse Research Center, estimated.

Population of college-age students is shrinking

Not only are fewer students interested in pursuing any sort of degree after high school, but the population of college-age students is also shrinking, a trend referred to as the “enrollment cliff.”
“There’s a broad-based drop in belief or trust in higher education as an institution,” said Cole Clark, a managing director within Deloitte’s higher education practice and co-author of a recent trends report. “It’s as much of a threat as the demographic cliff.”
These days, only about 62% of high school seniors in the U.S. immediately go on to college, down from 68% in 2010. Those that opt out are often low-income students, who increasingly feel priced out of a postsecondary education.

Steadily, college is becoming a path for only those with the means to pay for it, other reports also show.
Would-be college students are looking more closely at the return on investment as tuition costs remain high and a shortage of workers increases opportunities in the labor force — with or without a diploma.
At the same time, deep cuts in state funding for higher education have pushed more of the costs on to students and paved the way for significant tuition increases.

Arrows pointing outwards

High schoolers are more interested in career training

Most Americans still agree a college education is worthwhile when it comes to career goals and advancement. However, only half think the economic benefits outweigh the costs, according to a report by Public Agenda, USA Today and Hidden Common Ground — and young adults are particularly skeptical.
The rising cost of college and ballooning student loan balances have played a large role in changing views about the higher education system, which many think is rigged to benefit the wealthy, the report found. 
Only 45% of students from low-income, first-generation or minority backgrounds believe education after high school is necessary, according to a study by ECMC Group.
High schoolers are putting more emphasis on career training and post-college employment, the nonprofit found after polling more than 5,000 high school students six times since February 2020.

More than 75% of high schoolers now say a two-year degree or technical certification is enough, and only 41% believe they must have a four-year degree to get a good job, a separate report by Junior Achievement and Citizens also found. 
“A lot of students are weighing their options,” said Connie Livingston, the head of college counselors at college counseling firm Empowerly and a former admissions officer at Brown University.
“Does it make more sense to go to community college, trade school or directly into the workforce? In this economic climate, that’s attractive.”

Earning a college degree is almost always worthwhile

And yet, earning a bachelor’s degree is almost always worthwhile, research shows.
Bachelor’s degree holders generally earn 75% more than those with just a high school diploma, according to “The College Payoff,” a report from the Georgetown University Center on Education and the Workforce — and the higher the level of educational attainment, the larger the payoff.
But even while degrees deliver a strong premium in the job market, confidence in the higher education system is declining, according to Deloitte’s Clark.
“There is a lot of rhetoric about the individual with a college degree and a ton of debt and underemployed,” he said.
“You are going to continue to see this paradox,” Lakhani added. “There’s a subconscious consensus that it’s only worth going to college if you can go to a life-changing college.” 
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Prices and inflation are still a “top concern” as consumers have “gloomy” expectations for the economy, one expert says.
For many individuals and households, the big question is how soon they may see financial relief from higher costs.

baona | Getty Images

The rate of inflation has shown signs of easing, following the highest spike in four decades.
Yet the shock of rising prices continues to have an impact on consumers’ psyches.

“The typical U.S. consumer is looking at the gas station or their grocery store and seeing prices elevated and not coming down anytime soon,” said Ataman Ozyildirim, senior director of economics at The Conference Board.
The nonprofit think tank’s consumer confidence index declined in May amid “gloomy” expectations.
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Consumers’ perception of current employment conditions deteriorated the most, The Conference Board found, with those who said jobs are “plentiful” dropping to 43.5% from 47.5% in April.
Meanwhile, expectations for inflation were stable, but still high, with inflation expected to average 6.1% over the next 12 months.

“When anecdotally we ask consumers what’s your top concern on the economy, prices and inflation still come out as the top concern,” Ozyildirim said.

A growing share of Americans — 61% — now say price increases have caused financial hardship for their households, according to Gallup, up 6 percentage points from November.
For many consumers, the big question is how soon they may see financial relief.

Borrowing costs, savings rates are higher

The Federal Reserve is raising interest rates to combat the record spike in inflation.
Consequently, borrowing costs are rising on auto loans, credit cards, mortgages and student debt. The caveat is that savers can now earn higher rates on their cash. 
The Fed’s process is like trying to slow the speed of a car, according to Laura Veldkamp, finance professor at Columbia Business School.

When anecdotally, we ask consumers what’s your top concern on the economy, prices and inflation still come out as the top concern.

Ataman Ozyildirim
senior director of economics at The Conference Board

“What we’re doing right now is slowing the rate of inflation,” Veldkamp said.
That means still driving the car forward, but slowly, she said. It does not mean trying to throw the car in reverse, which would prompt negative inflation.
Negative inflation would be “pretty dangerous,” Veldkamp said, since it would remove price stability for what people can expect to pay in the future. This would make it more difficult to value forward-looking contracts such as rents or hiring, she noted.

It would also lead to a collapse of demand, since decreasing prices take away the incentive to buy something today when it will likely be cheaper tomorrow, she said.
Instead, the Federal Reserve is aiming to keep inflation off consumers’ radar screens.
“Their job is to keep prices so stable that you don’t worry exactly what a dollar will be worth a year from now,” Veldkamp said.

Prices not expected to drop ‘anytime soon’

The Federal Reserve’s goal is to bring inflation to a 2% target.
However, the latest readings show the central bank still has room to go before reaching that goal.
The annual inflation rate eased to 4.9% in April, per the consumer price index. The Fed’s preferred inflation measure — the personal consumption expenditures price index — was up 4.7% on an annual basis as of April.
“The increase in prices is not expected to come down to the Fed’s 2% target rate anytime soon,” Ozyildirim said.

Moreover, not every price will move in lockstep, as categories such as automobiles, homes and gasoline are subject to unique influences, such as supply chain bottlenecks, according to James Angel, associate professor at Georgetown University’s McDonough School of Business.
“It’s not like suddenly tomorrow all the prices are going to go back to where they were in 2020,” Angel said.
Inflation tends to create a “vicious circle” in the economy by prompting demand for higher wages, which then triggers higher manufacturing costs and therefore higher prices.
When high inflation does subside to normal levels, it will do so quietly, he said.
A 2% annual inflation rate will add up to more than 20% over a decade, Angel noted.
“But from day to day, you don’t really notice it,” he said. More

While the cost of medical care has recently fallen, it’s still nearly 30% higher than a decade ago, according to the U.S. Bureau of Labor Statistics.
“Spending shocks” and rising health-care costs can put investment portfolios at risk, especially during periods of market volatility.
There are several ways retirees can safeguard nest eggs from the so-called sequence of returns risk, experts say.

Geber86 | E+ | Getty Images

There are plenty of risks for retirees — and those risks may compound by the rising cost of health care in retirement. 
While the cost of medical care has recently fallen, it’s still nearly 30% higher than a decade ago, according to data from the U.S. Bureau of Labor Statistics. Typically, medical prices grow faster than other consumer costs.

There’s also a higher likelihood of retirees needing medical care as they grow older. A 65-year-old couple who retired in 2022 will spend an average of $315,000 in health-care costs throughout retirement, not including long-term care, according to Fidelity Investments.

What’s more, retirees face a greater chance of “spending shocks” due to unpredictable costs, such as medical expenses, according to J.P. Morgan Asset Management’s 2023 retirement guide.
Of course, every retiree’s costs will be different, said certified financial planner Anthony Watson, founder and president of Thrive Retirement Specialists in Dearborn, Michigan. “There’s no silver bullet for this,” he said, noting how health-care expenses can be tough to predict.

Beware the ‘sequence of returns risk’

Periods of stock market volatility can further compound financial issues because of the so-called sequence of returns risk, caused by tapping your portfolio when asset values have declined. Research shows the wrong timing of withdrawals can damage your nest egg over time. 
Retirees may be exposed to the sequence of returns risk through a “shock spending event,” such as expensive health care, or simply higher living expenses over time, Watson said.

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One strategy to reduce this risk is boosting income by waiting to claim Social Security, he said. For 2023, the average retirement benefit is $1,827 per month, but the maximum payment jumps to $3,627 at full retirement age, which is currently 66 to 67.   
Watson also suggests a “cash cushion” to help cover living expenses during a prolonged stock market downturn. “We always have to have a Plan B to fund our living expenses,” he said.
While experts may suggest one to three years’ worth of cash, you may trim expenses or keep less cash by supplementing with a home equality line of credit or pledged asset line of credit that uses your investment account as collateral, he said.

Learn to be an ’empowered patient’

Carolyn McClanahan, a CFP and founder of Life Planning Partners in Jacksonville, Florida, urges retirees to become “empowered patients” when it comes to health-care spending.
“The best way to plan for health-care costs is to learn how to be a good health-care consumer,” said McClanahan, who also is a physician and member of CNBC’s Advisor Council. 

For example, retirees may reduce unexpected medical costs and surprise portfolio withdrawals with a few health moves. You can also ask questions about tests or prescriptions before racking up expenses.
“With health care being so fee-driven, doctors have very little incentive to help you make better decisions about what you can do to keep costs down,” she said.
McClanahan also plugs the financial, physical and emotional benefits of working in retirement, at least with a part-time job. “Work is one big way where people are socially engaged,” which may provide a cognitive boost, she added. More

A GOP-led effort to overturn President Joe Biden’s sweeping student loan forgiveness plan passed the Senate on Thursday.
The White House said it will veto the measure.

The Senate voted to repeal President Joe Biden’s student loan forgiveness plan on June 1, 2023. Biden —pictured here with U.S. Secretary of Education Miguel Cardona in October  — is expected to veto the bill.
Getty Images | Bloomberg

A GOP-led effort to overturn President Joe Biden’s sweeping student loan forgiveness plan passed the Senate on Thursday. The White House said it will veto the measure.
Biden’s plan to cancel up to $20,000 in student debt for tens of millions of Americans is already on hold as the Supreme Court debates its validity.

The measure, which passed the House along party lines last week, would also nullify the pause on student loan payments. That stay on bills has been in effect for more than three years. It might even require borrowers to pay back the interest they’ve saved throughout the pause.
The legislation passed by a 52-46 vote margin, with two Democrats and one independent senator voting with Republicans.

Measure is largely symbolic

Given the expected veto, experts say borrowers have little to worry about.
“It’s not going anywhere,” said higher education expert Mark Kantrowitz. “It’s basically a form of political posturing to appeal to their base.”
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Sen. John Thune, R-S.D., acknowledged that the passage of the legislation was mostly symbolic.
“Unfortunately, the president is guaranteed to veto the measure, and there are not enough Democrats in the House and Senate willing to override his veto,” Thune said on the floor Thursday.
Sen. Joe Manchin, D-W.Va., said in a statement that he voted to overturn the president’s plan because the country can’t afford to add another $400 billion to its national debt. That is the expected cost of Biden’s program.
The policy “forces hard-working taxpayers who already paid off their loans or did not go to college to shoulder the cost,” Manchin said.

Democrats call attempt ‘cruel’

Several Democratic lawmakers released statements condemning the legislation.
“Republicans’ cruel attempt to stand in the way of President Biden’s plans to provide relief to tens of millions of Americans suffering under the crushing weight of student loan debt is damaging to our economy and wildly out of touch with the financial realities facing working families,” said Sen. Ed Markey, D-Mass.

“If you kicked Republicans in the heart, you’d break your toe,” Markey added.
Senate Majority Leader Chuck Schumer of New York called the move “a slap in the face” to more than 40 million Americans.
“We should help Americans with student debt, not make their problems worse,” Schumer said. More

Treasury bill yields have climbed over the past few months, and are currently topping 5%.
But there are a few things investors need to know before buying, according to financial experts.

dowell | Moment | Getty Images

Treasury bill yields have climbed over the past few months, with one-month to one-year terms currently topping 5%, as of June 1.
However, there are a few things for everyday investors to know about the Treasury bill purchase process, according to financial experts.

Treasury bills, or T-bills, have terms of four weeks to 52 weeks and are backed by the U.S. government. Investors receive interest at maturity and there are options to reinvest.
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But there is not a direct rate comparison with other products because T-bills are typically sold at a discount, with the full value received at maturity, explained Jeremy Keil, a certified financial planner with Keil Financial Partners in Milwaukee.
For example, let’s say you purchase $1,000 worth of one-year T-bills at a 4% discount, with a $960 purchase price. To calculate your coupon rate (4.16%), you take your $1,000 maturity and subtract the $960 purchase price before dividing the difference by $960.   

Fortunately, you’ll see the “true yield” or “bank equivalent yield” when buying T-bills through TreasuryDirect, a website managed by the U.S. Department of the Treasury, or your brokerage account, Keil said.

How to purchase T-bills via TreasuryDirect

If you already have a TreasuryDirect account — say, because you’ve purchased Series I bonds — it’s relatively easy to buy T-bills, according to Keil, who detailed the process on his website.
After logging into your account, you can pick T-bills based on term and auction date, which determines the discount rate for each issue.
“You don’t really know truly what the rate is going to be until the auction hits,” Keil said. The process involves institutions bidding against one another, with no action required from everyday investors. 

How to buy T-bills through TreasuryDirect
1. Log in to your TreasuryDirect account.
2. Click “BuyDirect” in top navigation bar.
3. Choose “Bills” under “Marketable Securities.”
4. Pick your term, auction date, purchase amount and reinvestment (optional).

After the auction, “you get the exact same rate as the Goldman Sachs of the world,” with TreasuryDirect issuing T-bills a few days later, he said.
There is one downside, however. If you want to sell T-bills before maturity, you must hold the asset in TreasuryDirect for at least 45 days before transferring it to your brokerage account. There are more details about the process here.

There’s more liquidity via brokerage accounts

One way to avoid liquidity issues is by purchasing T-bills through your brokerage account, rather than using TreasuryDirect.
Keil said the “biggest benefit” of using a brokerage account is instant access to T-bills and immediately knowing your yield to maturity. The trade-off is you’ll probably give up around 0.1% yield or lower, he said.

George Gagliardi, a CFP and founder of Coromandel Wealth Management in Lexington, Massachusetts, also suggests buying T-bills outside of TreasuryDirect to avoid liquidity issues.
For example, there are low-fee exchange-traded funds — available through brokerage accounts — that allow investors to buy and sell T-bills before the term ends, he said.
“The fees pose a small drag on the interest,” Gagliardi said, but the ease of purchase and ability to sell before maturity “may override the small penalty in interest rates” for many investors. More