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Under the Biden administration, the U.S. Department of Education made regular announcements that it was forgiving student debt for thousands of people.
That’s changed under President Donald Trump.
Here’s what to know about the current status of federal student loan forgiveness opportunities.

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Under the Biden administration, the U.S. Department of Education made regular announcements that it was forgiving student debt for thousands of people under various relief programs and repayment plans.
That’s changed under President Donald Trump.

In his first few months in office, Trump — who has long been critical of education debt cancellation — signed an executive order aimed at limiting eligibility for the popular Public Service Loan Forgiveness program, and his Education Department revised some student loan repayment plans to no longer conclude in debt erasure.
“You have the administration trying to limit PSLF credits, and clear attacks on the income-based repayment with forgiveness options,” said Malissa Giles, a consumer bankruptcy attorney in Virginia.
The White House did not respond to CNBC’s request for comment.
Here’s what to know about the current status of federal student loan forgiveness opportunities.

Forgiveness chances narrow on repayment plans

The Biden administration’s new student loan repayment plan, Saving on a Valuable Education, or SAVE, isn’t expected to survive under Trump, experts say. A U.S. appeals court already blocked the plan in February after a GOP-led challenge to the program.

SAVE came with two key provisions that lawsuits targeted: It had lower monthly payments than any other federal student loan repayment plan, and it led to quicker debt erasure for those with small balances.
“I personally think you will see SAVE dismantled through the courts or the administration,” Giles said.
But the Education Department under Trump is now arguing that the ruling by the 8th U.S. Circuit Court of Appeals required it to end the loan forgiveness under repayment plans beyond SAVE. As a result, the Pay As You Earn and Income-Contingent Repayment options no longer wipe debt away after a certain number of years.
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There’s some good news: At least one repayment plan still leads to debt erasure, said higher education expert Mark Kantrowitz. That plan is called Income-Based Repayment.
If a borrower enrolled in ICR or PAYE eventually switches to IBR, their previous payments made under the other plans will count toward loan forgiveness under IBR, as long as they meet the IBR’s other requirements, Kantrowitz said. (Some borrowers may opt to take that strategy if they have a lower monthly bill under ICR or PAYE than they would on IBR.)

Public Service Loan Forgiveness remains

Despite Trump’s executive order in March aimed at limiting eligibility for Public Service Loan Forgiveness, the program remains intact. Any changes to the program would likely take months or longer to materialize, and may even need congressional approval, experts say.
PSLF, which President George W. Bush signed into law in 2007, allows many not-for-profit and government employees to have their federal student loans canceled after 10 years of payments.
What’s more, any changes to PSLF can’t be retroactive, consumer advocates say. That means that if you are currently working for or previously worked for an organization that the Trump administration later excludes from the program, you’ll still get credit for that time — at least up until when the changes go into effect.

For now, the language in the president’s executive order was fairly vague. As a result, it remains unclear exactly which organizations will no longer be considered a qualifying employer under PSLF, experts said.
However, in his first few months in office, Trump has targeted immigrants, transgender and nonbinary people and those who work to increase diversity across the private and public sector. Many nonprofits work in these spaces, providing legal support or doing advocacy and education work.
For now, those pursuing PSLF should print out a copy of their payment history on StudentAid.gov or request one from their loan servicer. They should keep a record of the number of qualifying payments they’ve made so far, said Jessica Thompson, senior vice president of The Institute for College Access & Success.
“We urge borrowers to save all documentation of their payments, payment counts, and employer certifications to ensure they have any information that might be useful in the future,” Thompson said.

Other loan cancellation opportunities to consider

Federal student loan borrowers also remain entitled to a number of other student loan forgiveness opportunities.
The Teacher Loan Forgiveness program offers up to $17,500 in loan cancellation to those who’ve worked full time for “complete and consecutive academic years in a low-income school or educational service agency,” among other requirements, according to the Education Department.
(One thing to note: This program can’t be combined with PSLF, and so borrowers should decide which avenue makes the most sense for them.)

In less common circumstances, you may be eligible for a full discharge of your federal student loans under Borrower Defense if your school closed while you were enrolled or if you were misled by your school or didn’t receive a quality education.
Borrowers may qualify for a Total and Permanent Disability discharge if they suffer from a mental or physical disability that is severe and permanent and prevents them from working. Proof of the disability can come from a doctor, the Social Security Administration or the Department of Veterans Affairs.
With the federal government rolling back student loan forgiveness measures, experts also recommend that borrowers explore the many state-level relief programs available. The Institute of Student Loan Advisors has a database of student loan forgiveness programs by state.

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Tech and fossil fuel companies gathered in Oklahoma City to discuss how the U.S. can meet the growing energy demand from artificial intelligence.
Amazon and Nvidia executives said all options are on the table including gas.
The idea of using coal, however, was met with unease by the tech executives.

Anton Petrus | Moment | Getty Images

OKLAHOMA CITY — Amazon and Nvidia told a room of oil and gas executives this week that all options are on the table to power artificial intelligence including fossil fuels such as natural gas.
The tech and energy industries gathered in Oklahoma City at the Hamm Institute for American Energy to discuss how the U.S. can meet the growing energy needs for AI data centers. 

The Big Tech companies have invested mostly in renewable power in an effort to slash their carbon dioxide emissions, but they are now navigating a changed political environment. President Donald Trump has ditched U.S. commitments to fight climate change as he seeks to increase fossil fuel production, particularly natural gas.
There is now growing public acknowledgment from the tech industry that gas will be needed, at least in the near term, to help fuel AI.
“To have the energy we need for the grid, it’s going to take an all of the above approach for a period of time,” Kevin Miller, Amazon’s vice president of global data centers, said during a panel discussion Thursday. “We’re not surprised by the fact that we’re going to need to add some thermal generation to meet the needs in the short term.”
Amazon remains focused on slashing its carbon emissions, Miller said. It is the largest corporate purchaser of renewable energy and is investing in advanced nuclear and carbon capture technology to reduce the environmental impact of its energy consumption, the executive said.
But those advanced technologies will not come online until the 2030s and Amazon needs steady and secure power now, Miller said.

“We’re very explicit that meeting customers’ demands for capacity is first and foremost in our priority list, and so having access to power is first and foremost what we focus on,” Miller said. “And we have a goal to be net-zero carbon as a company by 2040 and are very focused on that.”
Nvidia is also focused on environmental impact but wants “all options on the table” as AI faces an energy crunch, said Josh Parker, the chipmaker’s senior director of corporate sustainability.
“At the end of the day, we need power. We just need power,” Parker said at the panel. “We have some customers who really prioritize the clean energy, and some customers who don’t care as much,” the executive said.
Anthropic co-founder Jack Clark called for data center developers to be realistic about the energy sources that are currently available. Anthropic estimates that 50 gigawatts of new power is needed by 2027, equivalent to about 50 nuclear reactors. AI demand can help drive the development of “new and novel sources” of power over the longer term, he said.
The idea of using coal, however, was met with unease. Trump recently signed an order that aims to boost coal production, citing demand from AI. The Amazon and Nvidia executives did not answer directly when asked during the panel whether they thought coal had a role play in powering AI.
“You have a broader set of options than just coal,” Clark said. “We would certainly consider it, but I don’t think I’d say it’s at the top of our list.”

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To successfully retire, it is mostly up to Americans to save as much as possible while they’re working.
Once they do retire, they must carefully manage those funds to potentially last for decades.
Many retirees are worried they’ll run out of money before they die. There are ways to reduce that risk, experts say.

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Many Americans are worried they’ll run out of money in retirement.
In fact, a new survey from Allianz Life finds that 64% Americans worry more about running out of money than they do about dying. Among the reasons cited for those fears include high inflation, Social Security benefits not providing enough support and high taxes.

The fear of running out of money was most prominent for Gen Xers who are approaching retirement. However, a majority of millennials and baby boomers also said they worry about their money lasting, according to the online survey of 1,000 individuals conducted between January and February.
Separately, a new Employee Benefit Research Institute report finds most retirees say they are living the lifestyle they envisioned and are able to spend money within reason. Yet more than half of those surveyed agreed at least somewhat that they spend less because of worries they will run out of money, according to the survey of more than 2,700 individuals conducted between January and February.
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Meanwhile, a Northwestern Mutual survey reported that 51% of Americans think it’s “somewhat or very likely” they will outlive their savings. The survey polled 4,626 U.S. adults aged 18 and older in January.
Since those studies were conducted, new tariff policies have caused disturbance in the stock markets and prompted speculation that inflation may increase. Meanwhile, new leadership at the Social Security Administration has prompted fears about the continuity of benefits. Those headlines may negatively affect retirement confidence, experts say.

With employers now providing a 401(k) plan and other savings plans versus pensions, it is largely up to workers to manage how much they save heading into retirement and how much they spend once they reach that life stage. That responsibility can also lead to worries of running out of money in the future, experts say.

How to manage the ‘fear of outliving your resources’

Because of the unique risks every individual or couple faces when planning for retirement, the best approach is typically to transfer some of that burden to a third party, said David Blanchett, head of retirement research at PGIM DC Solutions.
Creating a guaranteed lifetime income stream that covers essential expenses can help reduce the financial impact of any events that require retirees to cut back on spending, Blanchett explained.
That should first start with delaying Social Security benefits, he said. While eligible retirees can claim benefits as early as 62, holding off up until age 70 can provide the biggest monthly benefits. Social Security is also unique in that it provides annual adjustments for inflation.

Next, retirees may want to consider buying a lifetime income annuity that can help amplify the monthly income they can expect. Admittedly, those products can be complicated to understand. Therefore Blanchett recommends starting out by comparing very basic products like single premium immediate annuities that are easier to compare.
“Unless you do those things, you just can’t get rid of that fear of outliving your resources,” Blanchett said.
Without a guaranteed income stream, retirees bear all of the financial risk themselves, he said.
 “Retirement could last 10 years; it could last 40 years,” Blanchett said. “You just don’t know how long it’s going to be.”
Among retirees, there has been some hesitation to buy annuities, said Craig Copeland, EBRI’s director of wealth benefits research. Such a purchase requires parting with a lump sum of money in exchange for the promise of a guaranteed income stream.
“We see great increase in interest, but we aren’t seeing upticks in take up yet,” Copeland said. “I do think that’s going to start to change.”

What can help boost retirement confidence

To effectively plan for retirement, it helps to seek professional financial assistance, experts say.
Meanwhile, few people have a plan of their own for how they may live on the assets they’ve worked hard to accumulate, according to Kelly LaVigne, vice president of consumer insights at Allianz Life.
“This is something that you should not plan on doing on your own,” LaVigne said.
While the survey from Northwestern Mutual separately found individuals think they need $1.26 million to retire comfortably, the real number individuals need is based on their personal situation, said Kyle Menke, founder and wealth management advisor at Menke Financial, a Northwestern Mutual company.
In thinking about how life will look in 30 years, there are a variety of things to consider, Menke said. This includes stock market returns, taxes, inflation and medical expenses, he said.
Even people who have enough money for retirement often don’t feel confident in their ability to manage all of those factors on their own, he said. Financial advisors have the ability to run different simulations and stress test a plan, which can help give retirees and aspiring retirees the confidence they’re lacking.
“I think that’s where the biggest gap is,” said Menke, referring to the confidence Americans are lacking without a plan. More

The U.S. Department of Education will restart the process of involuntary collections, including wage garnishments, as early as May 5.
For five years, collection activity on federal student loans has mostly been paused.
Here’s what borrowers should know about their rights.

Blackcat | E+ | Getty Images

What payments can be garnished?

The U.S. government has extraordinary collection powers on federal debts and it can seize borrowers’ federal tax refunds, wages, and Social Security retirement and disability benefits, according to higher education expert Mark Kantrowitz.
The federal government can intercept other funds such as state income tax refunds and lottery winnings, Kantrowitz said.
In some cases, federal student loan borrowers can also be sued by the U.S. Department of Justice, and face a levy on the funds in their bank accounts, he said.

How much money can be taken?

Social Security recipients can typically see up to 15% of their monthly benefit reduced to pay back their defaulted student debt, but beneficiaries need to be left with at least $750 a month, experts said.
Carolina Rodriguez, director of the Education Debt Consumer Assistance Program in New York, said she was especially concerned about the consequences of resumed collections on retirees.
“Losing a portion of their Social Security benefits to repay student loans could mean not having enough for food, transportation to medical appointments, or other basic necessities,” Rodriguez said.

Meanwhile, your entire federal tax refund can be seized, including any refundable credits, Kantrowitz said. Fortunately, if you’ve already received your 2024 federal income tax refund, “the government cannot claw it back,” Kantrowitz said.
As for your wages, the federal government can garnish up to 15% of your disposable pay without a court order, Kantrowitz said. Wages of federal workers may be easier to seize, he added.

How can I avoid collection activity?

Take steps to get out of default and to try to avoid the start of any garnishments, experts said.
Borrowers in default will receive an email over the next two weeks making them aware of the new policy, the Education Department said. You can contact the government’s Default Resolution Group and pursue a number of different avenues to get current on your loans, including enrolling in an income-driven repayment plan or signing up for loan rehabilitation. 
Some borrowers may also be eligible for deferments or a forbearance, which are different ways to pause your payments, Rodriguez said.
“We’re advising clients to request a retroactive forbearance to cover missed payments, and a temporary forbearance until they can get enrolled in an income-driven repayment plan,” she said.

If you do end up facing the garnishment of your Social Security benefits or wages, the government is required to provide you with notice before it starts its collection activity, Kantrowitz said. For your wages, a 30-day warning is required, while 65 days’ notice must be given before the seizure of Social Security benefits, he said.
You may have the option to have a hearing before an administrative law judge within 30 days of receiving a wage garnishment order, Kantrowitz said. Your wages may be protected if your employment has been spotty, or if you’ve filed for bankruptcy, he said.
“Borrowers can also challenge the wage garnishment if it will result in financial hardship,” Kantrowitz said.
You can dispute the offsets to your Social Security benefits, too, he said, by contacting the Education Department. The notice you receive should provide information on whom to contact.
Are you worried about the garnishment of payments such as wages or Social Security benefits? If you’re willing to share your experience for an upcoming story, please email me at [email protected].

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Coinbase is removing fees for purchases of PayPal’s dollar-backed stablecoin
Coinbase and PayPal will collaborate on “stablecoin based solutions” for payments and commerce as well as potential use cases for PYUSD in decentralized finance.
Earlier this week, stablecoin titan Circle, which has a revenue agreement with Coinbase, debuted a payments network for financial institutions, challenging a major part of PayPal’s business.

Omar Marques | Lightrocket | Getty Images

Coinbase is removing fees for purchases of PayPal’s stablecoin as part of a broader effort to increase the use of the coin, and an attempt to boost on-chain payment opportunities for consumers and institutional users. 
In a blog post Thursday, Coinbase said it aims “to accelerate the adoption, distribution and utilization” of the PayPal USD (PYUSD), the U.S. dollar-pegged stablecoin that has lagged the market since it launched in 2023. With a market cap of only about $730 million, PayPal USD controls less than 1% of the market for stablecoins tied to the dollar. Tether’s USDT and Circle’s USDC, dominate the market with 66.5% and 28.3% shares, respectively, according to CryptoQuant.

PayPal said the companies will also collaborate on “stablecoin based solutions” for “moving or managing money around the world, particularly in commerce,” as well as potential use cases for PYUSD in decentralized finance and other on-chain platforms.
“We are excited to drive new, exciting, and innovative use cases together with Coinbase and the entire cryptocurrency community, putting PYUSD at the center and driving further utility and adoption for digital currencies among developers, customers, and other users,” said Alex Chriss, PayPal president and CEO.
Stablecoin race
The race for payment stablecoins has been heating up on expectations that Congress will pass its first piece of crypto legislation, focused on stablecoins, in the third quarter. Historically, stablecoins are primarily used for trading and borrowing in the crypto market. More recently, stablecoins have become more appealing to institutions aiming to transfer value, particularly in dollars, across the globe more cheaply and efficiently outside the traditional financial system.
Earlier this week, USDC issuer Circle – which earlier this month filed to go public – debuted a payments and remittance network aimed at financial institutions, challenging a major part of PayPal’s business. Ripple, the cross-border payments company and creator of the XRP cryptocurrency, launched its Ripple USD stablecoin (RLUSD) in December. 
PayPal’s two-sided network of more than 430 million consumers and merchants, “offers an unprecedented opportunity to increase stablecoin adoption globally,” Coinbase CEO Brian Armstrong said in a statement.

The crypto exchange operator has long set its sights on building a global economy that runs on cryptocurrency, using stablecoins as a means to diversify its revenue away from crypto trading. Coinbase has an agreement with Circle to share 50% of the revenue from the USDC stablecoin — and Armstrong said on the company’s most recent earnings call that it has a “stretch goal to make USDC the number 1 stablecoin.”
Circle declined comment to CNBC.
Crypto payments integration
Coinbase also has big ambitions for Base, its self-built network for Ethereum-compatible applications.
“We’re moving with haste to integrate crypto payments across our entire suite of products – we think that will be a big business over time – and we’re also solidifying Base as the number one chain … for start-ups to build on-chain,” Armstrong said on the earnings call.
“We can really fuel a lot of [stablecoin] growth by driving more partnerships with global and local players like Stripe and Yellow Card to do more global adoption,” he said on the same call with analysts and investors. “We’ve been adding a number of additional stablecoin trading pairs on our platform.”
As part of Thursday’s update, Coinbase users will also be able to redeem their PYUSD for dollars directly on the Coinbase platform, mirroring a USDC capability. Previously, users were required to move their PYUSD onto one of the PayPal platforms (PayPal, Venmo or Paxos) for redemption.
On Wednesday, PayPal introduced a 3.7% annual rewards rate on PYUSD balances, paid in more PYUSD, to boost adoption of the stablecoin.

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Amid tariff volatility, older investors may consider a bond ladder to help preserve their nest egg.
The strategy, which includes an allocation of bonds with staggered maturities, can prevent selling assets when the stock market is down.
As bonds mature, you can use the proceeds to cover living expenses or reinvest the cash.

Robert Daly | Ojo Images | Getty Images

Manage the ‘sequence of returns’ risk

Typically, you should avoid selling assets when the stock market is down, especially during earlier retirement years. Those early withdrawals paired with market dips can stunt your long-term portfolio, known as the “sequence of returns risk.”
Negative returns are more harmful early in retirement than later because you could miss more years of compound growth, according to a 2024 report from Fidelity Investments.
That’s why flexibility is important when it’s time to pull funds from your retirement savings, Caswell said. 

Caswell recommends a bond ladder of Treasuries that mature every six months or one year for up to five years. You can also use the ladder method with certificates of deposit. 
As assets mature, you can use the proceeds to cover living expenses. Alternatively, you could reinvest part of the cash if you receive more than you need, he said.
The strategy provides “more transparency and control” of when you’re taking money out of that part of your portfolio, Caswell said.

Create a ‘TIPS ladder’

You could also weigh a ladder of so-called Treasury inflation-protected securities, or TIPS, according to Amy Arnott, a portfolio strategist with Morningstar Research Services.
Issued and backed by the U.S. government, TIPS can provide a hedge against inflation because the principal rises or falls based on the consumer price index. 
“Inflation and loss of purchasing power can be a risk with bonds, which is why a TIPS ladder can be attractive,” especially when you’re able to get a positive return, she said. More

New market turbulence may tempt investors to have more cash set aside.
But experts warn it’s possible to have too much money in savings.

Warren Buffett walks the floor ahead of the Berkshire Hathaway Annual Shareholders Meeting in Omaha, Nebraska on May 3, 2024.
David A. Grogen | CNBC

Warren Buffett is sitting on a record amount of cash.
That’s not necessarily something everyday investors should emulate. If you have money on the sidelines, it may be time to rethink your strategy, experts say.

Buffett’s conglomerate Berkshire Hathaway, with a diverse portfolio of businesses, was sitting on a record $334 billion in cash at the end of last year.
Yet in a February letter to shareholders, Buffett told shareholders that “despite what some commentators currently view as an extraordinary cash position,” the majority of the money invested in Berkshire is in equities.
“Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned,” Buffett wrote.
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In hindsight, Buffett’s cash position looks wise, as Trump administration tariff policies have caused market turbulence.

Investors have also been thought to have a cash cushion. There is $6.88 trillion in money market funds as of the week ending April 16, according to the Investment Company Institute — even though higher interest rates have made it possible to earn more on cash.
Yet even as the markets have flirted with bear territory, experts still say it’s possible to have too much money on the sidelines.

A 60/40 portfolio beats cash in the long run

Boy_anupong | Moment | Getty Images

A traditional portfolio comprised of 60% stocks and 40% bonds almost always outperforms cash in the long run, according to recent JPMorgan Asset Management.
That is based on a classic 60/40 portfolio comprised of the S&P 500 index and Bloomberg US Aggregate Bond Index versus cash based on Treasury bills or a certificate of deposit equivalent, according to Jack Manley, global market strategist at JPMorgan Asset Management.
In looking at data over 1995 to 2024, the 60/40 portfolio beat cash on a one-month basis roughly 65% of the time, Manley said. On a six-month basis, that increases to 75% of the time. For one year, that climbs to 80% of the time. And by the time you hit 12 years, it’s 100% of the time, he said.
Yet in times of uncertainty, investors often feel safer in cash.
“When we think about investors making the wrong decisions — investing with their guts, not with their brains, where they are going to if they’re panicking — they’re going to cash,” Manley said.

How to balance cash and investing

In the stock runup of 2024, a “plain-vanilla version” of a 60/40 portfolio gained about 15%, according to new Morningstar research. The portfolio includes a 60% weighting in the Morningstar US Market Index and 40% in the Morningstar US Core Bond Index.
Yet a diversified portfolio of 11 different asset classes only gained about 10%, the research found. That included larger cap domestic stocks, developed markets stocks; emerging markets stocks; Treasuries; U.S. core bonds; global bonds; high yield bonds; small cap stocks, commodities; gold and REITs.
Major shifts in U.S. tariff policy may change how well those strategies perform going forward. Thus far in 2025, a diversified portfolio has held up better, with gold gaining about 32% this year, according to Amy Arnott, portfolio strategist at Morningstar. Meanwhile, commodities, global bonds and real estate have held up better than U.S. stocks, she said.

With interest rates higher, cash has been a better portfolio diversifier than Treasuries in recent years, according to Morningstar’s research.
Notably, those cash allocations are best held outside the portfolio in an emergency fund or for any large expenses that may come up in the next two years, Arnott said. Current retirees may want to have at least one to two years’ worth of portfolio withdrawals in cash, she said.
With current turmoil and market uncertainty, it’s important to remember that making radical shifts to your portfolio can often backfire, Arnott said.
“If you’ve had an asset allocation that was a good fit for your time horizon and your investment goals previously, it’s probably not a good idea to be making dramatic changes to that just because of all the uncertainty that’s going on right now,” Arnott said.

Investors who have an ample cash position to fit their needs do tend to feel more confident now, said Adrianna Adams, a certified financial planner and head of financial planning at Domain Money.
However, for those who already have a sufficient emergency fund, the best use for extra cash is typically in the markets, Adams said.
“I wouldn’t recommend holding cash if we’re using that account or allocation towards our long-term goals,” Adams said. “If we’re going to need the money in the next two years, then absolutely, we should keep it in cash.”
High-yield savings accounts tend to be a favorite among consumers for emergency funds, Adams said. However, individuals in high-income tax brackets may want to consider municipal money market funds that help limit the tax bills they will pay on the interest they earn on that money, she said. More

While Americans are increasingly concerned about their financial standing, consumer spending has picked up.
Even though spending is higher now, financial constraints coupled with expectations that the economy is weakening will cause consumers to cut back in the months ahead, experts predict.
“That is a self-fulfilling prophecy,” says Wharton’s assistant professor of finance Sasha Indarte.

While many Americans are worried about where the U.S. economy is heading, few have changed their spending habits in anticipation of a slowdown.
Nearly three-quarters, or 73%, of adults said they are “financially stressed,” with most pointing to the tariff wars as the culprit, according to a recent CNBC/SurveyMonkey online poll.

And yet, consumer spending has remained remarkably resilient.
In part because of looming tariffs, shoppers are panic buying. In fact, consumer spending was even stronger than expected in March, according to the Commerce Department and ticked up again in April, data released Wednesday from J.P. Morgan showed.
J.P. Morgan also raised its odds for a U.S. and global recession to 60%, by year end, up from 40% previously.More from Personal Finance:Cash may feel safe when stocks slide, but it has risksWhat higher stagflation risks mean for your moneyShould investors dump U.S. stocks for international equities?

Setting the stage for a slowdown

Consumer spending is considered the backbone of the economy because it represents a significant portion of Gross Domestic Product and fuels economic growth.
In a speech earlier this month before business journalists in Arlington, Va., Federal Reserve Chair Jerome Powell said “the economy is overwhelmingly driven by consumer spending.” Powell also said that he expects President Donald Trump’s tariff policies to raise inflation and lower growth.

Most experts agree that in the face of higher prices for many consumer goods, Trump’s tariffs are igniting a fresh wave of declining sentiment, which plays a big part in determining where the economy is headed.
The Conference Boards’ expectations index, which measures consumers’ short-term outlook, plunged to its lowest level in 12 years and well below the recession threshold, signaling heightened recession risk. The University of Michigan’s consumer survey also showed sentiment sank by more than 30% since December among persistent worries of a trade war.
“On-again, off-again rising tariffs and resulting turmoil in the stock market and world economy are clearly impacting consumer concerns about higher prices and future consumer spending growth,” Jack Kleinhenz, chief economist of the National Retail Federation, said in a statement.

How tariffs impact household budgets

The Trump administration’s tariffs on a host of other countries are currently in the middle of a 90-day pause, with a 10% baseline tariff rate instead applying to all imported goods across the board. The pause is due to expire on July 9, with Trump touting a series of rate negotiations with foreign leaders between now and then.
According to an analysis by the Urban-Brookings Tax Policy Center, if the lower tariff rates in effect during the 90-day pause remain in effect permanently, it could reduce real income for the average taxpayer by about $3,100 in 2026. A separate study by the Budget Lab at Yale estimates that tariffs could cost the average household roughly $3,800 per year.
“Household budgets remain under pressure and highly sensitive to further price increases,” said Greg McBride, chief financial analyst at Bankrate. “Inflation will continue to be central to how consumers feel about their finances, and their capacity for additional spending.”

A looming drop off

Financial constraints coupled with expectations that the economy is weakening will eventually cause consumers to spend less, which can cause businesses to cut back or lay off workers, according to Sasha Indarte, an assistant professor of finance at University of Pennsylvania’s Wharton School. “That is a self-fulfilling prophecy.”
“Even a small initial cutback in spending gets amplified,” she said. “One person’s spending becomes another person’s income — you can get this echo effect.”
But basic economic theories don’t tell the whole story, Indarte added.
Even when consumers intend to cut back, they don’t always scale back their spending as much as they want to, or should. Behavioral biases and inertia also play a role, according to Indarte.

“Even when our environment is changing, we are happy doing what we used to be doing. People are used to going to the same restaurants, or driving the same car, we aren’t used to making adjustments,” she said. “There’s a preference for sameness.”
However, once household budgets reach their limits, consumers will no longer be able to afford the lifestyle they were accustomed to — that’s “when the shock materializes,” she said.
At that point, consumers will have to reign in their spending, whether they want to or not, she said, which could lead to an economic drop-off in the months ahead. That prediction was also recently shared by JPMorgan analysts in a research note on Wednesday and Federal Reserve Bank of Chicago President Austan Goolsbee on Sunday.
“We should be worried,” Indarte said.  
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