Investing

Democratic presidential nominee Vice President Kamala Harris last week proposed a 28% tax on long-term capital gains, or assets owned for more than one year, for those making more than $1 million annually.
If she raised the net investment income tax to 5%, top earners would pay a combined rate of 33%.
Harris’ combined 33% capital gains rate for top earners would be the highest since 1978. But the average effective rate — what investors actually pay — is typically lower, experts say.

U.S. Vice President Kamala Harris in Milwaukee, Wisconsin, U.S. August 20, 2024 and former U.S. President Donald Trump in Bedminster, New Jersey, U.S., August 15, 2024 are seen in a combination of file photographs. 
Marco Bello | Jeenah Moon | Reuters

As the election ramps up, many investors are focused on capital gains taxes and how proposals from both parties could affect their assets.  
Democratic presidential nominee Vice President Kamala Harris last week proposed a 28% tax on long-term capital gains, or profits from the sale of assets owned for more than one year, for those making more than $1 million annually. The plan would raise the top rate from 20%.

“I would go higher than that,” Sen. Bernie Sanders, I-Vt., on Sunday told NBC’s “Meet the Press” of Harris’ proposal. “I think she’s trying to be pragmatic and doing what she thinks is right in order to win the election.”
More from Personal Finance:Here’s how the presidential election could affect your taxesWhat to know about court block on Biden’s new student loan forgiveness planAs the IRS targets the wealthy, here are audit red flags for everyday filers
Harris’ plan veers from President Joe Biden’s 2025 fiscal year budget, which calls for 39.6% long-term capital gains taxes for those earning above $1 million per year.
Her plan would also raise the net investment income tax, or NIIT, from 3.8% to 5%, The Wall Street Journal reported last week. Biden’s 2025 budget has the same NIIT increase for those with modified adjusted gross income, or MAGI, over $400,000.
Under current law, the NIIT applies to certain investment earnings once MAGI exceeds $200,000 for single filers or $250,000 for married couples filing together.

If Harris proposes raising the NIIT to 5%, the combined rate would be 33% for top earners. Biden’s plan would raise the combined rate to 44.6%.
The Harris campaign did not immediately respond to CNBC’s request for comment.

Meanwhile, former President Donald Trump broadly supports tax cuts but hasn’t outlined a capital gains tax proposal.
The issue was addressed in Project 2025, a “vision for a conservative administration” created by conservative think tank The Heritage Foundation with more than 100 other right-leaning organizations.
Project 2025 called for a 15% tax rate for capital gains and dividends. The collection of proposals would also abolish the NIIT.
Several Trump officials have been directly affiliated with Project 2025, but he has distanced himself from the plan.
The Trump campaign did not immediately respond to CNBC’s request for comment.
Of course, capital gains tax changes in either direction would require congressional approval, and control of the House and Senate is uncertain.
Here’s how the candidates’ proposals compare with past capital gains tax rates.

History of capital gains tax rates

In recent decades, capital gains tax rates have generally been lower than “ordinary income” or regular income tax rates, according to the Tax Foundation.
“We’ve applied preferential rates to qualified dividends and long-term capital gains, and that rate has trended downward over time,” said Garrett Watson, senior policy analyst and modeling manager at the Tax Foundation.  
If enacted, Harris’ combined 33% capital gains rate for top earners would be the highest since 1978, when the rate was close to 40%, he said.
Harris’ 28% top capital gains rate, excluding the NIIT, would mirror the top rate enacted by former President Ronald Reagan in 1986, which temporarily matched the ordinary income rate.
After tax cuts from former President George W. Bush, the top capital gains tax rate dropped to 15% from 2003 through 2012. That rate was the lowest since the Great Depression, according to the Tax Policy Center.

However, capital gains revenue is more volatile than regular income tax collections because it’s influenced by when investors sell or “realize” profits, Watson said.   
“It creates a lot of uncertainty for policy wonks who are trying to generate revenue estimates for these proposals,” he added.  
To that point, the average effective tax rates, or percentage of taxes paid, have been lower than the maximum capital gains rates, according to the Tax Foundation.

Capital gains taxes can have a ‘lock-in effect’ 

Generally, investors can choose when to sell assets and incur capital gains taxes. Higher rates or lower future rates can prompt investors to defer sales, experts say. Alternatively, investors will strategically realize gains in the 0% bracket, depending on their current taxable income and long-term goals.   
For 2024, investors pay 0%, 15% or 20% capital gains taxes, plus 3.8% NIIT for higher earners.

“There’s no question that there’s a lock-in effect associated with capital gains, and that will go up with a higher rate,” said Kent Smetters, a professor of business economics and public policy at the University of Pennsylvania’s Wharton School.
Although there have been proposals to tax unrealized gains, those plans have failed to reach broad support in Congress.  More

Oracle is designing a data center that would require more than a gigawatt of power, chairman and co-founder Larry Ellison said.
The data center would be powered by three small modular nuclear reactors, Ellison told investors this week.
Small modular reactors are next-generation designs that promise to speed the deployment of reliable, carbon-free power — but they face challenges reaching the commercial stage.

A view of Oracle’s headquarters in Redwood Shores, California, on Sept. 11, 2023.
Justin Sullivan | Getty Images

Oracle chairman and co-founder Larry Ellison had a “bizarre” announcement to make this week.
The electricity demand from artificial intelligence is becoming so “crazy” that Oracle is looking to secure power from next-generation nuclear technology, Ellison told investors on the company’s earnings call Monday.

“Let me say something that’s going to sound really bizarre,” Ellison told analysts. “Well, you’d probably say, well, he says bizarre things all the time, so why is he announcing this one. It must be really bizarre.”
Oracle is designing a data center that will require more than a gigawatt of electricity, the company’s chairman said. The data center would be powered by three small nuclear reactors, he added.

“The location and the power place we’ve located, they’ve already got building permits for three nuclear reactors,” Ellison said. “These are the small modular nuclear reactors to power the data center. This is how crazy it’s getting. This is what’s going on.”

Ellison did not disclose the location of the data center or the future reactors. CNBC reached out to Oracle for comment.
Small modular nuclear reactors are new designs that promise to speed the deployment of reliable, carbon-free energy as power demand rises from data centers, manufacturing and the broader electrification of the economy.
Generally, these reactors are 300 megawatts or less, about a third the size of the typical reactor in the current U.S. fleet. They would be prefabricated in several pieces and then assembled on the site, reducing the capital costs that stymie larger plants.
Right now, small modular reactors are a technology of the future, with executives in the nuclear industry generally agreeing that they won’t be commercialized in the U.S. until the 2030s.
There are currently three operational small modular reactors in the world, according to the Nuclear Energy Agency. Two are in China and Russia, the central geopolitical adversaries of the U.S. A test reactor is also operational in Japan.

Don’t miss these energy insights from CNBC PRO: More

Nearly a quarter of millennials and Gen Z without children do not plan to become parents, primarily due to financial reasons, according to a recent report.
Over decades, attitudes about marriage and parenthood have changed, but more recently, the high cost of living has become a contributing factor in decisions to forgo having children.
A lifestyle commonly referred to as DINKs — dual income, no kids — is becoming increasingly prominent.

Raising kids is expensive.
Of course, many believe that the rewards far outweigh the financial cost. However, others are opting for a life without children, largely because of affordability constraints.

Now, nearly a quarter, or 23%, of millennials and Generation Z without children do not plan to become parents, primarily due to financial reasons, according to a new consumer spending and saving index from MassMutual.
A lifestyle commonly referred to as DINKs — dual income, no kids — is becoming increasingly prominent.
More from Personal Finance:’Vibecession’ is ending as economy nails a soft landingMore Americans are struggling even as inflation coolsEven high earners consider themselves ‘not rich yet’ 
“With today’s financial stressors, it is understandable why there is a growing trend among young adults to prioritize financial security over parenthood,” said Paul LaPiana, a certified financial planner and senior executive at MassMutual in Park City, Utah.
“This shift reflects a broader understanding of the importance of financial stability and independence in achieving long-term goals that every generation must reckon with,” LaPiana said.

A preference for financial freedom and the inability to afford children are equally cited by 43% of younger generations, MassMutual found. The survey polled 1,000 adults in July.

Young adults face financial obstacles

Over decades, attitudes about marriage and parenthood have changed. Since the 1970s, the overall share of married adults has declined and fewer couples are having children, according to a 2023 report from Pew Research Center. Last year, the U.S. fertility rate reached a historic low.
More recently, experts say, the overall cost of living has become a contributing factor in decisions to forgo parenthood.
After a prolonged period of high inflation, many Americans today feel strained by higher prices — most notably for food, gas and housing, and younger adults are getting especially hard hit.
Not only are their wages lower than their parents’ earnings when they were in their 20s and 30s, after adjusting for inflation, but they are also carrying larger student loan balances, which makes it harder to save for long-term goals, such as buying a home and starting a family.

“There has been a sticker shock to so many aspects of life over the last few years,” said Greg McBride, chief financial analyst at Bankrate.com. “That doesn’t inspire the type of confidence needed to make decisions with big financial consequences.”
More than half of millennials and Gen Zers said they have delayed plans to have children and 86% cite finances as the primary reason, according to another recent survey of more than 1,000 millennials and Gen Zers by BadCredit.org. 
The majority of adults without children said not having kids has made it easier for them to afford the things they want and be successful in their job or career, Pew also found earlier this year.

Child-care costs are a major issue

At the same time, “the childcare crisis, which was simmering prior to the pandemic, has come to a boil,” according to a KPMG analysis. Between 1991 and 2024, the costs for child care rose at nearly twice the pace of overall inflation.
“There’s no question that parenthood faces real financial challenges,” said Brett House, economics professor at Columbia Business School. 
But parenthood and related child care costs are not just personal financial issues, he added. “The cost of child care is really an economic growth and productivity issue as well,” House said — and that affects all Americans, not just those with young kids.

There’s no question that parenthood faces real financial challenges.

Brett House
economics professor at Columbia Business School

A 2023 report by the advocacy group ReadyNation found that the nation’s infant-toddler child-care crisis costs the U.S. an estimated $122 billion in lost earnings, productivity and revenue every year.
Because caregiving demands still largely fall on women, that continues to shape their labor force participation and pay.
Women with young children have a much lower labor force participation rate compared to other groups, and those caregiving demands have largely contributed to a persistent gender pay gap, often referred to as the “motherhood penalty,” research also shows.
Heading into a U.S. presidential election, this is “one of the most important issues for policy makers and for businesses,” House said.
Subscribe to CNBC on YouTube. More

Dorm insurance is a personal property insurance for college students who live on campus.
But you might actually need renters insurance, or be able to cover dorm contents under a parent’s homeowners insurance policy.
Here’s what to consider before taking on dorm insurance.

Terry Vine | Getty Images

As “DormTok” social media posts entice college students to design elaborate dorm rooms — “the stakes of dorm decor have never been higher,” according to House Beautiful — parents may be wondering if they have the right insurance coverage to protect all those purchases.
Enter: “dorm insurance.” Before signing up, first consider your child’s specific needs to see if it is worth the purchase, experts say.

Dorm insurance is a personal property insurance for college students who live on campus, explained Loretta Worters, vice president of media relations of the Insurance Information Institute.
It tends to include coverage for accidental and water damage, and can cost up to $20 a month, according to marketplace site ValuePenguin.
More from Personal Finance:U.S. job market slows, but it’s not yet a ‘three-alarm fire’Here are red flags for everyday tax filers’The starving artist’ is a myth, author says
However, taking on the dorm insurance might not be necessary. In some cases, what your college student really needs is renters insurance, experts say. In others, parents’ homeowners insurance may be enough.
“People tend to buy insurance when it’s not always warranted,” said Carolyn McClanahan, a certified financial planner and founder of Life Planning Partners in Jacksonville, Florida.

Here’s how to know if you need to tack on an additional insurance policy for your college student’s dorm room, according to experts. 

How dorm insurance compares to other options

Colleges and universities will often partner with different insurers to offer dorm insurance, Worters said.
Using the partner may come with a price break, but parents could also shop around with other insurers to compare terms.
If parents decide to take on a dorm insurance policy, it would be billed separately from the room and board, said Worters.
Also, expect to pay out-of-pocket. To that point, money from 529 college savings plans cannot pay for dorm insurance because it is not a qualified educational expense, said McClanahan, who is a member of the CNBC Financial Advisor Council.

Whether you sign up for dorm insurance or not, your child’s dorm possessions will likely be covered under your home insurance plan, according to experts.
A parent’s homeowners insurance will typically cover a college student if they live on campus and are under age 26, according to the National Association of Insurance Commissioners.
The limits are typically 10% of the contents in their dorm, “which may be enough, depending on the needs,” Worters said.

For example, if your homeowners personal property is $100,000, the college student would be covered for $10,000. The coverage often includes computers, TVs, electronics, bicycles, furniture, and clothing, said Worters.
But keep in mind that dorm-specific insurance policies tend to have lower deductibles than home insurance policies, Worters said.
It doesn’t matter if the child attends university in a different city or state, said McClanahan. The home insurance policy will often stretch over, so long as the kid lives in a dorm, she said.

4 questions to ask before insuring dorm contents

1. How safe is your campus? A parent may want to consider dorm insurance if the university’s location has high criminal activity or if they have reason to worry about things being stolen, said McClanahan. “But if you look at statistics, most campuses are actually very, very safe, and there’s very little crime on campus,” she said.
The number of on-campus reported burglaries have been declining since 2011, according to data from the National Center for Education Statistics. In 2011, roughly 12.8 on campus burglaries were reported per 10,000 full-time students. The number fell to 4.7 per 10,000 in 2021, NCES found.
2. What high-value items are in the dorm room? In general, most of the things in a student’s dorm room are not high cost items, said McClanahan. Even so, a parent’s homeowners policy might only pay up to a specified amount, according to NAIC. It will be important to check what the limits are with the insurance agent or insurance company. 
3. Can you afford to replace stolen items yourself? Deductibles for homeowners insurance may be high enough that you’d have a significant outlay before coverage kicks in. Plus, making a claim can be a “ding” on your insurance, leading to higher rates in the future, said McClanahan.
4. Is your student living off campus? In that case, they may need renters insurance, which covers both personal property and certain liabilities. The premiums for renters insurance average between $15 and $30 per month depending on the location and size of the rental unit and the policyholder’s possessions, according to the NAIC.
“If the student lives off-campus, they may be required by the landlord to carry renter’s insurance,” said Worters. “More and more landlords are insisting on coverage before they will rent to a student.” More

Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., September 9, 2024. 
Brendan Mcdermid | Reuters

Stocks @ Night is a daily newsletter delivered after hours, giving you a first look at tomorrow and last look at today. Sign up for free to receive it directly in your inbox.
Here’s what CNBC TV’s producers were watching as stocks rallied Monday and what’s on the radar for the next session.

Apple’s big iPhone launch

Apple unveiled its latest slate of iPhones, Apple Watches and AirPods at its much-watched “Glowtime” event Monday, but investors didn’t seem impressed. The stock fell as the event kicked off, but staged a late-day rally to close in the green.
Shares hit an all-time high in mid-July, and they are almost 7% from those levels.
Still, Apple has been the second-best performing “Magnificent Seven” stock over the last three months.
The group has been led to the downside by Google-parent Alphabet, which is down almost 15% in three months, and Nvidia, down nearly 12%.
Apple, meanwhile is up more than 12% in the past three months. It’s trailing only Tesla, which is up 22% in that period.

Stock chart icon

Apple’s performance in the past month

Oracle earnings

The “old school” tech giant reported earnings after the bell tonight.
Shares were up in after-hour trading after the company posted earnings and revenue that beat expectations.
The day after its last earnings report in June, ORCL shares jumped 13.3%. The stock is up 11% in the last three months, and it’s up nearly 33% this year.
By comparison, the iShares Expanded Tech-Software Sector ETF (IGV) is up about 5% in the last three months, and it’s up 4% this year.
The Technology Select Sector SPDR Fund (XLK) is down about 4% in three months, and it’s up 7% this year.
The Nasdaq Composite is down about 1.5% in three months and up a little more than 12% this year.

Tall order

Monday marked Brian Niccol’s first day as CEO of Starbucks. Shares were up a little over 1%.
Niccol takes over from embattled former chief Laxman Narasimhan, who became CEO in March of last year. Under Narasimhan, SBUX shares were down 7.6%. Shares are down 14% from their 52-week high hit last November.
Niccol had previously been CEO of Chipotle, a role he took in March 2018. Under his tenure, CMG shares were up nearly 750%.
Chipotle shares hit an all-time high in June, just before a 50-for-1 stock split went into effect. The stock is down 21% from that high.

Stock chart icon

Starbucks’ 2024 performance

Cancer drug results

Shares of Summit Therapeutics soared 56% on very heavy volume after its lung cancer drug showed significantly better results than Merck’s Keytruda in Phase 3 trials.
It was the stock’s best day since just May, when it jumped more than 270%.
Shares are trading at an all-time high, up more than 630% this year.
Merck, meanwhile, was down 2% Monday.
Summit was the best performing stock in both the SPDR S&P Biotech ETF (XBI) and iShares Biotechnology ETF (IBB).
The second best biotech stock on Monday was Relay Therapeutics, which was up 52% on positive results for its breast cancer drug.

Taking off

Airlines among the best performing stocks Monday, with the US Global Jets ETF (JETS) gaining 2.6%, and posting its highest close since July 31.
JetBlue was the biggest gainer, up over 7%. The latest move came after Bank of America upgraded the stock to neutral from underperform. The company had raised revenue guidance last week.
United Airlines was up about 6%, the biggest gainer in the S&P 500. It posted its highest close since late June.
American Airlines, which will move from the S&P 500 to the midcap S&P 400 as of Sept. 23, was up nearly 4%.

Stock chart icon

JETS ETF performance in the past month

 New S&P companies

Speaking of S&P shake ups, two of the three newest members of the benchmark S&P 500 closed higher on Monday.
Palantir was up 14%, its best day since February. It posted its highest close since February 2021. It has more than doubled in price this year.
Dell Technologies rose almost 4%. It’s up nearly 40% this year, but down 40% from its record high hit in late May.
Insurance company Erie Indemnity shed 0.6%. It’s still up more than 50% this year, and hit an intraday record during the session, dating back to its 1995 IPO.

—Kavitha Shastry

CNBC will interview several big market-moving CEOs Tuesday

AT&T’s John Stankey is on in the 10 a.m. hour, Eastern time. The stock shot up 2.5% Monday, hitting a new 52-week high. It is up 8% in a week. The dividend on AT&T is 5.2%.
Michael Arougheti of Ares Management is also in the 10 a.m. hour. The stock is 10% from the July 31 high.
Larry Culp of GE Aerospace is live in the 1 p.m. hour. The stock is 7% from a 52-week high. It jumped 2.5% Monday, but it’s down 5.3% so far in September.

Stock chart icon

GE Aerospace’s performance in 2024

Apple’s suppliers

Apple’s event regarding the new iPhone left the stock flat.
But some of the suppliers moved.
Arm Holdings will be a big player in the new iPhone. The stock was up 7% on Monday. It remains 33.5% from the July high.
Taiwan Semiconductor was up 3.8%. The stock is 16% from the 52-week high hit in July.
Broadcom was up 2.8% Monday. The stock is 24% from the June high.
AMD was up 2.8% as well. It is 40% from the March high.
Cirrus Logic was up 1.7% Monday. It is 8.7% from the August 29 high.

GameStop reports after the bell Tuesday

The video game retailer with a lot of ups and downs reports Tuesday afternoon.
Shares are 63% from the May high.
GameStop is up about 11% in the last month. 

Stock chart icon

GameStop’s one-month performance

Basel III

CNBC’s Leslie Picker will report on what could be big news for the banks on Tuesday.
Ahead of the possible news, Wells Fargo is 12.7% from the 52-week high hit in May.
Citigroup is 12.2% from the July 17 high.
Bank of America is 11% from the 52-week high, also hit July 17.
Morgan Stanley is 10% from the July 16 high.
JPMorgan is 3.85% from the Aug. 30 high.  We will hear from CEO Jamie Dimon in the morning. 

Boeing August orders and deliveries

CNBC’s Phil LeBeau will be watching for the numbers when they come out at 11 a.m.
Shares are 39% from the high hit back on Dec. 21.
Boeing was up 3.36% on Monday.
It is down 6.2% so far in September.

—Jason Gewirtz More

For months, there’s been a “vibecession.” That’s a disconnect between how well the economy is doing and how people feel about their financial standing.
Now, recent economic data and consumer sentiment are more in line, some experts say.
“The problem with the recessionistas is, of course, they will always at some point be right,” says Brett House, economics professor at Columbia Business School.

For months, economists have wrestled with the disconnect between how well the economy is doing and how badly people feel about their financial standing.
Now, evidence suggests that the so-called vibecession, or that prolonged period of negative sentiment about the economy, appears to be ending, according to Michael Pearce, deputy chief U.S. economist at Oxford Economics. 

As inflation cools and the Federal Reserve prepares to lower interest rates, Americans’ assessments of the future are improving, which is bringing the country’s economic standing more in line with consumer sentiment, Pearce wrote in a report published Friday. 
More from Personal Finance:’Emotionproof’ your portfolio ahead of the election’Recession pop’ is in: How music hits on economic trendsMore Americans are struggling even as inflation cools
Other economists also note a recent glass-half-full outlook.
“Consumer confidence seems to be catching up with where the economy is,” said Brett House, economics professor at Columbia Business School. “They are kind of meeting in the middle.”
However, it is difficult to pinpoint what is causing the shift in mood, Pearce wrote in his report. 

“Our leading candidates would be a lagged response to the news that inflation is falling back and appears to be on a sustained trend back to 2%,” Pearce wrote. “It could also reflect increased optimism for the future now that the Fed is on a clear path to lowering interest rates.”

Setting the stage for the Fed to cut rates

Recent economic data has paved the way for the central bank to lower its benchmark rate for the first time in years.
The personal consumption expenditures price index — the Fed’s preferred inflation gauge — showed a rise of 2.5% year over year in July. And, though the unemployment rate is still low at 4.2%, it has been trending higher over the past year.
“All signs point to continued progress on inflation, with pressures expected to ease further with the release of the August consumer price index on Wednesday,” said Greg McBride, chief financial analyst at Bankrate.com.
“Other measures of inflation — the personal consumption expenditures index and unit labor costs — have been telling the same story and have set the table for the Federal Reserve to begin cutting interest rates this month,” he said.
Markets are now pricing in a 100% probability that the Fed will start lowering rates when it meets Sept. 17-18, with the potential for more aggressive moves later in the year, according to the CME Group’s FedWatch measure.

‘Nailing a long-awaited soft landing’

Meanwhile, consumer spending has held up even better than expected, according to the most recent reading.
“The American consumer has been resilient,” Jack Kleinhenz, chief economist at the National Retail Federation, said in the September issue of NRF’s Monthly Economic Review, released Friday
Despite earlier expectations of a recession, the U.S. has dodged a downturn, according to Kleinhenz.
“The U.S. economy is clearly not in a recession nor is it likely to head into a recession in the home stretch of 2024,” Kleinhenz said. “Instead, it appears that the economy is on the cusp of nailing a long-awaited soft landing with a simultaneous cooling of growth and inflation.”

Progress on inflation without a sizeable deterioration in the labor market has created a “classic ‘Goldilocks’ scenario,” Columbia’s House said.
Although as CNBC’s Bob Pisani recently put it, there is still a group of “recessionistas” who have been insisting there is a serious slowdown coming. And yet, fewer economists now see that happening in the near term. Goldman Sachs recently slashed the probability of an economic downturn from 25% to 20%, shortly after raising it from 15%.
“That bandwagon was very crowded in 2023, and for good reason, but the odds of a soft landing have continued to grow over the last 12 months,” McBride said.

Officially, the National Bureau of Economic Research defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.” The last time that happened was early in 2020, when the economy came to an abrupt halt.
In the last century, there have been more than a dozen recessions, some lasting as long as a year and a half.

‘Recessionistas will eventually be right’

“The problem with the recessionistas is, of course, they will always at some point be right,” House said. “It’s certainly the case, at some point in the future, the U.S. economy will dip into a recession.”
Since the fall of the Berlin Wall, some kind of economic disruption or correction has happened with pretty predictable regularity, according to House. Now there is the added uncertainty of an upcoming U.S. presidential election and the prospect of significant policy shifts.
“The recessionistas will eventually be right,” House said, but “there is no victory if it comes in a few years.”

Don’t miss these insights from CNBC PRO More

On Sept. 5, U.S. District Judge Randal Hall in Augusta, Georgia, issued a temporary restraining order against President Joe Biden’s second effort to cancel student debt for millions of Americans.
The administration was expected to publish its final rule on its revised student loan forgiveness plan, which could impact more than 25 million Americans, in October.
Here’s what borrowers need to know about what could happen next.

U.S. President Joe Biden speaks as he announces a new plan for federal student loan relief during a visit to Madison Area Technical College Truax Campus, in Madison, Wisconsin, U.S, April 8, 2024. 
Kevin Lamarque | Reuters

Earlier this summer, millions of federal student loan borrowers got a promising email. The Biden administration informed them that debt forgiveness was on the way and that they may be eligible.
However, before the U.S. Department of Education could publish its final rule on the debt relief and start to carry out its new sweeping loan forgiveness plan, a Republican-led challenge has managed to at least temporarily block the relief.

Here’s what we know so far.

Relief plan blocked until at least mid-September

On Sept. 5, U.S. District Judge Randal Hall in Augusta, Georgia, issued a temporary restraining order against President Joe Biden’s second effort to cancel student debt for millions of Americans. The Biden administration had previously tried to offer sweeping student debt forgiveness in 2022.
Hall, appointed by former Republican President George W. Bush, was responding to a lawsuit against the relief package brought by seven Republican-led states a few days earlier. The states — Alabama, Arkansas, Florida, Georgia, Missouri, North Dakota and Ohio — said the U.S. Department of Education’s new debt cancellation effort, like its previous attempts, is illegal.
More from Personal Finance:The ‘rent-first’ lifestyle is catching on’Recession pop’ is in: How music hits on economic trendsMore Americans are struggling even as inflation cools
Hall said the states had made a convincing case that the department was overstepping its authority, and blocked the Biden administration from moving forward with its plan until a Sept. 18 hearing.

“The court has only issued a temporary restraining order and the scope of the order is not clear,” said Luke Herrine, an assistant professor of law at the University of Alabama.
It appears the administration can still proceed with finalizing the rule and preparing to cancel the debt, Herrine said. But it likely won’t be able to start forgiving the loans until the courts decide on the rule’s legality, which could take months, experts say.
The Department of Education did not immediately respond to a request for comment.

In June 2023, the Supreme Court ruled that Biden’s attempt to cancel around $400 billion in federal student debt was unconstitutional. Immediately after, Biden vowed to find another way to deliver relief to borrowers.
Biden’s first attempt to forgive student debt was through an executive action. This time, his administration has pursued the regulatory process, a lengthier route that it hoped would make its relief package more immune to legal challenges.
It was not expected to publish its final rule on its revised student loan forgiveness plan, which could impact more than 25 million Americans, until October. However, in their lawsuit, the state attorneys general said they had discovered evidence that the Education Department had ordered federal loan servicers to begin erasing the loans as early as Sept. 3.
Yet it’s unlikely the Biden administration would break the rules of the regulatory process timeline, legal experts said.
“I strongly doubt that this allegation is true,” Herrine said.
Most likely, the administration had told the loan servicers to prepare to forgive the debt once the rule is finalized, he said.

Borrowers in limbo, again

For now, the future of the Biden administration’s new wide-scale student loan forgiveness plan is uncertain.
The Biden administration’s new affordable repayment plan for student loan borrowers, known as SAVE, is also tied up in the courts from a barrage of GOP-legal challenges. Those enrolled in the plan are excused from making payments for the time being.

As things stand, most of the Biden administration’s hopes to deliver relief to borrowers ahead of the 2024 presidential election are now stalled.
That may be part of the point, Herrine said.
“The GOP knows that student debt cancellation is popular and they want to prevent the Biden administration from doing popular things,” Herrine said.

Don’t miss these insights from CNBC PRO More

With the presidential election approaching, experts are sounding alarms about the upcoming expiration of the 2017 Tax Cuts and Jobs Act, or TCJA.
Without action from Congress, trillions in tax breaks enacted by former President Donald Trump via the TCJA will expire after 2025. The outcome of the 2024 election will determine which political party will handle those expiring tax breaks — and shape America’s tax policy for years to come.

“If the 2017 tax cuts are allowed to expire after 2025, about 62% of taxpayers would see their tax bills go up,” said Erica York, senior economist and research director at the Tax Foundation. “That’s because the TCJA provided tax cuts for the vast majority of taxpayers.”
A majority of Americans, 56%, already believe they pay too much in federal income taxes, according to an April 2024 Gallup poll. Meanwhile, only 22% think they receive valuable services in return, as reported by an AP-NORC survey from January 2024.
Both Trump, the Republican presidential candidate, and Vice President Kamala Harris, the Democratic candidate, have called for tax changes that could affect millions of Americans. While there is some overlap on ideas — including an expanded child tax credit and no tax on tips — their approaches differ.
“Everything we have to do should be oriented towards one thing: increasing the rate of economic growth of our country,” Stephen Moore, an economic advisor to the Trump campaign, told CNBC.
The Harris campaign did not provide comment in time to participate in this report.
Watch the video above to learn more about how Harris and Trump each plan to tackle the tax code if they win the White House. More