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Health care, long an ailing stock market sector, has recovered over the past six months.
Several analysts are projecting strong performance for this year.
Health care is a defensive redoubt for investors because demand isn’t affected by the economy.

The Good Brigade | Digitalvision | Getty Images

Health care, long an ailing stock market sector, has recovered over the past six months, with currently robust vital signs and strong growth projections.
The recovery comes after the sector failed to make good on positive expectations for 2022 based on estimates of pent-up demand for physician office visits and elective procedures after the pandemic.

Health care was basically flat in 2022 and again for most of 2023, a year when its overall performance was the third-worst among the market’s 11 sectors and the S&P 500 grew 26%.

Why this year may be different

Late in 2023 and in the first quarter of 2024, health-care stocks turned around, advancing about 5%, about half of the gain of the S&P 500. In mid-April, as the S&P 500 pulled back, the health-care sector gave up its first-quarter gains.
Yet, like the S&P 500, health care has gained since the market’s October low, catching some wind after two years of doldrums for the sector. 
Several analysts are projecting strong performance for this year. BlackRock’s view is particularly sanguine: “Health care’s 12-month forward earnings growth is expected to lead all other sectors on a year-over-year basis.”

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One factor driving investment is the broadening of market performance from big tech stocks into other sectors. Amid this perennial sector rotation, health-care stocks are a natural place for money to flow now because they’re defensive, having historically done well in slowing and growing economies alike.

This defensive advantage has been drawing investment from institutional investors expecting slowing economic growth at this late stage of the business cycle, as the Federal Reserve estimates growth of 2.5% for the first quarter compared with 3% in 2023.  

Constant demand

Health care is a defensive redoubt for investors because demand isn’t affected by the economy. People will always need health care, and insured people will usually seek it, regardless of what the economy’s doing.
For many individuals, a slowing economy may lead to less job security, prompting them to spend less. This may mean putting off buying a new car or remodeling the kitchen, but not medical care.
Further, demand is unflagging from baby boomers on Medicare, including those with supplemental plans with relatively low deductibles and co-pays.
Also driving the sector has been a shift in investor sentiment, with buzz surrounding new pharmaceuticals, such as GLP-1 drugs for treating diabetes and effecting weight loss, and robotic technology enabling minimally invasive techniques for complex surgeries.

GLP-1 drugs have doubled Eli Lilly’s share price over the past 12 months, bringing its trailing price-earnings, or P/E, ratio for that period to a lofty 129. Over the same period, Intuitive Surgical’s robotic da Vinci Surgical System helped the company grow its stock 42%, bringing its trailing P/E ratio to 75.
Though these two stocks may continue to do well this year, health-care companies that probably have more room to grow, as indicated by their lower valuations, aren’t scarce. They can be found in various subsectors, including biotech, providers/services, equipment/supplies and life science tools/services.

Six stocks to watch

Here are six stocks with attractive valuations, low-risk fundamentals, good earnings and strong growth projections:

Abbvie (ABBV). This well-known biotech company has an unusually high dividend yield — currently, 3.83%. Products include drugs for treating psoriatic arthritis, plaque psoriasis, Crohn’s disease, depression and some cancers. Market cap: $286 billion. Trailing 12-month P/E ratio: 16.3.

Vertex Pharmaceuticals (VRTX). This biotech company is a dominant player in the market for cystic fibrosis therapies. After announcing largely positive results from a clinical trial of a non-opioid acute pain drug in January, the company said it would apply for regulatory approval at midyear. The goal is to capture some of the huge market share of opioids, which carry the risk of addiction. Market cap: about $102 billion. Trailing P/E: 28.

Stryker Corp. (SYK). This medical device company manufactures various implants for spinal conditions and joint replacements for knees, hips and shoulders. Stryker benefits from sustained demand from aging boomers with deteriorating joints. Market cap: $129 billion. Trailing P/E: 33.

Medpace Holdings (MEDP). At 43, Medpace’s trailing P/E may seem high, but the share price has risen 63% over the last six months. A contract research organization, Medpace provides client companies with expertise and services to help them shepherd new drugs and medical devices through the different phases of development. Market cap: $12 billion.

Iqvia Holdings (IQV). This biotech company operates at the intersection of health care and technology, providing analytics, tech solutions and clinical research services to inform decision-making at hospitals and R&D organizations. P/E: 31. Market cap: $42 billion.

Cencora (COR). Though Cencora’s share price has risen more than 27% over the last six months, earnings growth gives this provider of pharmaceutical supply-chain solutions and services for the human and animal markets a relatively low trailing P/E — 26. Market cap: $47 billion.

Since 1952, presidential election years have been consistently positive for the overall market, especially when an incumbent is running. But health-care stocks are sometimes an exception because the sector is a political punching bag for candidates pledging to cut costs for consumers. Stock prices may dip from such rhetoric, creating buying opportunities.
Current projections indicate that investors now buying shares of health-care companies with good fundamentals and strong market positions, and holding them into 2025, may be positioned for strong gains.
— By Dave Sheaff Gilreath, a certified financial planner, and partner/founder and chief investment officer at Sheaff Brock Investment Advisors and its institutional arm, Innovative Portfolios. Sheaff Brock Investment Advisors placed #10 in CNBC’s FA100 rankings. More

The U.S. Department of Labor issued a final “fiduciary” rule on Tuesday that aims to raise investment-advice standards in retirement accounts.
The regulation follows an initial Biden administration proposal in October 2023.
President Obama also tried to crack down on conflicts of interest among brokers, advisors, insurance agents and others who give retirement advice. That rule was killed in court.

The U.S. Department of Labor headquarters in Washington.
Al Drago/Bloomberg via Getty Images

The Biden administration issued a final rule on Tuesday that cracks down on the investment advice that advisors, brokers, insurance agents and others give to retirement savers.
The U.S. Department of Labor regulation — which follows a rule proposal in October — aims to ensure that investment recommendations are in savers’ best interests, according to agency officials.

In legal terms, the final rule expands the scope of when a broker, advisor or other intermediary must act as a “fiduciary,” meaning they are required to give advice that puts the client first.
The final rule takes effect on Sept. 23. It takes up the mantle of a prior effort by the Obama administration to rein in conflicts of interest in retirement accounts. That Obama-era “fiduciary” rule, which experts say was broader than Biden’s measure, was killed in court.
Current retirement rules don’t provide adequate protections to savers, Labor Department officials said during a press call Tuesday.
Often, advice is tainted by “significant conflicts of interest” and in many circumstances there’s “no obligation” to act in retirement customers’ best interests, said Lisa Gomez, assistant secretary of the Employee Benefits Security Administration.
“That’s not right,” Gomez said.

The Labor Department is trying to restrain bad actors relative to two big areas of advice: rollovers from 401(k) plans to individual retirement accounts and purchases of insurance products like annuities, according to retirement and legal experts.
In certain instances, conflicts of interest may allow financial professionals to recommend a transaction that pays them a higher fee but isn’t necessarily best for the client. Such a dynamic can “chip away” at Americans’ savings, Gomez said.
The Council of Economic Advisers estimates Americans lose up to $5 billion a year due to conflicts of interest relative to one insurance product, an indexed annuity.
“For too many people, the retirement plan savings they have through their job are by far the single biggest sources of savings they have,” Gomez said. “These important and tax preferred savings deserve protection, and it is the Department of Labor’s job to make sure they are protected.”

The number of 401(k)-to-IRA rollovers is ‘astronomical’

The final rule doesn’t differ significantly from the Biden administration’s initial proposal, Labor officials said.
Its elements kick in over two time periods.
Starting Sept. 23, the financial industry must acknowledge fiduciary status when working with clients and adhere to “impartial conduct standards.”
Those standards mean financial professionals, when giving personalized investment advice to customers, have an obligation to be prudent, loyal and truthful and charge reasonable fees, for example, Labor officials said.
The remaining parts of the rule start a year later, in September 2025, officials said.
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Americans rolled over about $779 billion from 401(k)-type plans into IRAs in 2022, according to data cited in a Council of Economic Advisers analysis. Rollovers are common upon retirement, and the annual rollover dollar sum has grown as more baby boomers enter their retirement years.
“The amount of money being rolled over is astronomical,” said Andrew Oringer, partner and general counsel at the Wagner Law Group.
“That juxtaposition of an enormous amount of money and a compensation system that can incentivize the seeking of the rollover without regard necessarily to the best interest of the participant is something that has concerned the Department of Labor,” Oringer said.   

Meanwhile, industry groups say the regulation isn’t necessary and would harm the very retirement savers the Labor Department is trying to protect.
In a statement, the American Council of Life Insurers, a trade group, said the new regulation is “alarmingly similar to the Department’s 2016 regulation” under President Obama.
Before being overturned, that rule caused more than 10 million investor accounts with $900 billion in total savings to lose access to professional financial guidance, the group said.
Additionally, federal and state rules governed respectively by the Securities and Exchange Commission and National Association of Insurance Commissioners already offer “robust” consumer protections for retirement savers, ACLI said.
However, there appears to be concern from the Labor Department that the “reach and substance” of those regulatory schemes are “insufficient” in the retirement content, and it is trying to “level the playing field,” Oringer said.
Labor officials also said Tuesday that the final fiduciary rule differs significantly from the Obama-era regulation.
“We have done our level best to write a rule that takes the teaching of the Fifth Circuit [Court of Appeals], the lessons we learned from the [public] comments,” and draft a rule that protects investors without putting “undue burden” on the financial industry, said Timothy Hauser, deputy assistant secretary for program operations at the Employee Benefits Security Administration.

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After the Supreme Court blocked President Joe Biden’s first plan to forgive student debt, his administration set out to create a relief package that would survive legal attacks.
Here’s why the U.S. Department of Education thinks the revised plan will endure.

US President Joe Biden speaks about student loan debt relief at Madison Area Technical College in Madison, Wisconsin, April 8, 2024. 
Andrew Caballero-Reynolds | AFP | Getty Images

The aid package is narrower

Biden’s 2020 campaign promise to erase student debt was thwarted at the Supreme Court in June.
The majority-conservative court ruled that Biden didn’t have the authority to erase $400 billion in student debt without prior authorization from Congress. Biden had tried to forgive the debt of nearly all 40 million federal student loan borrowers, with many people getting up to $20,000 in cancellation.
This time, the Biden administration has narrowed its aid by targeting specific groups of borrowers, including those who’ve been in repayment for decades or attended schools of low-financial value. It hopes this will help the plan survive in front of a court that is skeptical of broad loan cancellation, experts say.

More than 25 million borrowers still stand to benefit from the program.
As a result, for critics of broad student loan forgiveness, Biden’s new plan looks a great deal like his first.

After the president touted his revised relief program on April 8, Missouri Attorney General Andrew Bailey, a Republican, wrote on X that Biden “is trying to unabashedly eclipse the Constitution.”
“See you in court,” Bailey wrote.

There’s a different legal justification

In addition to the fact that this effort is a more targeted aid program, the U.S. Department of Education is also using a different law — the Higher Education Act — as its legal justification. Biden’s first forgiveness plan was based on the Higher Education Relief Opportunities for Students Act, or HEROES Act, of 2003.
The HEROES Act was passed in the aftermath of the 9/11 terrorist attacks and grants the president broad power to revise student loan programs during national emergencies. The Biden administration initially tried to use this law because, at the time, the country was under national emergency status from the Covid-19 pandemic.

However, the conservative justices didn’t buy that argument.
Chief Justice John Roberts wrote in the majority opinion for Biden v. Nebraska: “But imagine instead asking the enacting Congress a more pertinent question: ‘Can the Secretary use his powers to abolish $430 billion in student loans, completely canceling loan balances for 20 million borrowers, as a pandemic winds down to its end?'”
“We can’t believe the answer would be yes.”
The HEA, which the Biden administration is now using, was signed into law by President Lyndon B. Johnson in 1965 and allows the Education secretary some authority to waive or release borrowers’ education debt.
When Sen. Elizabeth Warren, D-Mass., was running for president in 2020, she pointed to the HEA as a law that would allow her to deliver sweeping loan relief.
“This authority provides a safety valve for federal student loan programs, letting the Department of Education use its discretion to wipe away loans even when they do not meet the eligibility criteria for more specific cancellation programs,” Warren wrote in her student loan forgiveness proposal back then.

Biden administration is using rulemaking process

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The federal tax deadline was April 15, and if you missed it, you should file your return and pay your balance as soon as possible.
If you still owe taxes for 2023, you’ll continue racking up penalties and interest until you file and pay, according to the IRS.

Delmaine Donson | E+ | Getty Images

The federal tax deadline was April 15 for most filers — and if you missed it, you should file your return and pay your balance as soon as possible, experts say.
If you still owe taxes for 2023, you’ll continue racking up penalties and interest until you file and pay your outstanding balance, according to the IRS.

The late filing penalty is 5% of your unpaid balance per month or partial month, capped at 25% of your balance. The fee for failure to pay is 0.5% per month or partial month, with a maximum fee of 25% of unpaid taxes. Interest is based on the current rates.
“The longer you wait to file, the bigger the risk of higher penalties and interest from the IRS and state,” said Mark Steber, chief tax information officer at Jackson Hewitt.
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However, that doesn’t mean you should rush to file a return if you’re still missing key information, like tax forms for your investments or other earnings.
“A return needs to be completely accurate,” Steber said. “No guessing or estimating.” 

With missing information, the IRS could flag your tax return for audit, processing could be delayed or you could receive an agency notice. 
Still, “file an accurate return as soon as you’re able,” Steber suggested. 
Of course, some filers in disaster areas automatically have more time to file federal returns and pay taxes owed.

How to make a late payment for your taxes

There are several online choices for late tax payments, including IRS Direct Pay and your IRS online account.
If you can’t pay your tax balance in full, you have “various payment options,” including payment plans, according to the IRS.
IRS online payment plans, or “installment agreements,” include:

Short-term payment plan: This may be available if you owe less than $100,000 including tax, penalties and interest. You have up to 180 days to pay in full.

Long-term payment plan: This may be available if your balance is less than $50,000 including tax, penalties and interest. You must pay monthly, and you have up to 72 months to pay off the balance.

You could also qualify for first-time penalty abatement, which is like a “‘get out of jail free’ request,” according to Nicole DeRosa, tax partner at accounting firm Wiss & Company.
However, eligibility depends on the type of penalty and your past compliance with the IRS, she said. More

If you’ve inherited an individual retirement account since 2020, you could have a shorter timeline to withdraw the money, which can trigger tax consequences.
Under the Secure Act of 2019, certain heirs have a 10-year window to deplete an inherited IRA, but there’s no penalty for missed 2024 distributions.
There are several factors to consider when deciding to take inherited IRA withdrawals, experts say.

Jacob Wackerhausen | iStock / 360 | Getty Images

If you’ve inherited an individual retirement account since 2020, you could have a shorter timeline to withdraw the money, which can trigger tax consequences. But there are a few things to consider before emptying an inherited account, experts say. 
Under the Secure Act of 2019, so-called “non-eligible designated beneficiaries,” have a 10-year window to deplete an inherited IRA. Non-eligible designated beneficiaries are heirs who aren’t a spouse, minor child, disabled or chronically ill. Certain trusts may also fall into this category.

In 2022, the IRS proposed mandatory yearly withdrawals for heirs if the original account owner had already started their required minimum distributions, or RMDs. But the agency has since waived penalties for heirs’ missed RMDs amid confusion.
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These waived RMDs could create a tax problem for certain heirs who still must empty inherited accounts within 10 years, experts say. The shorter window could mean larger distributions and higher-than-expected income for those years.
However, “most beneficiaries don’t even care about the 10-year rule. They just want the money,” said individual retirement account expert and certified public accountant Ed Slott. 

Most beneficiaries don’t even care about the 10-year rule. They just want the money.

Individual retirement account expert

Heirs tend to earmark an inheritance for certain expenses and “the money is coming out on the way to the funeral,” he said.

Indeed, nearly 40% of Americans expecting an inheritance will use the money to pay off debt, according to 2023 survey from New York Life.

Tax changes are ‘one of many moving parts’

Provisions from the Republicans’ signature 2017 tax overhaul are slated to sunset after 2025 and without changes from Congress, individual federal income tax brackets could be higher.
Before 2018, the federal individual brackets were 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. But five of these brackets are temporarily lower through 2025: 10%, 12%, 22%, 24%, 32%, 35% and 37%.
Lower brackets through next year could prompt some heirs subject to the 10-year rule to make pretax withdrawals sooner.
But the expected tax law changes are just “one of many moving parts,” according to certified financial planner Edward Jastrem, chief planning officer at Heritage Financial Services in Westwood, Massachusetts.
“To a certain extent, I would lean towards other aspects of a client situation potentially being more important,” he said.
Before withdrawing money from an inherited account, you’ll need to consider one-off situations like selling a business or a home, which could temporarily boost income. You should also weigh your expected retirement date and when to start taking RMDs from your own retirement accounts, Jastrem said.
“It’s the big picture of each unique client’s plan,” he said.

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YOUR GUIDE TO NAVIGATING YOUR FINANCIAL FUTURE

More than eight in 10 teenagers have already thought about their retirement, according to a recent report. However, far fewer know the best way to set up a long-term plan.
Ed Slott, a certified public accountant and the founder of Ed Slott and Co., recommends starting with a Roth individual retirement account.
He said contributions can be small at the outset because “time is the key asset.”

Getty Images

When it comes to teens and money, there is often a disconnect.
Overall, teenagers are taking a greater interest in their long-term financial health — although far fewer understand basic retirement planning.

A majority, or 83%, of 13- to 18-year-olds, said they had already thought about their retirement, according to the results of a survey from Junior Achievement and MissionSquare.
But most teens mistakenly believed saving money in a bank account was the best long-term strategy. Only 45% said investing in stocks and bonds with the help of a financial advisor, which would offer a greater long-term return, was the preferred way to go.

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“This research shows retirement is more top-of-mind for teens than one might think,” said Jack Kosakowski, Junior Achievement’s president and CEO. “While young people have given retirement planning some thought, it’s apparent they still need information on the best way to go about it.”

‘The greatest money-making asset you can possess’

Although retirement can seem far away, particularly for those just starting out, teens have a unique opportunity that others do not, according to Ed Slott, a certified public accountant and the founder of Ed Slott and Co.
“The greatest money-making asset you can possess is time,” he said. “Someone who starts at 15 has a huge advantage even over someone who starts at 25.”

Slott recommends opening a Roth individual retirement account to get a head start.
Contributions to a Roth IRA are taxed upfront, and earnings grow tax-free. In retirement, withdrawals are completely free of tax and penalties, as long as the account has been open for at least five years.
Since there are no age restrictions, anyone with earned income — say, from a summer job — can contribute.

Even if a teen only puts some money away, parents can add funds on their child’s behalf, as long as the combined amount doesn’t exceed the teenager’s earned income for the year. Once contributed, the money inside a Roth IRA account can be invested appropriately to suit any type of long-term goal.
In Christopher Jackson’s 12th-grade personal finance class, students open Roth IRAs with an initial grant of $100 from the community, which they then learn to maintain on their own. Jackson, who teaches at Da Vinci Communications High School in Southern California, tells his students that “this is going to be the most important class they are going to take in their life.”
“My No. 1 goal is to affect their children’s children,” he recently told CNBC.

How Roth IRAs help you start saving

While there is a maximum IRA contribution limit of $7,000 for 2024, it’s less about how much you save and more about the act of saving, Slott said. “It doesn’t have to be a lot. Time is the key asset.”
Meanwhile, both the investment and all the interest, dividends and growth on these assets will accumulate tax-free over the years.

If there are more immediate needs before hitting retirement age, account holders can withdraw their contributions at any time without taxes or penalties if, for instance, they need the money for college or a down payment on a house down the road, according to Slott.
However, Slott advises young adults to view tapping into these funds as a last resort.
“Roth money is the last money you should touch because that money is growing the fastest and it will never be eroded by current or future taxes,” he said.
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Just an inch of floodwater can generate tens of thousands of dollars in property damage. Homeowners trying to move and start over after such a disaster might find a surprising buyer for their home: the government.
The Federal Emergency Management Agency, or FEMA, has spent around $4 billion assisting in the purchase of about 45,000 to 50,000 damaged homes since 1989, according to A.R. Siders, director of the University of Delaware’s Climate Change Science and Policy Hub, who analyzed FEMA’s data in 2019.

These homes have been marred by floods to the point where the homeowners decide to move away. To encourage homeowners not to sell to new buyers and stop what Siders calls “that terrible game of hot potato,” FEMA’s Hazard Mitigation Grant Program supports local and state governments in purchasing the homes, demolishing them and turning the property into public land, in what are called floodplain buyouts.

‘I have no regrets’

Andrea Jones accepted a floodplain buyout for her home in the Charlotte, North Carolina, area.

Andrea Jones, 59, sold her home in the Charlotte, North Carolina, area in a floodplain buyout. Jones, who works in the wealth and investments department of a bank, purchased her home in 2006 for $135,000. Her home was appraised in 2022 at a value of $325,000.
Jones said her home never flooded but her street did.
“Within three years of me being in the house was the first time I experienced the heavy flooding. It came up to my mailbox,” Jones said. “You could not see the street. You could not see the beginning of my driveway.”
Commuting to her home, which was not in a flood zone when she bought it but was later rezoned into one, made her worry.

“At times when I would be at work and it’d be raining really hard and I’d be like, am I going to be able to get home? Am I going to be able to get to my house? Am I going to have to park my car up the street?” she said. “It just didn’t happen a lot. But when it did happen, it was scary.”

The image on the left shows the former home of Andrea Jones before it was demolished following a floodplain buyout. The image on the right is how the land looks now.
Courtesy: Andrea Jones

Jones put the proceeds from the sale toward the purchase of a new home, which she said is nicer, for $437,000. Since the home is more expensive and interest rates are higher, Jones said, her monthly mortgage is double what it once was.
Her new home is outside the floodplain and about a 10-minute drive from her former neighborhood.
“I miss the neighborhood; I miss my friends,” she said. “I miss seeing people walking their dogs, standing out, talking with them, having conversations … things like that.”
However, she said she feels more comfortable and has peace of mind living in her new home because she doesn’t need to worry about her street flooding.
“I wouldn’t go back. I have no regrets [about] having made the decision that I made,” she said.

How floodplain buyouts work

Floodplain buyouts help a homeowner move out of harm’s way and potentially help the community by creating open space and/or an area that can collect flood waters to protect the other homes in the region.
For FEMA’s floodplain buyouts, executed under the Hazard Mitigation Grant Program, 75% of the buyout funding is provided by the federal government, and the remaining 25% comes from state, local and community funds. In some instances, the 2021 Bipartisan Infrastructure Law can cover 90% of the buyout with federal funds.
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However, buyouts as a strategy can be controversial, experts say.
“It’s a bit of a mixed bag. I think in some cases they’re successful and in some cases they’re not,” said Mathew Sanders, senior officer for U.S. conservation at Pew Charitable Trusts.
Sanders said some communities may be apprehensive about taking on the responsibility of the deeded land. “There’s legal liability associated with owning property generally, and so it ends up, in some cases, being a fairly significant drain on local resources,” he said.
The Congressional Research Service found that, without full participation, floodplain buyouts can also lead to problems such as blight, community fragmentation, difficulty with municipal services and inability to restore the floodplain to be able to properly absorb water.

For homeowners, it can be ‘a long time to wait’

Of course, a buyout can be a huge advantage for a person who does not want to live in a floodplain but may not have the resources to abandon their home.
Even so, the buyouts can take a long time. On average, federal buyouts can take two to five years, though 80% of the FEMA acquisitions are approved in less than two years.
“That’s a long time to wait, if your home has mud in it and you’re trying to figure out whether to rebuild or not,” said Siders, of the Climate Change Science and Policy Hub.
Jones’ buyout was delayed by the pandemic, but once she started the process up again in May 2022, things moved quickly. She purchased her new home in January 2023.
How long the buyout takes often depends on which program is funding the buyout. In addition to FEMA, the U.S. Department of Housing and Urban Development and many state and local communities fund floodplain buyouts.

And all of this is happening as the U.S. is facing a housing shortage of at least 7.2 million homes, according to Realtor.com.
“We’re talking about a crisis of affordability in housing across the country, combined with the crisis of the climate change effects. How do we ensure that we provide for our population while making sure that they’re not in harm’s way?” asked Carlos Martín, director of the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University.
Watch the video to learn more about how floodplain buyouts work and whether the U.S. should continue investing in buying and destroying homes facing flooding. More

President Biden hasn’t not given up on the idea of free community college nationwide.
Unlike student loan forgiveness, free college is a better way to combat the college affordability crisis, some experts say.
Even though Biden has yet to make college tuition-free at the federal level, the number of statewide free-college programs is growing.

When President Joe Biden unveiled the details of his Plan B for student loan forgiveness, he revealed that his hope to make some college free was not dead.  
“I also want to make community college tuition free so you don’t need loans at all,” Biden said after including free community college as part of his $7.3 trillion budget for fiscal 2025.

Unlike loan forgiveness, free college is a better way to combat the college affordability crisis, some experts say — and although a federal effort has yet to get off the ground, it could have a good chance of securing widespread approval going forward.
“Student loan forgiveness is a Band-Aid,” said Ryan Morgan, CEO of the Campaign for Free College Tuition. “It’s not a permanent solution but it’s certainly better than nothing.”
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Critics have panned the president’s efforts on loan forgiveness for overstepping his authority while only impacting those graduates with existing education debt.
“Loan forgiveness is a snapshot in time in terms of a fix,” Morgan said.

Alternatively, free college appeals more broadly to those struggling in the face of rising college costs, rather than after the fact.
“If you remove cost as the barrier than everyone who wants to, and is qualified to go, can attend some sort of higher education program,” Morgan said.
“That makes it “a very popular bi-partisan issue,” he added.

And yet, the Biden administration’s plan to make community college tuition-free for two years was ultimately stripped from the Build Back Better Act in 2021.
However, while the White House turned its focus to student loan forgiveness, states have been moving forward with plans to pass legislation of their own to make some college tuition-free.
As of the latest tally, 35 states already have some type of program in place.
Most are “last-dollar” scholarships, meaning the program pays for whatever tuition and fees are left after financial aid and other grants are applied. In other words, students receive a scholarship for the amount of tuition that is not covered by existing state or federal aid.

The problem with free college

Critics say lower-income students, through a combination of existing grants and scholarships, already pay little in tuition to state schools, if anything at all.
“The reality is that there’s a very good chance you aren’t going to pay tuition,” said Sandy Baum, senior fellow at Urban Institute’s Center on Education Data and Policy. “That’s not really solving an access problem.”
Further, in most cases the money does not cover fees, books, or room and board, which are all costs that lower-income students struggle with, and community college may not be the stepping stone to a four-year school it is often believed to be.
In fact, just 16% of all community college students go on and attain a bachelor’s degree, according to recent reports by the Community College Research Center at Columbia University, the Aspen Institute College Excellence Program and the National Student Clearinghouse Research Center.

“It’s a really risky way to think you are going to save money because very few people go on to get a bachelor’s degree,” Baum said.
In addition, community college is already significantly less expensive. At two-year public schools, tuition and fees averages $3,990 for the 2023-24 school year, according to the College Board. Alternatively, at four-year, in-state public schools, that number is $11,260 per year and, at four-year private universities, it’s $41,540.

New Mexico’s program is ‘our gold star’

Among all state-based plans, the New Mexico Opportunity Scholarship Act has been hailed as the most extensive tuition-free scholarship program in the country — “that’s our gold star in terms of programs,” Morgan said.
New Mexico’s Opportunity Scholarship goes a step further than most by opening up access to returning adult learners, part-time students and immigrants, regardless of their immigration status, in addition to recent high school graduates. (The average scholarship recipient in New Mexico is under 25 years old, female and Hispanic.)
In New Mexico, the state aid is applied first, so federal aid and private scholarships can go toward books, room and board and childcare to help cover the total cost of going to school. 
Since its inception in 2022, overall college enrollment has increased by nearly 7% in the state, reversing more than a decade of declines, according to Higher Education Department Secretary Stephanie Rodriguez.
That’s “telling us that students are ready to go to school, they want to be there and they want to reskill or upskill,” she said.
“It’s gratifying to see that the scholarship is doing exactly what it was intended to do,” Rodriguez added.
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