The U.S. economy entered a technical recession in the second quarter of 2022. The real GDP of the country shrunk by 0.9% in Q2 according to preliminary numbers released Thursday by the Bureau of Economic Analysis. In Q1, the economy had already decreased by 1.6 percent.
The current recession is so far a technical and an unusual one, as it doesn’t hit all the hallmarks of economic decline. Employment, for example, has climbed as of late, while consumer spending has stagnated but not fallen significantly. However, the tightening of the funds rate by the Fed following high inflation has been a factor that has curtailed economic growth as has been the changed import behavior of U.S. companies following supply chain struggles.
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The U.S. also suffered a short but deep recession in Q1 and Q2 of 2020 when it experienced the steepest decline ever recorded in the course of the coronavirus pandemic. U.S. GDP growth jumped up again in Q3 of that year, however.
The Biden administration pointed out that the official definition of a recession was not two quarters of negative growth in a row, but as pointed out by BEA “a significant decline in economic activity over more than a few months, which is assessed using several indicators, including the labor market, consumer and business spending, industrial production, and incomes.”
Yet even a technical recession will further stoke fears of economic trouble that are already running high in the U.S.
Related:
- Here’s how Biden’s approval ratings compare to Obama’s and Trump’s
- Majority of Americans think Biden is a ‘weak’ leader
This article originally appeared on Statista.com and was syndicated by MediaFeed.org.
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What we know about Biden’s plan to cancel student loan debt
Whether President Biden can unilaterally cancel student debt remains cloaked in secrecy for now. According to the Wall Street Journal, the reveal will likely happen in July or August.
This announcement will happen before September 1, when student loan payments are set to resume after the extended pause. Biden’s actions (and talk of his possible actions) have long since stirred a fierce debate on whether the president can actually cancel student loan debt. The following article breaks down the latest information. Keep reading to get all the details and context.
Related: The Advantages and Disadvantages of Student Loan Refinancing
Gage Skidmore
On the 2020 presidential campaign trail, Biden ran in part on a student loan reform platform. On top of suggesting potential changes to existing federal student loan forgiveness programs, he floated the possibility — both in Tweets and in campaign speeches — that he supported a proposal to forgive $10,000 in federal student loan debt.
And in April of last year, Biden asked the Department of Education if he had the authority to cancel student debt. He received a memo in response, but no public eyes have seen it so far. Thus, the cloak of secrecy.
For now.
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Biden recently erased $5.8 billion worth of educational debt for all former students of Corinthian College, the now-closed, for-profit school. This is the largest single student-debt cancellation ever by the United States government.
Another $6.8 billion in student loans were obliterated for 113,000 borrowers through amendments to the Public Service Loan Forgiveness Program. This allows non-profit and government employees to have their remaining debt forgiven after 10 years or 120 payments.
And more than $8.5 billion in student loans have been forgiven for 400,000 borrowers who have a total and permanent disability.
Additionally, let’s not forget the $2.1 billion for 132,000 borrowers through borrower defense to repayment. People can apply for borrower defense if their education provider deceived them “or engaged in other misconduct in violation of certain state laws,” according to the ED’s Federal Student Aid office.
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As many borrowers keep their eyes peeled for Biden’s summer announcement, speculation is growing about what is happening behind the scenes.
Many believe a debate continues in the Biden administration over the political and financial ramifications of wiping out billions in student loans. On one hand, the November midterm elections would be a good reason to come through on a campaign promise. On the other hand, inflation, which the Federal Reserve is fighting by raising its interest rates, could be exacerbated by the sudden cancellation of billions of debt.
While the political environment is evolving quickly, here’s an overview of some ways Biden might tackle the issue…
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So, can the president unilaterally forgive student debt? Senate Majority Leader Chuck Schumer and Senator Elizabeth Warren, among others, are pressuring Biden to take this controversial step, with the former repeatedly saying, “You just need the flick of a pen.”
Now that Biden has frozen repayments until Aug. 31, 2022, people are waiting for what happens next. Will it include a student loan forgiveness executive order? If not Biden, which president will forgive student loans in the future?
The coming announcement could impact how things unfold in the years to come.
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The president reportedly plans to cancel $10,000 in student loan debt per borrower. According to the Washington Post, the latest plan is for limiting debt forgiveness to Americans who earned less than $150,000 (or possibly $125,000) in the previous year or less than $300,000 (or possibly $250,000) for married couples filing jointly.
But Biden is hesitant to cancel the debt with the stroke of a pen. So despite the mystery surrounding the memo from the Department of Education to Biden, he continues to act through them to avoid Congressional challenges to an executive order.
Youngoldman / istockphoto
Some want to see all student loan debt canceled. But reports about forgiving $10,000 are saying it would be for federal loans only. If you’re looking for private student loan relief, namely to lower your payments, you may want to consider refinancing.
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Borrowers have been in limbo, waiting to know if and how much student loan debt the Biden administration will cancel. But with interest rates climbing, it could be a good idea to focus on the aspects of your educational debt that you can control.
One place federal borrowers can start is to determine if they qualify for existing federal student loan repayment programs — including income-driven repayment, deferment, and public service student loan forgiveness.
Another place, as mentioned earlier, is to look into student loan refinancing, it’s important to understand the refinancing process. When federal student loans are refinanced through a private lender, the borrower forfeits eligibility for federal repayment programs as well as federal protections like forbearance and deferment. (With private loan refinancing, a new private loan replaces the borrower’s existing educational debt — generally including new loan terms and rates).
Certain private lenders offer hardship programs to provide a cushion for the unexpected — like being laid off for no fault of your own. (Not all lenders offer these programs, so it’s key to read the lender’s terms and fine print).
When weighing whether to pursue student loan refinancing, some borrowers find it useful to research the rates and terms offered by lenders, including any fees or penalties.
Michael Krinke
When will student loans be forgiven?
There is no single answer to this. It depends on the type of loan you take out and your specific circumstances. The Student Loan Forgiveness page from the Department of Education has all the current details to help you understand more.
Do student loans go away after seven years?
Sorry, there is no program currently in place for that. This belief stems from the fact people see student loans disappear from their credit report after this amount of time. Seven years after the first missed payment that led to a loan either defaulting or being charged off, the main three credit bureaus (Equifax, Experian, and TransUnion) erase the default status and late payments from reports.
Are student loans forgiven after 25 years?
The answer to this is a “yes but.” Yes, you can have your student loans forgiven after 25 years, but only if you pay them under an income-driven repayment plan, and this only applies to federal loans. The U.S. government offers four income-driven repayment plans.
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Major news outlets reported in late May that the president plans on forgiving $10,000 of federal student loans for each person who makes less than $150,000 (or $125,000) annually. He’s expected to make an announcement this summer, no later than when the Cares Act payment freeze is scheduled to end (August 31).
But if you are thinking of refinancing, it may not pay to wait for an official word. After all, interest rates are on the rise from their historic lows. Instead, you could refinance all but $10,000 (or whatever amount you think will be forgiven) and lock in today’s low rate.
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This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
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