The Biden Administration Overhauls the Student Loan Forgiveness Program

Public Sector Workers Get Relief

The Biden administration is stepping up efforts to relieve certain borrowers of their student loan debt, announcing an overhaul of the government’s student loan forgiveness program. The changes to the Public Service Loan Forgiveness (PSLF) program will make it easier for public sector employees to receive student loan forgiveness. The changes have the potential to help about 550,000 of the 1.3 million student debt holders who are enrolled in the program.

Borrowers hoping to take advantage of PSLF must work for a qualified government organization (municipal, state, or federal organizations count) or a qualified 501(c)(3) organization, and they must make 120 on-time loan payments to be eligible for loan forgiveness. Prior to the changes, the program was only available to borrowers who had Direct Loans from the government. And while borrowers were able to consolidate their debt into a Direct Loan, previous payments made on the pre-consolidation debt were not counted toward the PSLF program.

Now, all previous loan payments will be counted retroactively toward the program if borrowers consolidate their debt into a Direct Loan by the end of October 2022.

Education Department Discharging Debt

To ensure public sector workers take advantage of changes to PSLF, the Department of Education plans to contact debt holders directly to urge them to consolidate into a Direct Loan and apply for forgiveness. The Education Department already said it will discharge over $5.8 billion in loans for 323,000 disabled debt holders. The government agency has also forgiven loans for former students of ITT Technical Institute, the defunct for-profit school. The Department of Education also plans to forgive some student loans of other people who were students at for-profit schools.

Separately, Wednesday the FTC announced it is sending warnings to 70 of the country’s biggest for-profit colleges saying that they will face sanctions if they use deceptive practices to recruit students.

Challenges with the PSLF Program

Because the program was created in 2007, the first people to qualify to have their loans forgiven applied for forgiveness in September 2017. But while the Congressional Budget Office estimates that the program could cost just under $24 billion in the next 10 years, and the US Government Accountability Office believes that more than four million student loan borrowers qualify for the program, some aren’t aware that it exists. And even more graduates have gotten bad information from loan servicers that rendered them ineligible.

In 2018, just 1% of applicants were approved for loan forgiveness through PSLF. In November 2020, the US Department of Education released updated information indicating that only 2.4% of applicants have been approved for PSLF.

Choosing the Right Credit Card For You

Choosing the most rewarding and suitable new credit card can become a research project. It’s best to think about your spending habits, needs, credit history, APR, any annual fee, and perks.

In this video, SoFi Financial Planner Brian Walsh breaks down several key factors in evaluating credit cards so that you can be sure you’re selecting the right one for you.

Market Technicals

A Weekly Column with Liz Young

Every week, SoFi’s Head of Investment Strategy shares her economic and market insights in order to help empower readers to take a more active role in their financial futures. This week, see what Liz has to say about market technicals.

Technicals Are Trending

Talk about increasing volatility isn’t the only thing on the rise. Technical market indicators have been thrown into casual conversation at a higher frequency, too, and they’re likely to remain hot topics as we watch markets whipsaw.

This week’s column seems, then, like a good time to demystify and define what a few of these terms mean, and lay out why traders and investors look to them as signals. The overarching theme of these indicators is, “don’t fight the trend,” which seems simple enough. The challenge, of course, is knowing how to identify the trend and when it might shift.

Moving Averages

One of the most commonly mentioned indicators is the moving average of a security’s price level over a specified period such as 50 days, 100 days, or 200 days. The purpose of moving averages is to show the path (or trend) of prices by dampening the day-to-day oscillations that occur. In other words, a smoothed trend line of which direction the price is moving.

The noteworthy signals are:

•   Where a security (or index) currently sits in relation to its moving averages

•   When a security’s current price crosses over one of these lines, either above or below

•   When one of these moving averages (usually the 50-day) crosses over another one (the 100-day or 200-day)

Those crossover points are the times when traders try to determine if they’re indicating a reversal in a trend. To illustrate, let’s look at the Nasdaq Index.

As of market close on Oct. 6, the Nasdaq’s 50-day moving average sits above its 100-day, which in turn sits above its 200-day. So the shorter-term average is higher than the longer-term averages, indicating a recent upward trend.

However, on Sept. 27, the daily price of the index fell below its 50-day moving average, and on Oct. 1, it fell below its 100-day moving average. Two notable crossover points, they caught the attention of traders and investors because they could have indicated a reversal and, in this instance, possibly signalled a coming downtrend.

Support and Resistance

The next place we might look to for signals is support or resistance levels to determine if a security’s price will stay in a range. The resistance level is the higher point and a representation of recent peaks in price. The support level is the lower point and a representation of recent troughs in price.

The concept behind support and resistance is that they represent psychological thresholds of price movement. The presumption is that future prices will stop at these “barriers” and remain in a range between them.

But nothing is forever. So the real signal occurs when a security’s current price rises above the resistance level or falls below the support level and could serve as one method of confirming a trend.

Just as these levels are psychological, breaking through them has psychological effects and tends to accelerate the trend that is taking shape. (There are exceptions when this hasn’t been the case, but for instructive purposes I’m painting with a broad brush here…. Please take heed of all the disclosures.)

Volume

The last big indicator I’ll cover is volume. Meaning, the volume of trading on a security that represents how active buyers and sellers are at a given point in time. Volume is more of a secondary indicator rather than primary, but can be an important way to confirm a trend or to identify overbought or oversold conditions.

For example, extremely high prices paired with low volume on further rallies (fewer buyers) and high volume on intermittent declines (more sellers) could indicate overbought conditions. In other words, when prices have moved up considerably, volume can help determine if the buyers are getting tired (i.e., overbought). Conversely, extremely low prices paired with low volume on further declines (fewer sellers) and high volume on intermittent rallies (more buyers) could indicate sellers are getting tired (i.e., oversold).

Don’t Scratch Your Trigger Finger

The thing about technicals is that they can give us itchy trigger fingers. The other thing about technicals is that for the vast majority of investors, they should be viewed as inputs, not major decision factors. But understanding the terms and knowing what to look for on charts can be an interesting way to learn about market movements. We are all forever students.

Coal Prices Soar Amid Inventory Shortages

Coal Supply Shortages Drive Prices to Record Highs

Fuel prices are soaring to record highs amid coal supply shortages which are expected to last through the winter at the very least. These trends are prompting concerns that countries across the globe could face fuel shortages in the coming months. This is already happening in China, where declining supplies of fuel and skyrocketing prices have led to energy shortfalls. The shortages are so severe that some industries are idling production and some cities are shutting off traffic lights.

As it stands, Australia’s Newcastle thermal coal, which is a global benchmark, is trading around $202 per metric ton. That is three times more than its price at the end of 2019. At the same time, global production of coal is down 5% from pre-COVID-19 levels.

Demand Outstripping Supply

The supply of coal has not kept up with demand across the globe this year. In 2020, a pandemic slump drove coal production down 5%. Now, producers are having trouble increasing supply as quickly as demand is increasing. Increasing coal production can take as long as nine months. Semirara Mining & Power, the Philippines’ largest coal producer, is operating at maximum capacity. That is particularly problematic for China, since most of Semirara Mining’s exports go to Beijing.

China, the world’s largest coal consumer, is at the center of the current coal shortages. As China moved to meet its emissions targets, coal inventories fell. At the same time, China stopped imports of coal from Australia due to diplomatic tensions. Now, Australia is courting new buyers and China is searching for coal in Africa, Europe, and Latin America.

The World Still Needs Coal

Despite the world’s commitment to move away from coal because of its impact on the environment, rising coal prices and supply shortages are underscoring the world’s reliance on coal. Prices of coal tend to depend more on economic growth than on government initiatives to curb emissions. During the pandemic, demand for coal fell across the world. This year, demand for coal is on track to meet or beat pre-pandemic levels.

Companies across the globe may be pouring billions of dollars into slashing their carbon footprint, but the world is still very reliant on coal. With the supply/demand imbalance likely to remain throughout the winter, it will be interesting to see how countries around the world respond.