By the numbers: 10.5 million fewer people were in families having problems paying medical bills in 2021 than in 2019 – a 3.2 percentage point decline, according to National Health Interview Surveys.

Women were likelier to have problems paying medical bills, and the percentage of people in families struggling with bills was higher among those with children aged 0–17 years (11.5%) and adults aged 18–64 (11.3%) than in adults 65 and over (7.7%).

The uninsured were more likely than those with Medicaid or private coverage to be in families that had problems in the previous 12 months.

The percentage of people in families having problems paying bills was higher among non-Hispanic Black people (15.8%) compared with Hispanic (12.8%), non-Hispanic White (9.4%), and non-Hispanic Asian (6.1%) people.

The CARES Act, American Rescue Plan Act, and other pandemic relief legislation may have indirectly softened the blow of medical debt by providing direct monetary payments, increasing the percentage of people covered by insurance using COBRA premium subsidies and expanding eligibility for subsidies in Affordable Care Act markets, among other things. Elective procedures and outpatient care early in the pandemic also may have reduced the odds of incurring debt through fewer copays, deductibles, and coinsurance, the researchers said.

Medical debt still is a major factor in overall debt in the U.S., and can increase the risk for eviction, food insecurity and bad health outcomes.

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Rather than creating an entirely new repayment plan, the administration intends to revise an existing IDR plan, known as REPAYE, to make it more generous. The following are the most significant changes:

The amount of income exempt from student loan payments will rise from 150% of the federal poverty line to 225%. For a single borrower in 2023, this threshold is $30,578.

For undergraduate student loans, payments are set at 5% of income above the threshold, down from 10%. Payments on graduate loans will remain at 10% of income above the threshold.

If a borrower’s monthly payment does not fully cover accrued interest on her loans, any remaining interest will be forgiven.

Those who borrowed $12,000 or less will see their outstanding balances cancelled after they make 10 years’ worth of payments. Time to cancellation will increase by one year for every $1,000 borrowed.

Undergraduate-only borrowers could also enjoy full loan cancellation after 20 years’ worth of payments; borrowers with graduate loans will receive cancellation after 25 years. These are unchanged from the current version of REPAYE.

The proposal also makes several changes to the broader infrastructure around IDR, including:

ED will allow borrowers to count time spent in deferment or forbearance toward loan cancellation. Depending on the type of deferment or forbearance, borrowers may need to make catch-up payments to claim this benefit.

Borrowers more than 75 days delinquent on their loans will be automatically enrolled in an IDR plan, provided ED can access their income information from the IRS.

In order to streamline the confusing array of repayment options, ED will phase out new enrollments in most IDR plans other than the revised REPAYE plan.

ED will publish a list of programs that yield “low financial value” in order to dissuade students from enrolling.

The above proposal will still be required to go through a public comment period and could be subject to change. In a best-case scenario, parts of the proposal could become effective this summer.

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The financial squeeze that started about six months ago for non-bank companies that lend to ordinary Americans is getting worse, contrasting sharply with recent rallies in stocks and corporate bonds. The main reason: These finance companies have lost access to easy money.

Widespread economic uncertainty has made debt investors less willing to buy the bonds these nontraditional lenders issue. Higher interest rates, courtesy of the Federal Reserve, have given investors other attractive options.

Now, these finance companies are paying as much as four times what they paid in January to borrow in bond markets the cash they lend to customers. Plenty of them are struggling to make that math work. Once-highflying consumer-finance companies such as Pagaya Technologies have flipped from profit to loss. Some smaller firms are shutting down altogether.

Many of the nontraditional lenders launched within the past decade, which means they have never weathered a sustained period of high interest rates.

Pagaya and other startups such as Affirm Holdings Inc. and Carvana Co. aren’t banks, which means they can’t take deposits for funding. For borrowers with imperfect credit, these alternative lenders are sometimes the only way to get an auto loan, mortgage or buy-now-pay-later offer.

Bottom line – tread carefully. The companies whose spreads are being squeezed are now lending less and/or charging more for loans they do make, adding to concerns already swirling about the health of the economy.

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Some 250,000 people who took out a mortgage this year to buy a home are now underwater, meaning they owe more on their loan than the home is worth, Black Knight, a mortgage software provider, found. Another million have less than 10% equity.

Those unlucky home buyers got caught in the crunch between historically high housing prices and rapidly rising mortgage rates, which in recent months have caused real estate values to slide.

All told, 8% of mortgages taken out this year are underwater — about one in 12 homes purchased in 2022.

The jump in mortgage rates this year has played a part. Rates have more than doubled this year, rising to an average of 6.3% — a multi-decade high — weighing on home sales and prices.

Although it’s not unusual for new homeowners to be underwater for a brief period, especially if they buy during the summer when prices are elevated, “It is much more pronounced this year than it normally is because prices are starting to cool,” said Andy Walden, Black Knight’s president of enterprise research. The portion of underwater borrowers tripled in October, he noted.

The situation is much worse for home buyers who purchased with government-backed mortgages, with 25% of those buyers this year now underwater, according to the report.

In Colorado Springs and Honolulu, more than 30% of mortgaged homes bought this year are underwater. In Virginia Beach, about 22% are worth less than what is owed. The figure is 20% in the California cities of Bakersfield, Riverside, San Diego and Stockton — cities with a large military presence where many people buy homes with government-backed mortgages.

FHA mortgages, as well as mortgages backed by the Veterans Administration, allow home buyers to buy property with small down payments — as low as 3% for an FHA loan or none for a VA loan. That helps lower-income purchasers who typically don’t have much money saved for a down payment, but it becomes a liability when home prices fall rapidly, keeping people stuck in their homes.

While this trend is clearly not as dramatic as 2008, it is something that should be monitored over the next 12-18 months.

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In late November, approximately 9 million borrowers received an email from President Joe Biden’s Education Department with a subject line that stated: “Your Student Loan Debt Relief Application Has Been Approved.” However, that subject line was incorrect, Insider has learned — it was simply supposed to inform borrowers that their applications had been received with the subject line: “Update on Student Loan Debt Relief.”

This error was made by Accenture Federal Services, a contractor of the Department of Education, While the content of the email was accurate and provided borrowers an update that debt relief is currently held up in court and loans cannot be discharged at this time, Accenture has acknowledged that the header was caused by human error and shall be sending new emails with a corrected subject line to those impacted borrowers in the coming days.

The Department of Education has previously indicated that 26 million student-loan borrowers had already submitted applications for debt relief. However, since October, the option to submit an application has been closed due to two legal decisions so far that have blocked the implementation of the relief. The first ruling came from a Texas judge last month who said Biden’s plan to cancel student debt is illegal, and just days later, the 8th Circuit Court of Appeals decided the temporary pause it had placed on the relief in October will remain in place. The Biden administration has now moved to have the Supreme Court review the issues raised by the 8th Circuit.

In addition, in light of the lawsuits, President Biden recently extended the pause on student-loan payments through June 30, or whenever the lawsuits are resolved — whichever comes first. The administration also continues to express confidence that it will prevail in court and stands behind the authority it used under the HEROES Act of 2003 to enact one-time debt relief for millions of borrowers.

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Companies such as Alphabet Inc.’s Google, Delta Air Lines Inc. and International Business Machines Corp. have reduced educational requirements for certain positions and shifted hiring to focus more on skills and experience. Maryland this year cut college-degree requirements for many state jobs—leading to a surge in hiring—and incoming Pennsylvania Gov. Josh Shapiro campaigned on a similar initiative.

U.S. job postings requiring at least a bachelor’s degree were 41% in November, down from 46% at the start of 2019 ahead of the Covid-19 pandemic, according to an analysis by the Burning Glass Institute, a think tank that studies the future of work. Degree requirements dropped even more early in the pandemic. They have grown since then but remain below pre-pandemic levels.

The shift comes as demand for workers remains high and unemployment is low. Job postings far outpace the number of unemployed people looking for work—10.7 million openings in September compared with 5.8 million unemployed—creating unusually stiff competition for workers.

The persistently tight labor market has accelerated the trend that builds on a debate about the benefits and drawbacks of encouraging more people to attend four-year colleges and as organizations try to address racial disparities in the workplace.

Some occupations have universal degree requirements, such as doctors and engineers, while others typically have no higher education requirements, such as retail workers. There is a middle ground, such as tech positions, that have varying degree requirements depending on the industry, company and strength of the labor market and economy.

Traditionally, a four-year college degree holder can lead to greater lifetime earnings than one without. The lifetime earnings of a worker with a high-school diploma is $1.6 million while that of a bachelor’s degree holder is $2.8 million, according to a 2021 report by the Center on Education and the Workforce at Georgetown University. Google has become a leader in evening out this disparity.

Since its inception, more than 100,000 people in the U.S. have completed Google’s online college-alternative program that offers training in fast-growing fields such as digital marketing and project management, the company said. It and 150 other companies are now using the program to hire entry-level workers.

Bottom line – Don’t be afraid to try – at the end of the day, it’s your skill level and desire to learn that can drive you, not necessarily a two- or four-year degree with student loan debt tied to it.

The post You Can Achieve High Earnings in This Market Without a Traditional College Degree appeared first on Feinsilver Law.

Soaring interest rates could mean you’ll ultimately pay more than you save from any perks a store brand offers. The average retail credit card charges a 26.72% annual percentage rate, with a high of 30.74% which measures how much it will cost per year if you carry a balance, according to a recent analysis by CreditCards.com.

Also, variable credit card interest rates have recently climbed to 19.14%, according to Bankrate.com. The higher rates come as all kinds of borrowing has become more expensive as the Federal Reserve works to combat record high inflation.

The CreditCards.com survey also reported that store-only credit cards are now charging an average of 28.22%, while retail co-branded cards are charging an average of 25.01%,

Those that may charge maximum APRs of 30.74% include the Speedy Rewards Mastercard, Kroger Rewards World Elite Mastercard and nine brands associated with Kroger, Other store-only cards may charge 29.99%, including Big Lots, Discount Tire, Jared, Kay Jewelers, Piercing Pagoda, Sterling Family of Jewelers and Zales, CreditCards.com reports.

Bottom line – think twice – what is usually too good to be true usually is.

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The NY Federal Reserve has reported that the application rate for credit cards increased to 27.1% in October 2022, up from 26.5% last year and above its pre-pandemic reading of 26.3% in February 2020. But application rates for mortgages, refinances, and auto loans fell during the same period.

The rise in credit card demand mirrors the growth in credit card balances over the past year, the New York Fed reported, and is expected to continue into 2023 even though credit card rates are likely to increase as the Federal Reserve hikes short-term interest rates.

“Looking ahead over the next 12 months, households anticipate they will be less likely to apply for an auto loan, mortgage, or mortgage refinance loan, but report a higher average likelihood of applying for a credit card or credit card limit increase,” New York Fed researchers said in a news statement.

Mortgage loan applications declined 6.7% in October 2022 from 8.5% last year, according to the report. In addition, mortgage refinance rates experienced the sharpest downturn, plunging from 21.4% in October 2021 to 8.9% in October 2022. These declines in mortgage activity is not a surprise.

Mortgage rates have more than doubled since the start of the year, with the average 30-year fixed-rate mortgage currently sitting at 6.61%, down from its recent peak this year of 7.08% earlier this month. A year ago, the rate on the 30-year loan averaged 3.10%.

The sharp increase in rates in tandem with elevated home prices have hurt homebuyer demand in recent months, according to the Mortgage Bankers Association’s latest survey, with purchase activity down 46% from a year ago. Sales of previously owned homes have now fallen for nine consecutive months in October, down 28.4% year over year.

Higher mortgage rates have also discouraged homeowners from refinancing, according to the MBA, as refi activity nosedived 88% year over year.

The application rate for auto loans remained at 12.9% this year, equal to the rate in October 2021. But the average application rate for the year overall still declined from 14.6% in 2021 to 13.0% in 2022.

Part of the issue may be a reluctance by banks to originate new auto loans. Many banks are experiencing higher charge-offs on existing loans as car prices fall. Prices for used vehicles are currently down 13.7% in November 2022, versus a year ago.

Overall, some of the largest U.S. banks have recently announced plans to tighten lending standards as concerns of a recession continue to brew Banks had reported they were also less likely to approve credit card and auto loan applications for borrowers with FICO scores of 620 and 680 versus the beginning of the year, the New York Fed found in a separate report.

The tightening of credit should increase further as the economy slows down in months ahead – stay tuned.

The post Credit Card Applications Rise Despite Decreases in Other Forms of Credit appeared first on Feinsilver Law.

The move, announced November 17, 2022, comes as President Biden’s broader plan for mass student-debt cancellation has been placed in limbo after being blocked by two separate Federal Courts. The proposed plan calls for canceling up to $20,000 in debt for borrowers under certain income thresholds. It would render up to 20 million people free of debt, around half of all student-loan borrowers, if Courts allow it to go forward.

At this point, there is no statutory change, only guidance from the White House to the DOJ and DOE. The guidance sets specific requirements for borrowers to prove that they are experiencing economic distress. Government lawyers will now assess a borrower’s ability to repay their loans based on a set formula — whether expenses equal or exceed a debtor’s income — and other considerations, such as retirement age, disability, educational attainment and job history.

The scope of its impact will depend on how the new rules are applied by Bankruptcy Judges, lawyers and student-loan borrowers across the country in individual bankruptcy cases.

Bottom line, In re Brunner is still the law. One can only hope that more cases go to mediation and end up in case by case settlements with the DOJ, DOE and servicers.

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The FHFA approved FICO 10 T and Vantage Score 4.0 as the new credit scoring models for conventional mortgages, or loans backed by Fannie Mae and Freddie Mac. The switch is expected to be a multi-year effort as the FHFA works with industry stakeholders to shift to the new credit score models, the agency said.

This is the first major update in 20 years. For the last 20 years, mortgage lenders have been required to use the Classic FICO model. This has persisted despite the creation of many newer credit models that other types of lenders have begun using.

Now, the newly announced models will improve accuracy by capturing new payment histories for borrowers when available, including rent, utilities and telecom payments, according to the FHFA. FICO’s new model even taps into trended data, which offers a historical view such as account balances for the previous 24 months, giving lenders more insight into how individuals are managing their credit. And because more data is available, more homebuyers can potentially qualify for a mortgage.

Previously, FICO’s credit score had been the only one accepted by Fannie Mae and Freddie Mac. But now, another credit score model will also be accepted: Vantage Score.

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