The big news this week was that President Biden took action to forgive $10,000 of student loan debt. This is important news as millions of borrowers continue to pay their loans long after graduation. Since the pandemic under Trump, the administration has installed multiple repayments pauses to provide some breathing room for families as the country transitions through COVID and a weakening economy. To qualify for the forgiveness, you must make less than $125,000 annually, which the White House says will benefit a large population. Additionally, Biden authorized a final payment freeze on federal student loans through the end of 2022.
According to Freddie Mac, we saw another hike in mortgage rates compared to last week, with the rate jumping to 5.55% for a 30-year from 5.13% last week. The past few weeks have illustrated an unstable economy, with many people unsure where things stand. Inflation continues to be high, and most people are still experiencing increased prices for everyday expenses. The inconsistent markets and overall economy leave families hesitant to make big purchases such as a home or vehicle. The cost to borrow money has gradually increased with rate hikes, leaving many people rethinking potential purchases. Additionally, while gas prices are down from earlier this year, we’re still paying significantly higher than just a year ago.
On Friday, the Federal Reserve conducted its annual meeting at Jackson Hole, Wyoming. This was an important meeting as the country has been faced with 40-year high inflation and a weakening economy. Fed Chairman’s briefing was less than optimistic and said families could expect “some pain.” As we’ve heard, there’s a significant challenge with slowing the economy to curb inflation while not pushing us into a recession. On Friday, Charmain Jerome Powell made it clear that the Federal Reserve plans to aggressively tackle inflation and set conditions for a more stable economy. This likely means another interest rate hike next month, which will raise the cost of borrowing money again. Additionally, as the Fed acts, we can expect some potential adverse effects on the economy, such as higher unemployment, as many of the actions by the Fed will take significant time to be effective.
Lastly, following the Fed’s briefing on Friday, investors showed significant concerns as the market tumbled down over 1,000 points on the state of the economy. While market swings can be based on emotions, it remains clear that inflation will not go away immediately, and we can expect side effects from the continuing action by the Fed as they attempt to provide long-term stability. Be sure to keep your budgets up to date and stick to them. Now is not the time to have excess spending, and you’ll want to ensure you can cover rising expenses.