For the millions of Americans with student debt who have been waiting to hear how the Biden administration would act — if at all — on student loan forgiveness, the last few months have felt like years.
President Joe Biden has now finally made his decision, announcing on Wednesday that he’ll cancel $10,000 per borrower. Biden will also cancel up to $20,000 for recipients of Pell Grants.
The relief will be limited to Americans earning under $125,000 per year, or $250,000 for married couples or heads of households. The relief is also capped at the amount of a borrower’s outstanding eligible debt, per the Education Department.
Around 9 million borrowers could have their balances entirely cleared by Biden’s plan, according to higher education expert Mark Kantrowitz.
If we zoom out, the last few months are just a blip on what has been a more-than-decadelong push to get education debt canceled.
This is how we got here.
Occupy Wall Street demands ‘justice’ for borrowers
In September 2011, the Occupy Wall Street movement began. The protest against income inequality, the wealthy and their financial institutions, led by activists “representing 99 percent of Americans,” soon led to the Occupy Student Debt Campaign, which directed its ire at the country’s skyrocketing tuition costs and debt-fueled higher education system.
“Given its younger demographic, for many of the movement’s participants and supporters, the burden of student loan repayment was probably their most direct financial experience with the political economy they so vehemently opposed,” said Barmak Nassirian, vice president for higher education policy at Veterans Education Success, an advocacy group.
When student debt surpassed $1 trillion in April 2012, the Debt Collective, a union for debtors, called for the abolition of all student debt, in addition to the implementation of free college.
“Having people be able to access education on terms that don’t require that they mortgage their futures is good for all of us,” said Astra Taylor, co-founder of the Debt Collective, a union for debtors and a participant in the Occupy movement.
At the time of the movement, the federal government had already implemented forgiveness opportunities for specific groups, including 2007’s Public Service Loan Forgiveness. That program allows those who worked for the government and certain nonprofits to get their debt cleared after a decade of qualifying payments.
But the protests marked the first big push for broader relief.
‘Predatory for-profit colleges’ spur forgiveness calls
A U.S. Department of Education investigation into the schools found that the company falsified its public job placement rates and misrepresented information to prospective and enrolled students.
Calls to abolish all student debt resurfaced amid a myriad of legal challenges representing victims of predatory for-profit colleges, Taylor said. Debt Collective’s campaign to cancel Corinthian students’ debt garnered endorsements from attorneys general while also catching the attention and support of Sen. Elizabeth Warren, D-Mass., and 2016 Democratic presidential candidate Hillary Clinton.
All Corinthian student debt was eventually canceled in June.
“We would not be talking about student debt cancellation if it wasn’t for students from predatory for-profit colleges getting organized,” Taylor said. “We worked really hard to make clear that this isn’t just about a few bad apples. We made this about the Department of Education and the entire way we were financing education in this country.”
Nassirian at Veterans Education Success agreed that the problems in the higher education system, namely price escalation and diminishing quality, span way beyond the for-profit sector.
At around half of U.S. colleges, the majority of students go on to earn no more than high school graduates do, according to an analysis by center-left think tank Third Way that measured earning outcomes six years after college enrollment.
Even after a decade, a majority of students at nearly one-third of schools did not reach this benchmark.
“Packaging people with debt that schools knew or should have known would be unrepayable began to look predatory, regardless of where the loans were made,” Nassirian said.
Repayment troubles for federal student loan borrowers, unsurprisingly, are common. Only about half of borrowers were in repayment in 2019, according to an estimate from Kantrowitz. A quarter — or more than 10 million people — were in delinquency or default, and the rest had applied for temporary relief for struggling borrowers, including deferments or forbearances.
These grim figures led to comparisons to the 2008 mortgage crisis.
Presidential debates put forgiveness ‘at the center’
In the lead-up to the 2020 presidential election, Democratic candidates began for the first time proposing various plans that called for the broad abolition of student debt.
Warren’s plan called for the U.S. Secretary of Education to immediately cancel up to $50,000 of debt for 95% of all borrowers, in addition to reining in the for-profit college industry.
“Our country’s experiment with debt-financed education went terribly wrong: Instead of getting ahead, millions of student loan borrowers are barely treading water,” Warren said that month.
Sen. Bernie Sanders, I-Vt., wanted to make two- and four-year public colleges tuition- and debt-free, and to erase all outstanding federal student debt.
“What you have then is suddenly debt cancellation is at the center of the presidential debate, and I think that was obviously critical, because what it did was it forced Biden’s hand,” Taylor said.
Biden ultimately came out in support of forgiving up to $10,000 for most borrowers.
‘We intend to keep fighting’
Taylor called the president’s announcement on Wednesday “bittersweet.”
“On the one hand, this is a landmark victory for our movement,” she said. “This has never happened before in history and it provides further proof that debtors have power when we come together.”
At the same time, she said, limiting the cancellation to $20,000would still leave millions of borrowers with unmanageable balances.
“That’s why we intend to keep fighting until all student debt is canceled and college is free,” Taylor said.
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Investor Sarat Sethi Is Finding Buying Opportunities in Cheap Stocks That Just Reported Earnings
Corporations are in the thick of earnings season this week and, while reports are mixed, there are good opportunities in some of them for investors, according to Sarat Sethi, portfolio manager at Douglas C. Lane & Associates. Boeing and AT & T are among the big names that posted their numbers Wednesday, following Microsoft, which reported late Tuesday. Going by profit numbers alone, Boeing posted the bleakest report of the three, including a loss for the fourth quarter as labor and supply strains overshadowed an increase in jet demand. “They’ve been supply constrained for a while so I do think it’s an interesting story and the stock is getting punished a little bit, but their demand going forward for travel is getting pretty big,” Sethi said of Boeing on CNBC’s “Squawk Box” Wednesday morning. “The cheaper it gets, for us, the better we like the story.” Sethi, who doesn’t currently own Boeing, also noted the airplane builder was cash flow positive for the first time “in a long time” and he’s eager to see if it can meet its demand and push operating margins higher. Elsewhere, AT & T’s report showed an increase in subscribers, but the company forecasted annual profit below analyst expectations, according to Refinitiv. Still, the investors are looking for companies that, like AT & T, are cheap and will grow cash flow and income, Sethi said. “AT & T is a cheap stock, so is Verizon. … The market is looking to see who has the proper valuation at this point, given where we are with the discount rate,” he said. “That’s going to be really important for our earnings going forward.” “One of the things that we need to watch for now is – companies cannot grow by acquisition, the government is now allowing it,” he added. “That is really tough for companies especially [with] interest rates going up. You have to focus on your customer base, organic growth and what you have given valuation metrics people have.” Those may be better opportunities than a stock like Microsoft, which reported mixed results Tuesday after the bell. The company also said it expects could revenue growth to further slow down. Sethi didn’t say whether he’d sell his shares but that he’s “looking at it very carefully.” “There are going to be other opportunities there,” he said. “I don’t know I would own it in the size that it is in the market. I like the company, there are a lot of attributes – cashflow positive, a lot of recurring revenue. But I think you can look for other opportunities, especially if it’s a sizable position.”Read More
Tesla Reports Earnings After the Bell Wednesday
Electric vehicle maker Tesla plans to report fourth-quarter results after market close on Wednesday.
Here’s what analysts were expecting as of Wednesday morning, according to Refinitiv:
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Earnings (adjusted): $1.13 per shareRevenue: $24.16 billion
In the year-ago quarter, Tesla reported revenue of $17.72 billion and adjusted earnings of $2.52 per share.
Earlier this month, Teslavehicle delivery and production numbers for the fourth quarter of 2022 that set a new record for the company, but fell shy of the company’s goals and analysts’ expectations, despite having cut prices on its cars in December to spur customers to take deliveries before the year’s end.
Tesla reported 405,278 vehicle deliveries and production of 439,701 vehicles in the period ending December 31, 2022. Full year deliveries amounted to around 1.31 million, a record for Tesla, after the company started production at its new factories in Austin, Texas, and Brandenburg, Germany.
Last year, Musk said the factories were akin to “money-burning furnaces” in an interview with an owners’ club posted to YouTube in June.
So far in 2023, Tesla has continued to cut prices on its cars around the world, upsetting customers in the US and China who recently bought new Teslas at higher prices, and triggering an instant decline in used Tesla prices in the US as well.
Tesla solicits questions ahead of their earnings calls via a site called Say.com from both retail and institutional investors.
Among other things, investors on that site say they want to know what the recent price cuts will do to Tesla’s automotive gross margins, how much the company expects to grow sales of its cars in 2023, and when Tesla plans to start mass production and deliveries of its long-delayed, sci-fi inspired, pickup truck the Cybertruck.
Throughout the fourth quarter of 2022, shareholders also sought answers from Tesla and Elon Musk about his intentions at the automaker as the price of Tesla shares declined. Tesla’s share price has dropped more than 40% over the past six months.
Musk is currently splitting his time, attention and resources between Tesla, SpaceX, the defense contractor where he is CEO, and Twitter, the social media business he recently acquired.
The celebrity CEO sold billions of dollars worth of his Tesla holdings last year, including $3.6 billion in the fourth quarter, in part to finance the Twitter deal, which closed in late October 2022. He immediately appointed himself “Chief Twit,” and CEO there.
Since taking over Twitter, he has made sweeping changes to the business and the service, including allowing people who had been permanently suspended from the platform to come back online.
Musk’s moves at Twitter, and his political statements on the social media platform, have correlated with a sharp decline in Musk’s and Tesla’s reputation, especially among liberal- to very liberal-leaning people in the US, according to research by YouGov shared with CNBC.
This is breaking news. Please check back for updates.
Source Here: cnbc.com
Southwest CEO Maps Out a Recovery After Holiday Meltdown: ‘We Have Work to Do’
His focus now is ensuring a similar crisis never happens again. The airline has hired consulting firm Oliver Wyman to review its processes, interview staff and union members, lay out what went wrong, and how to avoid it in the future. The low-cost airline is working with General Electric
The event was jarring for many travelers used to Southwest customer service, which includes policies like free checked bags, a rarity for domestic U.S. travel. Lawmakers and Transportation Secretary Pete Buttigieg said they want to look further into the disruptions.
Less a year into the airline’s top job, in the aftermath of travel chaos he hadn’t seen in his more than three decades at Southwest, Jordan is now tasked with making things right with passengers and employees.
“We took good will out of the bank. We know that,” Jordan said in an interview earlier this month. “We have work to do to repair trust, but our customers are very loyal and we’re seeing that loyalty.”
Southwest said it offered premium pay to flight attendants and $45 million in “gratitude pay” to pilots because of the meltdown. Both groups have warned about inadequate technology and scheduling for years.
The carrier has also handed out 25,000 Rapid Rewards points each, which the company estimates at a roughly $300 value, to about 2 million people who had flights booked over the chaotic holiday period, Jordan said.
He said that a recent fare sale was successful and that many customers are redeeming the frequently flyer points for Southwest flights.
Southwest said the chaos will likely mean a hit of between $725 million and $825 million to its pretax results and a rare quarterly loss. Executives will face questions from analysts and reporters when the carrier reports results, scheduled for Thursday morning.
Southwest said it canceled about 16,700 flights between Dec. 21 through Dec. 31, a tally that swelled after it failed to recover from severe winter weather that crippled travel across the country, stabilizing days later. Airline executives had expected it to be the busiest travel period since the Covid-19 pandemic began.
Hydraulic fluid turned so thick in the brutal cold that jet bridges couldn’t move. Snow and high winds suspended operations at airports across the country. Airplane engines iced over.
Most airlines had largely recovered from the bad weather by Christmas Day, but Southwest’s problems worsened when crews had to call in to get new assignments or hotel rooms, causing a backup.
The carrier’s aircraft and crews were left out of place and at the mercy of crew scheduling systems that were designed to handle current or future flight disruptions, not a pileup of flight changes in the past.
“We needed a larger answer to reset the network,” Jordan said. “That was basically pulling the schedule down.”
Southwest flew around just a third of its planned schedule for several days after Christmas to get crews and planes where they needed to go.
“The GE Digital tool that is integrated into Southwest’s systems performed as designed throughout the event, and we are working with them to define new functionality as they improve their crew rescheduling capability,” a GE spokesman said Tuesday.
“Every airline has its fall, and from that they rise with new perspectives,” said Samuel Engel, a senior vice president at consulting firm ICF. “The airline reaches a certain point of complexity and has a disruption event of such scale that it causes them to look deep inside.”
Both Spirit and Southwest operate so-called point-to-point networks that don’t rely on hubs, like larger airlines, and instead have planes hopscotching around the country. The model generally works and helps keep costs down, but it can compound disruptions during extreme events.
Jordan defended the model and said the network is usually easier to recover because travelers don’t have to rely on connections to get to their destinations.
“The issue here wasn’t the network, the issue was how many places got hit with weather and how many cancellations that drove, basically continuously,” he said.
Even those travelers burned by an airline in an event like this one face few alternatives when booking airline tickets and are often focused on price and schedule, ICF’s Engel said.
“Customers just consistently choose their flights based on fare and schedule,” he said. “As they’re going through a disrupted trip they’ll say ‘never again’ — and then they do.”
Mark Ahasic, an aviation consultant who worked with JetBlue during the 2007 meltdown, said the airline’s reputation “took a hit, but it didn’t destroy the brand.”
Southwest has to solve the issues that caused the holiday trouble and make amends with customers, but many travelers — particularly those at airports where Southwest has a strong foothold — typically have few airline choices, Ahasic said.
Southwest has nearly finished processing customer refunds and is working through the more complex task of reimbursements, which Jordan said includes everything from meals to dog-sitting fees. Some travelers who were left to pay high fares for scarce seats on other airlines are still waiting for their money back.
Codi Smith, a 28-year-old artist who lives in Los Angeles, paid $578.60 for a Delta flight back to LA from his mother’s house in St. Louis after Southwest canceled part of his return trip after Christmas. Southwest offered Smith an alternative flight on New Year’s Eve, but Smith said he has multiple sclerosis and needed to get back to Los Angeles sooner to get his medication.
“I just didn’t know what could happen,” Smith said.
Southwest refunded Smith for the portion of his trip on its airline, but as of last week hadn’t refunded him what he spent on the Delta flight. He said Southwest sent him four inflight drink coupons.
“Why would I use drink tickets when you owe me $600?” he said. “I really just want this money back.”
Cameron Brainard, a voiceover artist and country music radio host, said he paid more than $1,000 to get back to New York from Nashville, Tennessee, including a rental car from Louisville, Kentucky. Southwest offered him $540.02, noting in a Jan. 19 email, which Brainard shared with CNBC, that he hasn’t claimed the reimbursement yet.
“Make sure to claim this payment before it expires” in July, the email reads. “This payment constitutes full and final settlement of your claim with Southwest Airlines.”
Brainard said he flies Southwest frequently and isn’t planning to quit the airline after his cancellation, though he would “second guess it” depending on how his reimbursement pans out.
“I hope it makes them a better airline,” he said.
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