The U.S. Department of Education in Washington, D.C.
Caroline Brehman | CQ-Roll Call, Inc. | Getty Images
The Biden administration announced on Wednesday that it was moving to make sweeping changes to the federal student loan system, including making it easier for public servants to get debt forgiveness and setting new limits on the accrual of interest.
“We are committed to fixing a broken system,” U.S. Secretary of Education Miguel Cardona said, in a statement.
Key elements of the proposal include:
- Protections for defrauded borrowers: Under the proposed regulations, students who attended for-profit schools that lied or took advantage of them could be considered for debt cancellation as a group, meaning individuals wouldn’t be burdened to make their case alone. Defrauded borrowers would also be given more leeway around when they could file a claim for loan cancellation, and the definition of misconduct by schools would be expanded to include aggressive and deceptive recruitment practices. Many colleges could also be prohibited from requiring borrowers to sign mandatory pre-dispute arbitration agreements or class action waivers.
- An overhaul of the public service loan forgiveness program: The program allows for debt cancellation after 10 years for those who work for the government or specific non-profits. Borrowers who were in certain types of forbearances or deferments could get those months counted toward their timeline to relief. Currently, these periods don’t qualify. Late payments would also no longer be excluded from a borrowers’ total qualifying payments.
- Changes to how interest accrues: The practice of interest capitalization on federal student loans, in which accrued interest is added to the principal balance, would also be eliminated in cases when a borrow exits a forbearance or defaults on their loan.
The public has 30 days to comment on the Education Department’s proposed regulations, and the final rules will go into effect no later than July 1, 2023.
Although these changes have long been called for by advocates, the Biden administration has been under increasing pressure to respond in a deeper way to the student loan crisis by forgiving a large amount or all of the debt.
The country’s $1.7 trillion outstanding student loan balance outpaces credit card or auto debt, more than 10 million borrowers were behind on their payments prior to the pandemic public.
On the campaign trail, Biden said he was in support of clearing $10,000 from borrowers’ accounts. Doing so would cost around $321 billion and completely forgive the loans for around a third of student loan borrowers.
As the White House deliberates on how to move forward with loan forgiveness, if at all, the amount it should cancel remains one of the biggest sticking points.
The NAACP has been vocal about how $10,000 wouldn’t go nearly far enough for Black student loan borrowers. Wisdom Cole, national director of the association’s youth and college division, recently said on Twitter that nixing just $10,000 would be “a slap in the face.”
The Senate’s top Democrat, Chuck Schumer of New York — along with Sen. Elizabeth Warren, D-Mass., and other Democrats — is pushing the president to cancel at least $50,000 for all.
Still, no amount of forgiveness would leave all borrowers happy. More than 3 million student loan borrowers owe over $100,000.
At the same time, many Americans are infuriated by the the idea of any student debt forgiveness, including those who never borrowed for their education or went to college. Some Republicans have said they would try to block an effort by the president to cancel the debt.
With the November midterms looming, these are all key considerations for Biden.
Ford CEO says 65% of U.S. dealers agree to sell EVs
Ford F-150 Lightning trucks manufactured at the Rouge Electric Vehicle Center in Dearborn Michigan.
Courtesy: Ford Motor Co.
DETROIT – About 65% of Ford Motor’s dealers have agreed to sell electric vehicles as the company invests billions to expand production and sales of the battery-powered cars and trucks, CEO Jim Farley said Monday.
About 1,920 of Ford’s nearly 3,000 dealers in the U.S. agreed to sell EVs, according to Farley. He said roughly 80% of those dealers opted for the higher level of investment for EVs.
Ford offered its dealers the option to become “EV-certified” under one of two programs — with expected investments of $500,000 or $1.2 million. Dealers in the higher tier, which carries upfront costs of $900,000, receive “elite” certification and be allocated more EVs.
Ford, unlike crosstown rival General Motors, is allowing dealers to opt out of selling EVs and continue to sell the company’s cars. GM has offered buyouts to Buick and Cadillac dealers that don’t want to invest to sell EVs.
Dealers who decided not to invest in EVs may do so when Ford reopens the certification process in 2027.
“We think that the EV adoption in the U.S. will take time, so we wanted to give dealers a chance to come back,” Farley said during an Automotive News conference.
Ford’s plans to sell EVs have been a point of contention since the company split off its all-electric vehicle business earlier this year into a separate division known as Model e. Farley said the automaker and its dealers needed to lower costs, increase profits and deliver better, more consistent customer sales experiences.
Farley on Monday also reiterated that a direct-sales model is estimated to be thousands of dollars cheaper for the automaker than the auto industry’s traditional franchised system.
Wall Street analysts have largely viewed direct-to-consumer sales as a benefit to optimize profit. However, there have been growing pains for Tesla, which uses the sales model, when it comes to servicing its vehicles.
Ford’s current lineup of all-electric vehicles includes the Ford F-150 Lightning pickup, Mustang Mach-E crossover and e-Transit van. The automaker is expected to release a litany of other EVs globally under a plan to invest tens of billion of dollars in the technologies by 2026.
Tim Draper predicts bitcoin will reach $250,000 despite FTX collapse
Tim Draper, founder of Draper Associates, onstage at the Web Summit 2022 tech conference.
Ben McShane | Sportsfile via Getty Images
Venture capitalist Tim Draper thinks bitcoin will hit $250,000 a coin by the middle of 2023, even after a bruising year for the cryptocurrency marked by industry failures and sinking prices.
Draper previously predicted that bitcoin would top $250,000 by the end of 2022, but in early November, at the Web Summit tech conference in Lisbon, he said it would take until June 2023 for this to materialize.
He reaffirmed this position Saturday when asked how he felt about his price call following the collapse of FTX.
“I have extended my prediction by six months. $250k is still my number,” Draper told CNBC via email.
Bitcoin would need to rally nearly 1,400% from its current price of around $17,000 for Draper’s prediction to come true. The cryptocurrency has plunged over 60% since the start of the year.
Digital currencies are in the doldrums as tighter monetary policy from the Fed and a chain reaction of bankruptcies at major industry firms including Terra, Celsius and FTX have put intense pressure on prices.
FTX’s demise has also worsened an already severe liquidity crisis in the industry. Crypto exchange Gemini and lender Genesis are among the firms said to be impacted by the fallout from FTX’s insolvency.
Last week, veteran investor Mark Mobius told CNBC that bitcoin could crash to $10,000 next year, a more than 40% plunge from current prices. The co-founder of Mobius Capital Partners correctly called the drop to $20,000 this year.
Nevertheless, Draper is convinced that bitcoin, the world’s largest cryptocurrency, is set to rise in the new year.
“I expect a flight to quality and decentralized crypto like bitcoin, and for some of the weaker coins to become relics,” he told CNBC.
In 2014, Draper purchased 29,656 bitcoins confiscated by U.S. Marshals from the Silk Road dark web marketplace for $18.7 million. That year, he predicted the price of bitcoin would go to $10,000 in three years. Bitcoin went on to climb close to $20,000 in 2017.
Some of Draper’s other bets have soured, however. He invested in Theranos, a health startup that falsely claimed it was able to detect diseases with a few drops of blood. Elizabeth Holmes, Theranos’ founder, has been sentenced to 11 years in prison for fraud.
Draper’s rationale for bitcoin’s breakout next year is that there remains a massive untapped demographic for bitcoin: women.
“My assumption is that, since women control 80% of retail spending and only 1 in 7 bitcoin wallets are currently held by women, the dam is about to break,” Draper said.
Crypto has long had a gender disparity problem. According to a survey conducted for CNBC and Acorns by Momentive, twice as many men as women invest in digital assets (16% of men vs. 7% of women).
“Retailers will save roughly 2% on every purchase made in bitcoin vs dollars,” Draper added. “Once retailers realize that that 2% can double their profits, bitcoin will be ubiquitous.”
Payment middlemen such as Visa and Mastercard currently charge fees as high as 2% each time credit cardholders use their card to pay for something. Bitcoin offers a way for people to bypass the middlemen.
However, using the digital coin for everyday spending is tough, since its price is very volatile and the coin is not widely accepted as currency.
“When people can buy their food, clothing and shelter all in bitcoin, they will have no use for centralized banking fiat dollars,” Draper said.
“Management of fiat is centralized and erratic. When a politician decides to spend $10 trillion, your dollars become worth about 82 cents. Then the Fed needs to raise rates to make up for the spend, and those arbitrary centralized decisions create an inconsistent economy,” he added. Fiat currencies derive their worth from their issuing government, unlike cryptocurrencies.
Meanwhile, the next so-called bitcoin halving — which cuts the bitcoin rewards to bitcoin miners — in 2024 will also boost the cryptocurrency, according to Draper, as it chokes the supply over time. The total number of bitcoins that will ever be mined is capped at 21 million.
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