Money Rehab with Nicole Lapin - Student Loans and the Debt Ceiling Deal

Episode Date: May 30, 2023

On Sunday night, Speaker of the House Kevin McCarthy revealed a 99-page debt deal that would stop the U.S. from defaulting on its debt and raise the debt ceiling. The people who will be impacted most from this proposed agreement are people who have student loan debt, who are on food assistance programs, and mama earth. Nicole explains the new debt deal and the biggest implications. The next President will have to address the debt ceiling question yet again, so make sure that person represents your priorities. To help someone in your life register to vote, send them this link: https://www.vote.org/register-to-vote/

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Find a co-host at Airbnb.com slash host. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. Okay, so believe it or not, some progress has been made on the debt ceiling issue, and it's really turning out to be a buzzer beater. A few months ago, Treasury Secretary Janet Yellen told us that

the U.S. would face default on its debts by June 1st if the debt ceiling wasn't raised. She recently revised that estimate and said the U.S. could probably handle its bills a little longer and that actually X day, or the day the U.S. would no longer have authorization to pay its debts, is June 5th, which doesn't totally buy us that much more time. But the government has taken a big step toward a resolution. As I'm recording this on Monday, May 29th, here is the latest. Speaker of the House Kevin McCarthy revealed a proposed agreement on Sunday night, 99 gorgeous pages of a budget recommendation, and announced to the House

that the voting will happen on Wednesday. Don't you just love it when your boss hits you with a 99-page document on a Sunday night? Now, again, voting is supposed to happen on Wednesday, but Majority Leader Chuck Schumer said that the vote may realistically happen on Friday or even over the weekend. If the deal passes in the House and in the Senate, President Biden said he would sign it, which is a big signal of his support. So we could have a new debt limit set just in time for X day. McCarthy has been very frank about the fact that this is not going to be literally anyone's favorite debt deal. He said, quote, it doesn't get everything everybody wanted, but in divided government, that's where we end up, end quote. Kind of a Debbie Downer, right? Anyway, some U.S. representatives have been

live tweeting their responses to the deal, and there is typical drama that you'd expect from politicians. Representative Debbie Dingell, a Democrat from Michigan, said that the deal is not favorable for liberals and Democrats are being, quote, held hostage, end quote. While a Republican senator from Texas put it more bluntly and called the deal a, quote, turd sandwich. Gross. If the proposed deal goes through, the debt limit would be suspended for two-ish years until January 1st, 2025. So that is good news for the debt ceiling and tough news for anyone hoping to win the presidential ticket in 2024. Along with the Oval Office, they will inherit a multi-trillion dollar problem. But until then, the people who will be impacted the most

from the new rules will be people who have student debt, who are on food assistance programs, or people who love the environment and or live in Virginia. If you fall into any of these categories, you will be affected by the proposed debt deal. But don't worry, I will walk you through it. Let's start with student debt. So as of right now, student loan repayment requirements are paused and interest is not accumulating on any outstanding debt. This new debt deal will press play on payment requirements and allow interest to once again snowball. Under the deal, borrowers will need to start making payments again by the end of August. But to be honest, this doesn't change

much for people with student debt. The biggest change, of course, would have been some wide sweeping debt forgiveness. In debt ceiling negotiations, Republicans were keen on slashing any student debt relief, but those decisions were punted to the Supreme Court, literally. Biden's debt relief plan is on the Supreme Court docket for this summer. And the game plan even before the debt ceiling negotiation started was for student debt repayments to resume 60 days after the lawsuit in the Supreme Court is resolved. Or if not resolved by June 30th, 60 days after that. In other words, the end of August, same, same as is what is written in the current debt proposal. So again,

even though this debt deal would officially resume student loan payments, it actually doesn't change much from what was already decided. And for everything else, the arena where big student loan change will be decided is the Supreme Court. Next up, Mama Earth. This debt deal is not good news for progress that climate activists have been making over the last few years. The big consequence of the debt deal, where the planet is concerned, is that the agreement would freeze spending for the Environmental Protection Agency, which is the federal agency that protects people and the environment from health risks, and develops and enforces environmental regulations.

Beyond that, Biden has already made a really big concession to Republicans and agreed to expedite permitting for the Mountain Valley Pipeline. That is a 303-mile gas in construction pipeline that would run through the Blue Ridge and Appalachian regions of Virginia and West Virginia all the way to North Carolina. Construction of the pipeline has been stalled with dozens of environmental violations, but Biden gave a yellowish greenish light in the debt deal. Pro pipeline voices say the main benefits will be jobs created to construct and maintain the pipeline and local residents will have better gas service. The anti pipeline peeps say that the pipeline and local residents will have better gas service. The anti-pipeline peeps say that the pipeline will hurt regional clean water and endangered species, as well as increase

dependence on gasoline. It is a tale as old as time, new jobs versus quality of life. And I think we're all ready for a world in which there's an emphasis on new green jobs that can actually also help our quality of life. Last but certainly not least, Supplemental Nutrition Assistance Program benefits, also known as SNAP benefits or food stamps. More than 42 million people were enrolled in SNAP at the top of the year. That is a lot of people that depend on these benefits to put food on the table for their families. And to cut to the chase here, the debt deal would trim SNAP spending overall, but expand access to programs for some groups. There are three big changes to SNAP that are proposed in the debt deal. And heads up, there's a lot of jargon here, but I'll break it down after I get to it. First, raising the age of food stamp recipients subject to work reporting time

limit requirements from 50 to 54, but only until 2030. Second, placing new restrictions on how often states can waive work requirements for food stamp recipients. And third, requiring the Agriculture Department to publish a report of which state waivers it approves and rejects. Again, that is so much jargon, so let's unpack this. In order to qualify for SNAP, generally, your household income needs to be at or below 130% of the poverty line. For a three-person family, for example, you are eligible for SNAP benefits if your household income is a little under $30,000 a year. In order to get SNAP benefits, if you are able to work, you need to meet the general work requirement. And these requirements

are basically that you need to be trying to work. There are some exceptions, but that's generally the prerequisite. But if you're between the ages of 18 and 49, you might also need to work at least 80 hours a month in order to be eligible. And that definition of work is pretty flexible. It can be 80 hours of paid or unpaid work, or even volunteering or going through a federal training program. The new debt ceiling agreement basically raises the age where you can stop reporting those 80 hours of work in order to

get SNAP. As of right now, if you're able to work, you probably don't need to report those 80 hours of work if you're over 50. But under the new deal, you would need to report those hours until you're 54. The second and third changes will have the biggest difference to SNAP, restricting when states can waive work requirements and requiring more reporting around when states have waived these requirements. Most Democrats are looking at this as an effort to weed out more people who can claim SNAP benefits and therefore cut SNAP spending. There is one last important

change when it comes to food assistance. This debt deal actually expands SNAP access to veterans, unhoused people, and young adults transitioning out of the foster care system. So net net, the SNAP point of the debt deal actually tells a pretty decent story of cooperation and compromise from both sides of the aisle. Breaking news. For today's tip you can take straight to the bank. If you're newly of voting age, don't wait until fall of 2024 to register to vote. And parents of voting age kids, help them out with the registration. We all remember what it's like to be a teen and wait until the last minute to do low-key, very important things. As I mentioned, if the debt ceiling agreement passes, it will be resolved until 2025. That means if spending isn't under control by then,

the next president is going to have to negotiate another deal similar to this one, and you'll want to make sure that their non-negotiables are your non-negotiables. So please take the voter registration link in the show notes and send it far and wide to anyone and everyone in your life who may need a little extra nudge in order to get set up to vote in 2024. I love hosting on Airbnb. It's a great way to bring in some extra cash. But I totally get it that it might sound overwhelming to start or even too complicated if, say, you want to put your summer home in Maine on Airbnb, but you live full time in San

Francisco and you can't go to Maine every time you need to change sheets for your guests or something like that. If thoughts like these have been holding you back, I have great news for you. Airbnb has launched a co-host network, which is a network of high-quality local co-hosts with Airbnb experience that can take care of your home and your guests. Co-hosts can do what you don't have time for, like managing your reservations, messaging your guests, giving support at the property, or even create your listing for you. I always want to line up a reservation for my house when I'm traveling for work, but sometimes I just don't get around to it because getting ready to travel always feels

like a scramble, so I don't end up making time to make my house look guest-friendly. I guess that's the best way to put it. But I'm matching with a co-host so I can still make that extra cash while also making it easy on myself. Find a co-host at Airbnb.com slash host. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Levoy. Our researcher is Emily Holmes. Do you need some money rehab?

And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at Money News and TikTok at Money News Network for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.