July 17, 2019

Tax Credits, Free College And Other Proposals That Could Affect Your Wallet Next Year

Tax Credits, Free College And Other Proposals That Could Affect Your Wallet Next Year


It’s hard to believe that we’re nearing another presidential election. As the 2020 hopefuls vie for a nomination, they’re bringing their biggest and boldest ideas to the table, especially when it comes to the financial lives of Americans. Our current president has a few thoughts, too.

Here are seven proposals kicking around Congress that, if passed, could impact your bottom line in the near future.

Proposal: Cap credit card interest rates at 15 percent.

Sen. Bernie Sanders (I-Vt.) and Rep. Alexandria Ocasio-Cortez (D-N.Y.) announced earlier this month during a live-streamed press conference that they have a plan to cap interest rates on credit cards and consumer loans. They’re calling the new piece of legislation the “Loan Shark Prevention Act,” which, if passed, would cap interest rates at 15 percent.

The average credit card interest rate is the highest ever at 17.73 percent, though the highest rates top 30 percent. In fact, there is currently no federal limit on how high credit card interest rates can go. The average U.S. household with credit card debt carries approximately $6,929 in balances month to month, according to an analysis by NerdWallet. About 1 in 11 Americans who have credit card debt say they don’t think they will ever be completely free of it.

Proposal: Forgive almost all student loan debt.

Considering that total student loan debt held by Americans now tops $1.5 trillion, college debt has taken center stage as a major issue our country needs to solve.

Several Democratic hopefuls have proposed solutions to rising student loan debt. Sanders has long been a proponent of making public colleges tuition-free so that students don’t have to take on loans in the first place. He’s also proposed forgiving existing debt, as has Sen. Elizabeth Warren (D-Mass.) with a recently announced plan to eliminate $50,000 in student loan debt for anyone with a household income below $100,000, as well as provide relief to households with incomes between $100,000 and $250,000.

Proposal: Encourage more retirement savings.

A key House committee recently passed a bill that includes the most comprehensive changes to private retirement plans in more than 10 years. The Setting Every Community up for Retirement Enhancement Act ― or Secure Act ― includes provisions that encourage small businesses to provide retirement benefits to employees, creates a new $500 tax credit for businesses that set up plans with auto-enrollment and makes retirement benefits available to some part-time workers, among other benefits.

Various elements of the bill have been debated for years, and now it’s finally come together with wide bipartisan support. Unlike other proposals in Congress, the Secure Act is expected to pass into law.

Proposal: Make rent more affordable.

As rents continue to rise, Americans shoulder the financial strain of trying to keep up. In 2015, 38 percent of all renter households spent more than one-third of their incomes on rent. That’s why both Sen. Cory Booker (D-N.J.) and Sen. Kamala Harris (D-Calif.) have introduced bills to make rent more affordable.

Booker’s Housing, Opportunity, Mobility, and Equity (HOME) Act would provide tax credits to those who spend more than 30 percent of their incomes on rent, as well as change zoning policies to increase the availability of affordable housing and reduce housing discrimination. Similarly, Harris’ Rent Relief Act aims to provide a refundable tax credit to those who earn less than $100,000 a year and spend at least 30 percent of their income on rent, including utilities.

Proposal: Move closer to universal basic income.

In addition to trying to help renters, Booker and Harris are also pushing bills that would provide a financial safety net to all Americans. Though they don’t quite call for universal basic income, their proposals certainly lean in that direction.

Harris recently proposed the LIFT the Middle Class Act, which would provide families with a tax credit of up to $500 a month (or up to $6,000 per year) to help them keep up with the rising cost of living.

Booker has embraced the idea of issuing “baby bonds” as a way to close the racial wealth gap. His plan would issue a $1,000 savings account to all newborns, as well as up to $2,000 per year for children in low-income households. The goal is that by the time those children reach age 18, when the funds are released, their savings will have grown into a sizable nest egg.

Proposal: Loosen payday loan requirements.

While the 2020 hopefuls have been focused on introducing new legislation, the current administration is working to reverse some existing laws. For example, the Consumer Financial Protection Bureau ― an organization established in the wake of the Great Recession to serve as a consumer watchdog ― might soon roll back some Obama-era rules surrounding payday lenders.

The Trump administration, which happens to have a rather cozy relationship with the payday lending industry, recently appointed a new CFPB chief who said the current underwriting standards make it difficult for consumers to access credit. As a solution, she plans to undo the requirement that lenders must first determine whether a borrower has the means to pay back their loan before approving them for one.

The fees that come with payday loans equate to APRs as high as 300 percent, and consumers who borrow these loans often become trapped in cycles of debt. That’s why they’re considered to be predatory financial products by opponents such as Americans for Financial Reform and the Center for Responsible Lending, which have formed a coalition to block the changes from taking place.

Proposal: Kill the Public Service Loan Forgiveness program.

Public Service Loan Forgiveness was established in 2007 as a means for student loan borrowers to have their debt forgiven after making 120 payments while working for a qualifying employer in the public service sector. However, Trump’s 2020 budget proposal aims to defund the program, which he says is too costly, as well as to cut funding for Pell Grants and other federal aid.

The program was established nearly 12 years ago, which means the first rounds of borrowers who made all 120 qualifying payments can finally request to have their debt forgiven. The problem is the program offers no way to officially enroll or confirm eligibility throughout those 10 (or more) years. Instead, borrowers must apply for forgiveness once they’ve made all 120 payments to find out if they qualify to actually receive forgiveness.

So far, less than 1 percent of PSLF applications have been approved. Whether or not Trump ends up cutting PSLF, borrowers should know there may be other ways to get their debt canceled.



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