With less than a month before federal midterm elections, the U.S. Department of Education opened its website for millions of Americans to register for $20,000 worth of federal college debt forgiveness. The program, which is the result of executive action by President Joe Biden and is estimated to cost $400 billion, has been challenged in court. One of the key challenges centers on whether states have the legal right to tax loan forgiveness as income. At least seven states want the ability to do so.
The main lawsuit against the loan forgiveness program was filed by state attorneys general from Missouri, Arkansas, Kansas, Nebraska and South Carolina, as well as legal representatives from Iowa. A summary of the lawsuit filed by Missouri Attorney General Eric Schmitt says:
“The majority of the Mass Debt Cancellation will ‘accrue to the debt borrowers in the top 60 percent of the income distribution.’ And none of the benefit will accrue to those who worked and paid their debt.” Citing that same study, the lawsuit notes, “The Wharton School of the University of Pennsylvania released a study concluding that ED’s Mass Debt Cancellation alone will cost up to $519 billion over ten years, and the overall cost could rise to more than $1 trillion when factoring in the other components of ED’s announcement.”
The lawsuit incorporates three counts: (1) Separation of Powers, (2) Violation of the Administrative Procedure Act Exceeding Statutory Authority and Violating the Constitution, and (3) Violation of the Administrative Procedure Act Arbitrary and Capricious Agency Action.
But even while the challenges are pending, the applications are open.
Current students also may be eligible for the forgiveness program. Their eligibility will be based on the individual’s household income, which will show up on their Free Application for Federal Student Aid, or FAFSA, form. (Anybody who has applied for college in the last decade or so will be very familiar with that onerous form.) Borrowers who are enrolled as dependent students will have their eligibility based on parental income for either 2020 or 2021.
Defaulted student loans are eligible.
Only federally held student loans are eligible for the debt relief — private student loans are excluded. Even government-guaranteed student loans held by private lenders are not eligible.
To qualify, the application asks you to choose one of the following categories:
- I made less than the required income to file federal taxes.
- I filed as a single tax-filer AND made less than $125,000.
- I was married, filed my taxes separately, AND made less than $125,000.
- I was married, filed my taxes jointly, AND made less than $250,000.
- I filed as a head of household AND made less than $250,000.
- I filed as a qualifying widow(er) AND made less than $250,000.
The wages refer to adjusted gross income for either tax year 2020 or 2021. Adjusted gross income is the amount that is left after 401K contributions and/or alimony payments for example.
Here are tons of other questions and answers about who is eligible.
Here is a step-by-step guide of what happens after you file your application:
(studentaid.gov)
How a Supreme Court ruling could raise the price of bacon
The U.S. Supreme Court is considering what to do with a lawsuit that seeks to force pig farmers to raise their herds humanely. The pork industry says if the justices rule against farmers, the price of bacon, pork chops, sausage and all other things pork will go up beyond the 17% price increase that you already are paying this year.
The lawsuit has to do with a California ballot proposition called Prop 12, approved by voters in 2018, which ruled that pork sold in California can only come from pigs that are birthed in conditions where the sow (mother pig) had at least 24 square feet of space. Pig farmers commonly put birthing mothers in “gestation crates,” metal pens that confine the sow to a space that isn’t much larger than she is. The National Pork Producers Council and the American Farm Bureau Federation sued to stop the California law. Even though California produces very little pork, it consumes about 13% of the pork eaten in America.
The Biden administration sided with the farmers, but lower courts, so far, have ruled in favor of animal rights groups.
This is not just a battle over pig farming, although that alone affects a $26 billion industry. Also at stake is a legal tenet called the “dormant commerce clause.” That is the legal understanding that even if the Constitution does not explicitly say anything about state law, the Constitution grants the power over interstate commerce to Congress. By extraction, the theory goes, states cannot pass laws that discriminate against interstate commerce. If the Supreme Court buys into that argument the farm groups are making, then the California statute would go down in flames.
SCOTUSblog explores the issue, which may sound wonky, but consider the implications raised by the justices last week:
A brief filed by the National Association of Manufacturers warned that allowing the lower court’s decision to remain in place would open a Pandora’s box to all kinds of regulations of the food supply. “If California can enact laws controlling the production of out-of-state pork,” the group wrote, “Texas can dictate how California grows avocadoes and tomatoes.” A brief filed by the Retail Litigation Center cautioned that the 9th Circuit’s decision could affect the supply chain for other retail goods and restaurants more broadly.
The numerous “friend of the court” briefs filed in the case also quarrel over the facts and assumptions underlying the dispute. One brief filed by a group of agricultural and resource economics professors suggests that the economic impact of Proposition 12 will not be as significant as the challengers predict. Under Proposition 12, they say, consumers in California will pay more for uncooked pork products, but it will have relatively little effect on other pork consumers in the U.S. The producers for whom it makes economic sense to comply with Proposition 12 will do so, the professors reason, while those who “choose not to supply the California market will suffer at most only marginal economic harm.”
And what about the claim that pig farmers are mistreating their herds? ScotusBlog gives us two views from veterinarians who filed briefs with the Court:
Another brief, filed by a veterinarian, seeks to refute the challengers’ contention that the structure of the pork industry, with the possibility that different cuts from the same pig will go to different parts of the country, makes it impossible for producers to know whether their products will eventually be sold in California. The pork industry has developed “highly sophisticated” methods to trace and segregate pork products, Dr. Leon Barringer writes. Indeed, Barringer notes, the use of these methods allows “pork producers to make marketing claims like ‘antibiotic-free’ and ‘source-verified’ on their pork products.”
Two other briefs filed by veterinarians spar over what benefits Proposition 12 may provide to animals. In a brief supporting the challengers, the American Association of Swine Veterinarians cites “a well-established body of scientific literature” demonstrating that the use of both individual stalls and group pens “can be important in managing a healthy herd. Categorically banning one of them, as Proposition 12 does,” the group concludes, “will likely harm rather than improve animal well-being.”
But a brief by nearly 400 animal welfare scientists and vets counters that the AASV brief “relies heavily on studies published by the National Pork Board and funded by the pork industry, which focus on … economic benefits to pork producers – rather than on animal welfare.” The AASV’s analysis, the briefs say, “disregards peer-reviewed research” and “ignores the harms that gestation crates inflict on pigs.”
The ruling should come before the end of June 2023.
Interest in home buying is dropping-fast
Real estate broker Redfin, which operates in 95 U.S. markets, reports:
Housing-market activity is plunging further this fall than it did over the summer as mortgage rates near 7% and the topsy-turvy economy deters would-be buyers and sellers. Price drops have reached a record high, and home sales and new listings are dropping.
- Fewer people searched for “homes for sale” on Google. Searches during the week ending October 8 were down 35% from a year earlier, dropping to a level on par with March 2020.
- The seasonally adjusted Redfin Homebuyer Demand Index—a measure of requests for home tours and other home-buying services from Redfin agents—was down 25% year over year, but up slightly from the prior four-week period.
- Touring activity as of October 9 was down 23% from the start of the year, compared to a 9% increase at the same time last year, according to home tour technology company ShowingTime.
- Mortgage purchase applications were down 2% week over week, seasonally adjusted, and were down 39% from a year earlier during the week ending October 7.
The houses that are selling are holding their prices, mostly. In fact, 99% of homes sold last month in America went for 99% of final listing price. But that may be a little misleading because almost 8% of homes listed had dropped their prices from the original listing price.
(Redfin)
But look at the size of those mortgage payments!
(Redfin)
It now takes twice as long to sell a house compared to January — so what?
One of the effects of inflation in the housing market and combined with rising interest rates is that it is taking longer, and by that, I mean a LOT longer for houses to sell.
(Redfin)
In January, a seller could expect to find a buyer in 2.1 months. Now it is 4.1 months, and you can expect that the trend will lead to larger inventories of homes for sale and longer wait times to sell them. Eventually, prices will fall and buyers will gain some advantage.
This is bad news for several groups besides sellers. Home construction may slow as building prices and the competition for buyers grows. Think about all of the businesses that rely on construction: construction workers, appliance sales, lumber companies and architects.
Local governments rely on property taxes to fund a considerable portion of local services. Their budgets depend on rising sales, which, usually, increase property values. That is why it is worth noting that the National Association of Realtors reports that in August, the median price for homes dropped to $389,500, down from the record high of $413,800 in June.
