Inflation Checks by state, Student Loan & SSA updates | Summary news 19 October
Headlines: 19 October 2022
- Key dates for the inflation relief check in California
- Social Security recipients could see on average $1,752 more in 2023 thanks to the COLA
- Which states are offering inflation relief payments? Full list
- A record number of taxpayers requested an extension this year
- California to offer gasoline relief as residents pay $2.00 more per gallon compared to other states
- States move to count the amount forgiven in student loans as taxable income
- The biggest COLA increases in US history: 8.7%
Named after a section of the US Internal Revenue Code, a 401(k) is a retirement savings and investing plan offered by many American employers. Contributions are automatically taken out of a worker’s paycheck and invested in funds selected by the employee from a list given to them by the plan administrator.
With traditional 401(k) plans, the funds are withdrawn from the pre-tax amount of a paycheck and the employee gets a tax break upfront. However, they will be liable to pay income taxes on them when they withdraw down the road. A Roth 401(k) plan works the other way around, you pay in with after-tax money and then in retirement you don’t pay tax on qualified withdraws.
The amount of student debt in the US has been a problem for young Americans for years. Back in 2006 it was $461 billion, by no means small, but it was a trillion dollars lower than it is now. At the end of 2021 student debt was tallied to be worth over $1.75 trillion. This staggering number has prompted action from the federal government.
In terms of per capita number the debt makes for scary reading. In 2021 the mode average student loan debt per borrower was $39,351, which means an average monthly payment of $393, according to recent statistics from EducationData.org. The median debt is $17,000 and 56 percent of people owe less than $20,000.
Mortgage rates continue to soar in the US
A number of states are offering inflation relief payments - one-off checks - to help with the price rises witnessed in many key sectors throughout 2022. The Federal Reserve is attempting to stem the price increases by raising interest rates and discourage borrowing, but this is having damaging consequences for the housing market.
With borrowing becoming more expensive, anyone looking to take out a mortgage is being hit with mortgage rates far higher than were seen last year. This is having the knock-on effect of reducing demand for the homes and cooling the housing market considerably.
During the pandemic trillions of dollars was spent by the federal government to ensure that Americans were able to cover the cost of essentials and to keep the economy from slowing to a complete standstill.
More than 9 million individuals and families have been contacted to inform them of key tax benefits and the IRS has just issued letters to inform them of the vital relief payments that they are missing out on.
Biden breaks down the student loan forgiveness payments
While campaigning for the 2020 presidential election, Joe Biden promised to offer widespread student loan forgiveness for the majority of borrowers. It has taken more than 18 months, but the online portal to claim the relief went live last week and it looks to have given the Democrats a much-needed boost going into the midterm elections next month.
Biden breaks down the figures for student loan forgiveness on Twitter...
Each year the federal tax brackets are adjusted to reflect the general rate of price increase, and to avoid a phenomenon known as 'bracket creep'. The adjustment is usually fairly minor but this year, with inflation running above 8%, many were expecting a signficant change to the tax brackets, one that could see you paying less taxes next year.
The IRS has released the updated 2023 federal income tax brackets...
Inflation bites around the world
President Biden and the Democrats are expected to suffer at the polls next month as the economic pressures push up prices for consumers. But it should be remembered that the US is far from the only major economy facing these circumstances, and across the pond things are perhaps worse.
The United Kingdom has announced a year-on-year inflation rate of 10.1%, representing a 40-year high. In the UK the cost of groceries has squeezed the houshold finances of residents and is causing major concern ahead of the winter month.
California offers inflation relief payments
“We know it’s expensive right now, and California is putting money back into your pockets to help. We’re sending out refunds worth over a thousand dollars to help families pay for everything from groceries to gas."
“Inflated costs for everyday necessities have forced many to cut corners or make impossible choices, and pain at the pump has been compounded by the return of the commute for many Californians.
"As the holidays approach, my team members are thrilled to be able to get these payments into the hands of those who have been struggling, so they can enjoy a measure of relief.”
Mortgage rates in the United States have soared in response to the Fed's decision to push up interest rates. The move was designed to bring down inflation by discouraging borrowing but it has had a severe impact on the US housing market too.
Every morning we will be bringing you the latest mortgage data from the United States. Here's what that looks like for Wednesday, 19 October...
New dates confirmed for California Middle Class Tax Refund
The state of California is offering up to $1,050 per person in a bid to help middle class households deal with rampant inflation. The first batch of payments was issued on 7 October but it will take weeks or even months for the support to arrive.
The California Franchise Tax Board has issued this new guidance for recipients:
GSS I or II direct deposit recipients: 7 October through 25 October 2022
Non-GSS recipients: 28 October through 14 November 2022
Debit card payments: 24 October 2022 through 14 January 2023
US inflation shows no sign of stopping
The widespread price rises across the United States appeared to be slowing a couple of months ao when gasoline and diesel prices dipped from record highs, but inflation remains a real threat for millions of households. The Federal Reserve has acted to curb the increase, imposing significant interest hikes in a bid to discourage borrowing, but grocery store bills continue to rise and will cause concern ahead of the holiday period.
Finally President Biden's widespread student loan forgiveness initiative has now gone live. The White House announced in August that Pell Grant recipients could get up to $20,000 discharged on their federal student loans, non-Pell Grant recipients as much as $10,000.
The measure applies to individuals that made less than $125,000 and families that earned $250,000 in either 2020 or 2021, roughly 40 million borrowers.
Learn more about the applicaiton process to trigger that support.
Biden opens up student loan debt relief
Speaking from the White House, President Biden outlined the importance of the long-awaited batch of student loan forgiveness that he passed recently, and heralded the opening of the application process for the support. Borrowers can submit their application on the StudentAid.Gov website and should see the relief credited on their account within six weeks.
Will California get more inflation support payments?
As gas prices in the Golden State continue to rise, contrary to other trends seen around the country, Gov. Newsom has proposed a windfall profits tax on oil and gas companies. The proposal would place an additional tax on revenue earned beyond what was seen last year. This tax would account for increased costs faced by customers, and the total accumulated by the state would then be redistributed to drivers.
Newsom's office released the plan after a report found that “California consumers paid $2.61 per gallon higher gas prices than the average US price as of October 4, 2022.” The office even accused oil refiners of slowing production to create shortages that drive up costs.
“Five refiners—Chevron, Marathon Petroleum, PBF Energy, Phillips 66 and Valero—make 97% of the state’s gasoline. They are in a position to restrict gasoline supply to drive up gas prices. They have consistently restricted supply and artificially driven up their prices significantly in excess of their costs.”
There is no word on when the legislature may vote on the bill, but many in the Golden State support the measure, as prices at the pump reach over $7/gallon in some areas. The divided created by the windfall profits tax could help families next year, but for many the relief could not come fast enough.
Learn more about California's inflation relief checks
Welcome to AS USA
Good morning and welcome to AS USA, where we will be keeping you up to date on the latest financial news and information from the United States. A number of states have opted to provide one-off payments to help ease the pain caused by inflation, while President Biden has offered a widespread program of student loan forgiveness worth up to $20,000 per borrower.