Perhaps you’ve heard. A new president takes office this week. The changes may seem radical to you or not, but with every change in an administration — especially when the party is different — there are often significant changes. Executive orders, directives to various departments and a new congressional agenda will highlight the differences and the swing in policy directions.
What does it mean for you and your finances? Here are a few thoughts:
The president-elect noticeably left student loans out of his proposed $1.9 trillion package for COVID relief, but don’t think he doesn’t plan to act.
- Total student loan debt: $1.67 trillion.
- Total borrowers: 44.7 million.
- Graduates with student loan debt: 62%.
While Biden hasn’t specifically put a proposal on the table, he is known to support legislation that includes a $10,000 forgiveness for each borrower. Some Democrats are pushing to increase that to $50,000 and, in fact, are encouraging him to sign an executive order.
WHAT TO EXPECT? Biden will likely extend the deferment that has been in place since mid-2020. That would mean no payments and no interest would continue for most student loans. Some type of forgiveness is also possible on the horizon but may be tough in a divided Congress. It’s unclear if he actually has the authority to create this break by Executive Order.
Most Americans can expect another stimulus check as soon as this month. Biden has proposed an immediate $1,400 for each eligible American and many in Congress believe that isn’t enough. Depending on the economic rebound — or lack thereof — you may anticipate even more stimulus checks by summer.
The question is: What will you do with it?
Biden proposes to change the tax code. That may be tough with narrow margins in each house, but he will likely get something passed in the new Congress.
His plans will raise taxes on wealthier Americans and corporations and lower taxes on middle-income families who earn less than $400,000. First, there are tax credits and other breaks:
- Temporarily raise the child tax credit to $3,000 per child for children ages 6 to 17 and $3,600 for children under 6. That’s an increase from the current $2,000 break.
- Emergency one-year increase for the child care tax credit. Eligible families would get a tax credit equal to 50% of their child care expenses for children under 13, up to $4,000 for one child and up to $8,000 multiple children.
- Expand the Earned Income Tax Credit for adults without children from $530 to about $1,500, and raise the income limit from $16,000 to $21,000.
According to Dave Ramsey…
- Households making between about $50,000–90,000 would get an average tax cut of about $6,700.
- Higher-income households ($330,000–790,000) would be hit with an average $98,000 tax increase.
- The top 1% of earners ($790,000 or more) would pay an average of $265,000 more than they do now.