Mana’s Big Legislation Update
There has been a lot of amazing news lately, some with obvious financial implications (the student debt cancellation plan) and other news with less obvious financial benefit (the climate and health care bills). While all of this is exciting, we know it can also be overwhelming to comb through the details of each and figure out how you might be individually impacted. So, this week at Mana, we wanted to synthesize and recap what all of these monumental events can mean for our readers and clients.
Let’s start with the student debt cancellation and forgiveness plan…
This is obviously big, exciting news for anyone struggling with their student-debt-to-income ratio. Here are the important highlights, as summarized by the amazing writers over at Student Loan Planner:
The basic summary and headline story
If your individual household earnings are less than $125,000 per year (or less than $250,000 for married couples), you can expect up to $10,000 of debt to be canceled. Borrowers with Pell grants can expect up to $20,000 in cancellation (but critically, not in addition to the baseline $10,000). Confused about how your income level will be determined and over what timeline? We recommend checking out this CPA Planner Twitter thread that breaks it down nicely.
Some finer nuances
This plan also includes a new income-driven repayment plan, allowing borrowers to pay just 5% of their income instead of the current 10%. Faster forgiveness will be offered to borrowers with balances below $12,000. Additionally, student loan repayment has been paused one final time until January 2023. Information from FAFSA forms and income driven repayment plans will be used to identify individuals who automatically qualify for student loan cancellation.
What you might not have considered
If you receive cancellation, you do not have to worry about federal income tax consequences!
For the income-driven repayment plan, if you have graduate loans in addition to undergraduate loans, you will receive a weighted average rate. This rate will be skewed higher the more graduate debt you have.
How to maximize your benefit
You will likely need to apply for this benefit. Ensure that your contact information is up to date with your student loan servicer(s), make sure you are checking your email and text messages often (although be wary of phishing scams!) for updates. Of course, we also recommend speaking with your financial advisor or even reaching out to a specialized service like Student Loan Planner to help you make the most of your benefits.
Next we’ll discuss the climate change and inflation reduction bill
We read the Senate notes so you don’t have to :)
The main point
Historic investments will be made to decrease inflation, lower consumer energy costs, increase energy access and security, and reduce greenhouse gas emissions contributing to climate change.
Financial highlights for the average American
Energy costs will get lower. From gas prices to electricity bills, incentives will be put in place to make alternative green energy more affordable and appealing. These initiatives also target pollution clean up in disadvantaged communities.
Bigger picture and systemic benefits
The bill provides significant funding increases for NOAA weather forecasting, climate research grants, computing equipment and hurricane-observation. This means better predictions and understanding of climate disasters that affect individuals and the communities they live in. This will certainly mean better understanding of climate risk for regional housing markets in the longer term. $60 billion dollars goes to industries involved with manufacturing and providing renewable energy infrastructure. This in turn predicts greater value and new opportunity for jobs in these areas.
Specific points of interest: EV tax credits
EV federal tax credit qualifications are changing. Elektrek did a great review of the details, but we’ll summarize the highlights here. The first is that you may or may not qualify for the federal tax credit now, and if you do qualify, the amount of credit you receive could vary. The amount is determined by your personal income as well as the size of the electric car battery you are purchasing. The tax credit is issued against your income tax owed, and anything extra is not refunded or offered as a credit next year. You may still be able to get the full tax credit up front at your time of purchase, but everyone’s experience will be different. Additionally, the EV you purchase must be assembled in the US in order for you to get the full credit. Once again, we encourage you to check out the tables at the bottom of this article to see if the car you are interested in still qualifies for the full $7,500 credit, as a baseline.
The EV issue gets more complicated state by state too. Be sure to check on clean vehicle rebate programs and other initiatives to make sure you understand your full benefit clearly. For instance, California’s CVRP webpage is fairly straightforward to read through. Be sure to check your income eligibility. Note that qualification criteria may change, and that you’ll need to do research up to your time of purchase. California recently amended their eligibility criteria to benefit lower income households, which is inconvenient for high earners but beneficial to communities at large.
TL;DR here, is that this issue is complicated and our summary should still motivate you to read further and speak to your car dealer and financial planner to understand your personal situation better.
Adjacent to these new policies, it’s a good idea to be on the lookout for increased climate incentives and safeguards from your basic service providers. You may be eligible for state tax breaks or refunds for climate-change preparations and home improvements. We recommend starting by checking your utility provider’s website for any new promotions or offers.
Next highlight is about the healthcare bill and corporate tax
This one is exciting and pretty straightforward compared to the others. There is now a cap on prescription drug costs for Medicare. The out-of-pocket cap for people with Medicare is $2,000, and the bill provides an extension of three years on subsidies in the Affordable Care Act, especially supporting access to health insurance for Americans who purchase their own. Insulin costs will be capped at $35 per dose.
Additionally, there is now a 15% minimum tax for corporations making $1 billion or greater per year, which should provide more revenue and funding for healthcare benefits. A 1% excise tax on stock buybacks will go into effect, helping support a more dynamic economy and less circular benefit among company shareholders.
This was just a short and sweet summary from the Mana team, and we of course recommend that you do your own reading and research before taking any financial action based on these legislative updates. For another summary view, we recommend this Upshot piece from the NYT, which includes some useful visualizations and data tables about what’s in the bill. Of course, we always strongly suggest that you speak to your financial planner to help you understand how these changes will affect your day to day.
Follow our Instagram for personal finance tips and inspiration
Madison Elliott is a UX Researcher at Google. Madison leads data engineering and usability at Mana Financial Life Design (FLD). Mana FLD provides comprehensive financial planning and investment management services to help clients grow and protect their wealth throughout life’s journey. Mana FLD specializes in advising ambitious professionals who seek financial knowledge and want to implement creative budgeting, savings, proactive planning and powerful investment strategies. Madison brings her combined background in cognitive science, computer science and clinical psychology with her professional UX design and engineering experience to optimize workflows at Mana FLD and improve people’s lives.