Over $100 Billion In Student Loans To Be Forgiven By Federal Government
December 01, 2016
The Government Accountability Office reported that the federal government is set to forgive at least $108B in student loans in coming years; U.S. manufacturing activity expanded in November at the quickest pace since early-2015; Initial jobless claims rose to a five-month high in the week ended November 26 in the second consecutive week of increases; Output in China’s manufacturing sector reached a multi-year high in October as a credit-fueled industrial recovery signaled a pickup in domestic inflation expectations while services expanded, too.
- The Government Accountability Office disclosed on Wednesday in a report to Congress that the federal government is set to forgive at least $108 billion in student loans in coming years as an increasing number of borrowers seek help in repaying their debt. The report sharply criticized the government’s accounting methods for its $1.26 trillion student-loan portfolio, highlighting flaws that have led to consecutive write-downs in pro forma revenue guidance in the years ahead. The government says it still expects the program to generate a profit in the long run, however. Repayment streams on student loans have become more volatile since the financial crisis, as President Obama has championed income-driven repayment plans to stem the rise in defaults in the wake of the recession. Enrollment in such plans has tripled to 5.3 million borrowers with $355 billion in outstanding debt. The current plans allow for repayment forgiveness after 25 years for private-sector employees and allow for payments to be a minimum of 10% of discretionary income. President-elect Trump, meanwhile, has proposed repayment forgiveness after 15 years and minimum payments be 12.5% of discretionary income. [WSJ]
Economic Indicators & News
- U.S. manufacturing activity expanded in November at the quickest pace since early-2015, as the Institute for Supply Management’s monthly gauge rose more than a point to 53.2 in November. Market consensus was for a reading of 52.5 during the month. The measure of factory output has grown to this level expansionary territory only one other time during the year, and it has not exceeded it since February 2015. The production index registered 56, the employment index 52.3, the inventories of raw materials 49, and the prices 54.5, all either exceeding or, at least, at parity with October levels. Imported raw material inputs fell from 52.0 to 50.5. [ISM]
- Initial jobless claims rose to a five-month high in the week ended November 26 in the second consecutive week of increases, totaling 268,000, though the underlying trend for new claims remained consistent with a healthy labor market. The four-week moving average accounting for week-to-week volatility was up 500 to 251,000 as new claims remained below the critical 300,000-threshold indicative of employment strength for the 91st week. Lagging continuing claims rose by 38,000 to 2.043 million as the moving average for the metric increased 12,750 to 2.038 million. The insured unemployment rate was unchanged at 1.5%. The market consensus was for 253,000 initial unemployment claims last week. [DOL]
- Output in China’s manufacturing sector reached a multi-year high in October as a credit-fueled industrial recovery signaled a pickup in domestic inflation expectations while services expanded, too. The country’s manufacturing PMI read 51.7 last month as the non-manufacturing PMI totaled 54.7, as the market consensus was for a reading of 50.7 among goods-producing industries. The steel industry PMI, which has been under foreign regulatory scrutiny on accusations of global dumping, increased to 51.0 from 50.7. The report added evidence that the old growth drivers are picking up in China’s economy and large state owned enterprises are faring better than smaller companies. New orders strengthened to 53.2 from 52.8 and new export orders rose to 50.3 from 49.2, though business activity expectations fell to 55.5 from 58.5. [Bloomberg]