Welcome to the Weekly Scan. Here’s what we’re following for the week of June 21, 2021.
Federal forgiveness. The U.S. Department of Education recently approved $500 million in student loan forgiveness for former students of ITT Technical Institute, a private chain of colleges that was shut down in 2016 for misrepresentation. Due to a legal provision called the borrower defense to repayment, the Department will forgive the loans of 18,000 former students of the schools who claim that ITT Technical Institute misled them regarding their employment prospects and the process of transferring credits to other schools. ITT, which provided degrees in criminal justice, nursing, and more, closed its doors after the federal government banned it from accepting students who receive federal aid.
- The takeaway: The Biden administration is reportedly exploring the options for more widespread student loan forgiveness. Millions of U.S. consumers have student loan debt, totaling about $1.6 trillion as of March 2021. Due to the Covid-19 pandemic, most federal student loans are in a period of forbearance through at least September 2021, meaning those loans aren’t accruing interest. The Biden administration forgave $1 billion in student debt for 72,000 people in March, and suspended debt collection for 1.1 million borrowers who had defaulted on student loans. Previously, the Obama administration began forgiving the debt of students who proved that their schools had defrauded them. The Trump administration then provided new guidelines for that forgiveness.
Billions and Billions. MacKenzie Scott, ex-wife of Amazon founder and chief executive Jeff Bezos, announced last week that she has donated $2.7 billion of her fortune to 286 charities and philanthropic organizations. Scott donated to the Alvin Ailey Dance Theatre, racial equality funds in philanthropy and journalism, and others. Since splitting with Jeff Bezos in 2019, Scott has donated $8.5 billion. After her donations, Scott is worth almost $60 billion and maintains a 4% stake in Amazon following the divorce. Scott remarried a Seattle science teacher named Dan Jewett and together, they’ve committed to making donations and redistributing some of their wealth. Jeff Bezos, meanwhile, has said he will donate $10 billion to fighting climate change since the divorce.
- The takeaway: Increasingly, the top 0.1% of the world’s earners have built massive wealth. In 2020 alone, the 500 richest people in the world added $1.8 trillion to their collective wealth. And in 2020, Americans gave a record $471.4 billion to charities, a 3.8% increase from the previous year. Scott isn’t the only billionaire to give away a large portion of her wealth. Twitter CEO Jack Dorsey donated $2.9 million to charity, which he earned from selling a non-fungible token (NFT) of the first tweet. In 2021, the divorce of Bill Gates and Melinda Gates could mean even more in individual donations.
Home alone. Responding to supply chain interruptions around the globe, home improvement giant Home Depot has hired its own cargo ship to ensure it has uninterrupted access to the materials and products its customers need from overseas. The ship will reportedly travel back and forth between various ports, solely carrying its own goods. By contracting its own ship, Home Depot may head off steadily increasing prices for shipping, which might otherwise be passed on to consumers. Home Depot is reportedly the third largest importer in the U.S.
- The takeaway: The pandemic interrupted the global economy in 2020, with falling demand followed by surging consumer demand in some areas of the economy. That in turn has caused bottlenecks in the ability of overseas manufacturers and producers to supply large retailers with the goods and services they need, as well as severe blockages at many U.S. ports. A spike in home buying and home improvement, as people left large cities for the suburbs or decided to fix up places where they’ve been spending more time due to Covid-19, has reportedly led to quarter over quarter revenue increases for Home Depot, including a 31% increase in same-store sales for Home Depot in the first quarter of 2021 compared to the same fiscal quarter a year earlier.
We’re definitely interested. In its latest meeting on June 16, 2021, the Federal Reserve (the Fed) announced it would leave its benchmark interest rate at 0%, where it’s been since the start of the pandemic in 2020, but also indicated it might increase rates to 1% through two rate hikes in 2023. Experts had reportedly expected the nation’s central bank to leave interest rates at their current level until 2024.
- The takeaway: The Fed has a dual mandate to insure full employment and to keep inflation under control. Inflation has been running above the Fed’s target level of 2% in recent months. (In May, the inflation as judged by the Consumer Price Index, was 5% compared to a year ago.) The Fed reportedly estimates an inflation rate of 3.3% for 2021, an increase from a 2.2% estimate for the year from March. On the plus side, the Fed also forecasts a strong economic recovery in 2021, with gross domestic product growth of approximately 7% for the year.
Find out what we covered in last week’s Scan.