Feature

When student debt relief backfires

And more of the week's best financial insight

Here are three of the week's top pieces of financial insight, gathered from around the web:

Low returns on bank accounts

"Higher interest rates may mean some good news for savers, but probably not right away," said Ann Carrns in The New York Times. Starting in March, the Federal Reserve is expected to begin raising rates to stave off rising inflation, and subsequent rate hikes could continue from there. "But deposit rates paid to savers will probably rise at a much slower pace, analysts say." Why? Because banks are so "flush with cash" they won't feel the pressure to attract more deposits. That's unfortunate for many savers who were hoping to close "the gap between the rates for depositors and inflation." Currently, the average rate paid on a basic savings account insured by the Federal Deposit Insurance Corporation is just 0.06 percent.

When student debt relief backfires

"A program to cut student debt for health-care workers sticks some with even more," said Rebecca Smith and Rebecca Ballhaus in The Wall Street Journal. The National Health Service Corps has for decades encouraged health-care workers to serve in medically understaffed areas by offering "tens of thousands of dollars of student-loan relief." But "to deter participants from skipping out once their education costs were paid," Congress imposed a penalty for not fulfilling contracts, to the tune of $7,500 a month, plus interest. It meant that "someone who had gained the maximum loan relief, $50,000, risked owing more than $200,000." That penalty stands even if workers were laid off, even though many "stressed hospitals and clinics had to furlough workers and close facilities" during the pandemic.

Auto dealers profiting from shortages

"Ford and General Motors are warning dealers against using auto supply-chain disruptions to jack up prices and juice their profits," said Courtney Vinopal in Quartz. The global chip shortage and other factors have sent car prices soaring over the past year, and much of the gains have gone to dealers. It was "once rare for dealers to sell cars above their sticker price," but last month more than 80 percent of car sales in the U.S. included a markup. According to JD Power, the average Ford transaction price has been "growing faster than the revenue the company earns on car sales, meaning dealers are pocketing a decent chunk of the company's profits." Ford specifically warned dealers against marking up the price of its new electric F-150 truck.

This article was first published in the latest issue of The Week magazine. If you want to read more like it, you can try six risk-free issues of the magazine here.

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