This Week In Your Wallet: What You Need To Know About The Child Care Cliff

This Week In Your Wallet:
What You Need To Know About The Child Care Cliff

In the nick of time, Congress avoided a government shutdown over the weekend, funding the government through mid-November. One issue they’ve yet to solve though is the “child care cliff.”

Sounds ominous, but what is it exactly? Here’s the short version: In 2021, as part of the American Rescue Plan Act, the federal government allocated $24 billion to the “Child Care Stabilization Act.” This funding was a lifeline to child care providers, allowing them to pay employees more, improve quality of care and ultimately, keep their doors open. The problem? Those funds expired on Saturday and the federal government has yet to take any action to extend them. HerMoney recently dug into what the child care cliff will mean for families, as well as the economy. (Hint: It’s not good.) Experts we talked to say the fallout won’t be immediate, but gradually could result in the closure of 70,000 programs and more than three million children losing care.

Then, you have the economic ripple effect. The Century Foundation, which did an in-depth analysis of the child care cliff’s impact, projects it will result in $9 billion annually in lost earnings. While the study was able to quantify expected lost wages, Laura Valle-Gutierrez, who worked on the Century Foundation’s report, says there are long-term costs they weren’t able to account for–especially for women, as studies show when child care options go away, it’s disproportionately mothers taking on the responsibility. “It has material costs for them, but then there’s also the longer term costs,” she tells HerMoney. “Lost retirement, maybe lost health insurance and also just losing out on opportunities for advancement.”

If you’re a parent reading this, you’re probably wondering: “What can I do?” Unfortunately, not much, as it’s going to be up to the federal government to figure out both short-term and long-term solutions to a problem that has existed for a long time. For our coverage, HerMoney talked with labor economist and economic policy consultant (and mom) Kathryn Anne Edwards, who had some good advice for parents. “I think it’s important to stress to families that there is no amount of effort that you can put forward that can fix a market failure,” she says. “It is on your government to either decide that market doesn’t matter enough to be saved…or to intervene. That can make you feel all kinds of things about yourself but there’s no effort that you can put in to solve this.”

Cutting Costs As Car Ownership Becomes More Expensive

In last week’s newsletter, we discussed the impact the UAW strike is expected to have on car prices. But, as Ann Carrns reports for the New York Times, even before people took to picket lines, the cost to own a vehicle has risen steadily in recent years. According to AAA, the average annual cost of ownership has increased more than 13 percent since last year to more than $12,000 annually. Yes, you’re doing the math correctly — that’s $1,000 a month. What’s responsible for the hike? Higher car prices, as well as the increased cost of financing, maintaining and insuring a new car.

The good news is that there are steps you can take to reduce expenses. For starters, consider your true needs when choosing a vehicle. For example, a popular half-ton pickup truck like the Chevrolet Silverado will cost you $1.06 per-mile to drive. “If you need a truck only occasionally to haul mulch from the garden center, it might make sense to buy a smaller car — say, a compact sport utility vehicle like a Nissan Rogue — at about 67 cents per mile and rent a truck when you really need one,” reports Carrns.

Then there’s the issue of car insurance. As the Times reports, some drivers are skipping coverage altogether (even though most states require it) because they can no longer afford their premiums. For help with your own premium, Carrns advises getting quotes from several insurers and asking what steps they can take to lower your costs, such as raising your deductible. Last but not least, if you really want to reduce expenses, get rid of your vehicle altogether. “As car ownership becomes more costly, you may want to consider if you can get by without one, especially if you live in an urban area with good public transportation or wide availability of ride-sharing services,” she writes.

PS, if you are considering buying a new vehicle and are contemplating going the electric route, USA Today has put together a pretty thorough guide to incentives and rebates available. Every little bit helps!

Thinking Of Refinancing Your Student Loan? Think Again!

With a turn of the calendar page to October, tens of millions of student-loan borrowers are making payments again for the first time since the federal government put them on pause in March of 2020. If you’re among those due to start paying again, you might be tempted to refinance your loans in an attempt to save money. For many, the Wall Street Journal reports, doing so would be a terrible idea. That’s because the cost of credit has increased substantially. For example, for the most common undergraduate loans, this year’s rate is 5.5%. That’s up from 2.75% in 2020. For loans taken out by graduate and professional students, or parents of students, rates are set at 7.05% and 8.05%, respectively. “People that have excellent credit might be able to find introductory offers where there’s a bank that’s trying to recruit for their business that will also offer a low interest rate,” Sarah Behr, a financial planner and founder of Simplify Financial in San Francisco tells reporter Gabriel Rubin. “If it’s not below 7%, I don’t see how it’s compelling.”

If you are considering refinancing a federal loan with a private lender, there are risks. For one, that debt would no longer be eligible for forgiveness via income-based repayment programs, such as the Biden Administration’s recent SAVE Plan. You’d also be left out of possible future mass debt-forgiveness plans. “If the Education Department succeeds in its second attempt to cancel large amounts of debt for most borrowers, private loans wouldn’t be eligible,” says Rubin.

Those with graduate and parent loans might have an argument for refinancing. “Many non-undergrad loans don’t qualify for the most generous types of income-based repayment programs that could lead to forgiveness, and many professionals such as lawyers and doctors have incomes that make such programs unattractive,” Rubin explains. “For these borrowers, refinancing might make sense.” And note, if you are say a medical resident now with a low salary but anticipate a much higher one down the road, a refi gives you the opportunity to stretch out your term and lower your payment. In some cases that might make sense.

Swifties In Their NFL Era

Raise your hand if you watched Sunday’s matchup between the Kansas City Chiefs and New York Jets to see whether Taylor Swift was in the stands? Ok, me too. Since the pop superstar made her appearance in Kansas City last month to watch (alongside his mother, no less) Travis Kelce (who she may or may not be dating — but come on, probably is) do what he does best, Kelce and the NFL have been experiencing what some refer to as the “Taylor Swift Effect.”

As NPR reports, the phenomenon is very real, and now taking the sports world by storm. Since Swift’s appearance at Arrowhead Stadium, sales of Travis Kelce jerseys have spiked nearly 400%. Tickets for Sunday’s game shot up 35% and on the Apple charts, New Heights, a podcast Kelce hosts with his brother hit No. 1 following the release of an episode where the tight end chats about Swift. As for Kelce’s social media accounts, the football star has attracted more than 1.3 million new followers across several platforms. Swift’s appearance has even inspired a condiment (yes, a condiment), along with merch, including everything from sweatshirts to duffel bags popping up on Etsy.

I’m going to go out on a limb and say most of our readers know more about Taylor Swift than they do Travis Kelce. If you want to get up to speed on Taylor’s supposed new beau, check out this episode of the HerMoney podcast, where I chatted with Donna Kelce. Mom to Travis and Jason (who plays for the Philadelphia Eagles), she made NFL history earlier this year as the first mom to have two sons compete against each other in the Super Bowl.

Have a great week!

Jean

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