Low GDP Growth and Stalemate in the Congress

With the Bureau of Economic Analysis releasing tepid GDP numbers of only 1.3 percent growth and last night's failure of the House of Representatives to bring up Speaker Boehner's (R-OH) debt limit proposal, the markets opened down. Already a poor market showing this week, with the Dow Jones down 440 points through Thursday, today's news only highlights what is becoming an urgent need for policymakers to come to a deal and pass a debt ceiling increase as well as some sort of strong deficit reduction measure to send a signal to markets.

The House Rules Committee is scheduled to vote on a re-draft of the re-draft of Boehner's proposal at 11am this morning, which means that this bill may move to the floor soon. However, with the Senate saying this plan is dead on arrival, more negotiating between the two sides is needed.

With all of this in mind, President Obama is scheduled to speak at 10:20am this morning, addressing the current debt limit debates and how he plans to move forward. We plan on tuning in to see what he says, and let's hope something can be done to help end the stalemate.

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Recent Student Loan Actions Forgo $5 Billion in Repayments

The Department of Education announced last week a six-month extension of automatic forbearance to all borrowers enrolled in the SAVE income-driven repayment plan while it is being challenged in courts, adding that they will forgive any unpaid accrued interest during that time. We estimate that the Department of Education is forgoing roughly $500 million of repayments per month, meaning that this extension would result in $3 billion in forgone payments, bringing the total amount up to $5 billion. Importantly, much of those payments will instead be paid later, and so the net cost would be some fraction of that $5 billion.

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