Financial Independence

While many were enjoying an extended break last week, there was good news and bad news on the financial independence front. For the economy, independence from a Federal Reserve rate cut proved to be the right course of action, at least for now. The labor market bounced back from a weak showing in May, with 224,000 new positions in June, across a variety of sectors. Despite the overhang of trade concerns, even manufacturing added workers.

The unemployment rate edged up to 3.7 percent, but for the right reason: the labor force increased. Despite the strength of the report, annual wage gains have eased to 3.1 percent from the high point reached in February. Still, “when you smooth out the wild swings in job gains, it is clear the economy and the labor markets remain solid,” according to economist Joel Naroff.

For those who believed that the Fed should have lowered interest rates at their June meeting, including the President, the June jobs report underscores why waiting to do so might have been the most prudent course of action. The central bank will gather more data before its upcoming meeting at the end of July, including the overall economic scorecard for the second quarter, the Gross Domestic Product (GDP). Naroff notes Q2 GDP “could be the weakest in three years.  But that would not necessarily mean the economy is falling apart enough for the Fed to actually start cutting rates.”

But investors have become dependent on the Fed to make their bullish case. On July 3rd, the Dow, S&P 500 and the NASDAQ Composite all closed at record high levels, as investors continued to bet that a rate cut is in the offing. Perversely, investors “root for weak numbers so the Fed will cut rates, rather than hope for strong numbers that show growth remains solid.” Naroff asks a critical question: “is it better to have a soft economy and rate cuts than a strong economy and no rate cuts?” He argues that a rate cut would keep investors dependent on the Fed and solidify the central bank’s “role as drug supplier to the equity markets.”

College Borrowers’ Financial Independence at Risk

Amid the good news on the macro economy, there has been a disturbing trend for education borrowers: a massive scam is targeting millions of Americans who owe $1.5 trillion of student loans. The FTC, the Department of Education (ED) and the CFPB have been flooded with reports of aggressive phone calls, emails, letters, and/or texts offering consumers relief from their federal student loans or warning them that federal student loan programs would end soon. The communications seem like they are coming from the Department of Education, but they are not. The fraudsters promise debt forgiveness and lower payments and often demand upfront fees of thousands of dollars, which is illegal, for this so-called service.

 Some red flags include:

  •  A requirement to pay up-front or monthly fees for help.

  • The promise of immediate and total loan forgiveness or cancellation.

  • A claim that the offer is limited and that you need to “act NOW!”

  • A request for Federal Student Aid Identification (FSA ID) password.

  • A third-party authorization form or a power of attorney.

  • Communications with spelling and grammatical errors.

One reason this is so confusing is that the ED actually does work with outside companies to service student loans. To ensure that any company is legit, borrowers should review the government’s list of trusted companies that provide student loan services and also private collection agencies (PCAs).

If you think that you have been scammed, file a complaint with the FTC at; the CFPB at and your state’s Attorney General’s office. Additionally, be sure to file a report of suspicious activity through the ED’s Federal Student Aid Feedback System and immediately change your FSA ID.

What’s doubly frustrating about this particular scam is that these scammers prey on desperate borrowers who could find relief from the terms of some federal loans themselves, AT NO COST. Here’s what you can do through the Department of Education

  • Lower or cap your monthly federal student loan payment

  • Consolidate your federal loans

  • Determine if you are eligible for loan forgiveness or other programs

  • Get your loans out of default

Here’s the catch: While these legitimate plans could result in lower monthly payments, they often extend the term of the loan for years in the future and result in more interest paid over the life of the loan. It is imperative for borrowers to run the numbers and also consider consolidating and refinancing loans with a private company, but doing so may mean that they lose access to the ED programs above.