| | | | | | | | | | | Axios Markets | | By Emily Peck and Matt Phillips · Aug 25, 2022 | | 🤠 Howdy. The market's focus is about to turn to Jackson Hole, Wyoming, the site of the annual Fed conference that culminates with a big speech from chair Jerome Powell tomorrow. Let's do this. Today's newsletter, edited by Kate Marino, is 1,145 words, 4.5 minutes. | | | | | | 1 big thing: The cherry on top |  | | | Illustration: Shoshana Gordon/Axios | | | | Americans with student loans cheered the announcement yesterday that the Biden administration is forgiving some of that burden. But for many this was just the cherry on top of the unprecedented — and possibly even more impactful — nearly three-year loan payment moratorium, Emily writes. Why it matters: At an individual level, for some borrowers, the freeze on student loan payments first put in place during the Trump administration freed them up to buy homes, rent better apartments, and switch careers. Some even went back to school. They also bought stuff. - Mark Mullen finished medical school in 2020 and hasn't had to make a loan payment since. He tells Axios he has $350,000 in debt, and the $10,000 in loan forgiveness he might qualify for wouldn't have the impact the debt pause had.
- Mullen had an extra $500 in his pocket per month for more than 24 months. That $12,000+ far eclipses the cash from the COVID stimulus checks or child care tax credit payments that some Americans received.
The big picture: While there's been hand-wringing and debate over whether the loan forgiveness will cause inflation, the plain fact is that the pause on loan payments already put upward pressure on prices. On the flip side: Crucially, the moratorium helped shore up borrowers' personal finances. Their credit scores increased dramatically, according to an analysis from the New York Fed. And credit card use declined, as well. - "As someone who graduated in 2020, it saved me from drowning under payments when there was no hope of starting my career," says Becca Cox, who is carrying $40,000 in loans.
- Instead of spending $389 a month on loan payments, she saved the money while working in her Michigan hometown and then moved to New York where she found a better job than would have been possible before.
"It saved us," said Arianna Masterson, of the moratorium. She's a nurse living in Ulster County, New York, with a typical monthly student loan bill of more than $1,000. This summer, because of the financial relief, she was able to take time off from work after giving birth to a stillborn daughter. Yes, but: There are plenty of people who missed out completely on this massive stimulus. - Those who didn't go to college, for starters.
- Folks who refinanced their federal loans into private ones, to take advantage of lower interest rates, also were a bit chagrined.
Go deeper. |     | | | | | | 2. The next student loan crisis |  | | | Illustration: Maura Losch/Axios | | | | President Biden's student debt cancellation plan is welcome news for millions of existing borrowers, but it does little to address high college costs that will burden future students, Axios' Dan Primack writes. Why it matters: Student Defense, a nonprofit that is pushing for broader systemic changes, compared the plan to bailing the water out of a sinking boat without plugging the leak. By the numbers: Higher ed costs are astronomical, including for graduate programs, even though "sticker price" inflation has moderated in recent years. - Average in-state tuition for a four-year public university is $9,410 per year, and more than doubles to $23,890 for out-of-state students, per The College Board. Average four-year private university costs are $32,410, per year, or nearly $130,000 for the diploma.
- For context, the median family income in 2021 was $79,900. If such a family has two in-state college students, 23.5% of their pre-tax income would be consumed by college costs (minus financial aid and/or federal loans).
This is a systemic issue, which explains why most politicians have preferred to play along the easier margins. - Biden's primary responses to future loan obligations have been to increase the size of Pell Grants, crack down on predatory schools, and reduce monthly repayment percentages. None addresses the costs of the product being financed.
Keep reading. | | | | | | | | 3. Catch up quick | | 🥼Amazon is shutting down its telehealth service, Amazon Care. (CNBC) 🇨🇳 China rolls out aid to power and ag industries amid drought and heat wave. (WSJ) | | | | | | | | A message from Axios | | Get $200 off Axios Pro: Deals | | |  | | | | If you've been curious about Axios Pro, there's never been a better time to subscribe. Why it matters: Inflation, international conflicts and a looming recession all make H2 difficult to forecast. Axios Pro is here to help. Use code PRO200 at checkout to get $200 off your subscription. | | | | | | 4. Zoom boom meets doom |  Data: FactSet; Chart: Axios Visuals Remember the stay-at-home stocks? How the trendy have fallen, Matt writes. Why it matters: The saga of stay-at-home stocks is a useful reminder that hot new technology stocks can fall out of favor fast. Driving the news: Two companies whose businesses seemed custom-made for the COVID era — Zoom Video and Peloton — are making a splash this week. The big picture: While such moves are fairly large for any given week, they obscure the big story of these companies — a familiar one on Wall Street. - It's called boom-and-bust.
Flashback: During peak COVID, a number of companies that were optimized for the WFH era posted remarkable gains, as customers flocked to their services. - In 2020 alone, shares of both Peloton and Zoom were up an astounding 400%.
- Shopify, which helps brick-and-mortar retailers set up online stores rose nearly 200%.
- Chegg, which offered digital textbook rentals, roughly doubled.
Today: Almost all those gains have vaporized. Go deeper. | | | | |  | | | | If you like this newsletter, your friends may, too! Refer your friends and get free Axios swag when they sign up. | | | | | | | | 5. Revlon shareholders' setback |  Data: FactSet; Chart: Axios Visuals Revlon's bankruptcy judge just dealt a reality check to meme stock dreams, Axios' Kate Marino writes. What happened: The judge overseeing the case yesterday denied a retail shareholder group's request to form an official equity committee. The move would have given the group a better seat at the table for bankruptcy plan negotiations. Why it matters: Judge David Jones basically said he sees little chance that shareholders will get money back in the eventual bankruptcy plan — despite the stock's sevenfold increase in the wake of the filing. - The kicker: "A positive stock trading price alone is insufficient" to prove shareholders are likely to recover anything, Jones said, according to Bloomberg.
- Yet, the shareholders had pointed to the stock price as evidence of just that, the WSJ noted. (That's even though Revlon's bonds — which will get repaid first — trade at pennies on the dollar.)
The background: Official equity committees aren't common, but they're a real thing — and they get the court's blessing when there's any reason to believe there's value for shareholders. - These committees get their lawyers paid for out of the bankruptcy estate, just like the more commonplace committees of official creditors do.
Yesterday's ruling means that while shareholders can still agitate, they have to pay for their own lawyers in order to fight for the scraps. - Shares fell 12% — but are still almost 500% higher than the lows around the time of the bankruptcy filing.
The bottom line: Judging from the objections to the shareholders' motion to form a committee — objections from the company itself, as well as creditors — virtually no one who's in a position to decide things thinks that Revlon's share price reflects reality. | | | | | | | | A message from Axios | | Get $200 off Axios Pro: Deals | | | | | | | | If you've been curious about Axios Pro, there's never been a better time to subscribe. Why it matters: Inflation, international conflicts and a looming recession all make H2 difficult to forecast. Axios Pro is here to help. Use code PRO200 at checkout to get $200 off your subscription. | | | | 🍩 1 thing Emily loves: Duck Donuts. Sometimes heaven is a small round pastry with a hole in the middle. This delightful shop, founded in Duck, North Carolina in the Outer Banks (where I just spent a blissful, beachy week that I promise I'll stop talking about soon) is now all over the U.S. You guys it is so good. They make the doughnuts to order, so you get them nice and warm with a little crispness at the edges. Bacon is one of the toppings! And they're not too big, like some of the fancy "artisanal" doughnut places. These are "cake" doughnuts, not yeast, which I previously thought were my favorite. Readers: Do you have a favorite doughnut shop or type? Tell me everything and maybe we can get Kate to let us expense them all. (Hi Kate!) Reply to this email and let us know. Include your name and where you live and maybe we'll round up the answers. |  | | Why stop here? Let's go Pro. | | | | | | Axios thanks our partners for supporting our newsletters. If you're interested in advertising, learn more here.
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