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Biden administration plans to extend student loan forbearance: How the headlines affect your money

Markets held steady amid political uncertainty and higher interest rates.

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US President-elect Joe Biden speaks at The Queen theater in Wilmington, Delaware on January 7, 2021, to announce key nominees for the Justice Department.
Jim Watson | AFP | Getty Images

Markets held steady Tuesday despite political uncertainty and the possibility of higher interest rates. Student loan borrowers remain in limbo. Here's how the headlines could affect your money.

Markets steady amid political tension

After an up-and-down trading session, stocks ticked up slightly Tuesday. The Dow rose 0.2%, the Nasdaq climbed 0.3%, and the S&P 500 finished the day up less than a tenth of a percent.

The market opened flat Wednesday as investors mulled political uncertainty, rising interest rates, and the possibility of a third stimulus package. 

Vice President Mike Pence indicated Tuesday night that he would not invoke the 25th Amendment to remove President Donald Trump from office, heading off a House vote to urge him and the Cabinet to do so. The House will convene to consider Trump's impeachment on Wednesday.

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Treasury yields reach 10-month high

Tuesday saw the interest rate on the benchmark 10-year Treasury note hit 1.187% — the highest level since March — before receding back to 1.13%. The 30-year T-bond rose to 1.88%, another post-March high.

Interest rates have been on the rise since Democrats won majorities in both houses of Congress. Traders anticipate another round of fiscal stimulus, which would prompt the government to issue more bonds. So they have been selling, which in turn pushes prices down and increases yields.

More time on student loans?

A Biden administration aide told reporters last week that the president-elect plans to extend the forbearance on federal student loans that's set to expire this month. 

The announcement lacked an important detail: the length of the extension. "Federal student loan borrowers are in limbo right now when it comes to payment restarting again," Anna Helhoski, a student loan expert at NerdWallet.com, told CNBC. Predictions for a new deadline vary among student loan experts. Among the most optimistic: Student loan expert Mark Kantrowitz, who believes forbearance will last through September 2021.

Words you've heard: 10-year Treasury note

A 10-year Treasury note is a loan you make to the U.S. government that matures in a decade. The yield on the 10-year note is considered a "benchmark" rate, meaning it influences rates on similar-length loans, such as 15-year mortgages, which rise and fall alongside it.

Although the daily news can have an impact on your wallet, remember to take a long-term outlook when it comes to decisions on spending, saving, and investing.

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