We recently returned from a few weeks in Austria, Hungary and Sicily, so I have to continue my tradition of reporting on a few financially related observations.
First, in Sicily, they have some interesting layered pricing when it comes to Gelato (ice cream), that I don’t believe would ever fly here, and no one can any longer explain its rationale — it is just the way it is! So in Taormina, a one-scoop gelato is 2 Euro, but if you want to sit at one of the outside tables, it is 3.25 Euro, and they ask you what you are going to do at the cashier! By the way, a Euro is about $1.12.
Second, believe it or not, they still have cigarette vending machines in Sicily, where smoking is very much less restricted. You can buy a pack in the machine, when the stores are closed, for 8 Euro, about $9, which is definitely a higher price than in a tobacco store.
Third, according to our guide at the Planeta Winery in Sicily, the weight of a caret of gold derived from the weight of a carob seed/bean. It is a seed from a pod that grows on a carob tree, a flowering evergreen tree or shrub in the legume family. Wikipedia confirms this.
Fourth, men in Europe definitely use more change purses, like I do, in order to effectively recycle their change. If you are a regular reader, you know I keep mine in my car and bring it into the store when I go to one. In Europe it really makes “cents,” because, in addition to all that regular change that we have, they have 1 / 2, 1, and 2 Euro coins. My advice is that if you travel to where they use Euros, bring a change purse.
Last, this is not so much directly about personal finance, but it is about marketing a city and developing a culture with not that much of an investment. At the Vienna Opera, many times when the Opera or Ballet is sold out, it broadcasts the performance live on a big screen in the front of the Opera House. Hundreds of people enjoy it, and no doubt the nearby merchants benefit from the crowds. What about Lincoln Center? Sure, some of the performances can be seen for free on public television, but it is really not the same thing.
On a different subject, we have recently talked about the high tax burden in New York State. You no doubt know by now, that the IRS has rejected the attempts by New York and New Jersey to circumvent the $10,000 federal tax cap on the deductibility of state and local taxes, with regulations that prevent governments from giving tax credits in exchange for charitable contributions. Was this a surprise to anyone? The bottom line for now is that the tax burden on many New Yorkers will continue to be the highest in the nation.
On an encouraging note, as reported in forbes.com, Congress has recently lowered the interest rates on new government student loans taken out between July 1, 2019 and June 30, 2020, as follows:
Undergraduate Subsidized and Unsubsidized Direct Loans: 4.53%; Graduate Direct Loans: 6.08%; and Graduate and Parent PLUS Loans: 7.08%.
These represent a sizable decrease in interest rates. Previously for 2018-2019, the rates were:
Undergraduate Subsidized and Unsubsidized Direct Loans: 5.05%; Graduate Direct Loans: 6.6%; and Graduate and Parent PLUS Loans: 7.6%
This may not seem that significant, but if you take out a $10,000 undergraduate loan that is repayable over 20 years, it will mean a savings of about $682. To put it a different way, if you graduate with last year’s average student loan debt of $28,650, you could save over $1,900 over 20 years, based upon these decreased rates.
It is also important to realize that these rates are really quite good when you consider that there is no real underwriting when it comes to government student loans. There is no determination made if a student is at the right school, in the right program for their aptitudes and abilities, whether they are likely to graduate on time, or even the likelihood that the loan will be repaid in a timely manner, because the student is likely to be employed in a position with a sufficient salary to enable them to repay the loan on time. That reality of no underwriting and favorable rates is why I have never understood the arguments of some, which is that these student loans should be dischargeable in bankruptcy, like credit card debt.
That leads me to the other issue that I heard so much about when I was traveling in Europe, where, to be honest, I wasn’t able to get a lot of US news. That is the “sound bite” proposals by some Presidential candidates that the outstanding current student loan debt, which is about $1.5 trillion, should be forgiven as to the borrowers. I have not yet had the opportunity to read the details of the proposals, but I do know that the loans are technically to be repaid by one or more taxes or fees on some Americans or companies, but that doesn’t change the fact that they are being forgiven as to the borrowers. I wonder what that message is, since they signed up for the loans knowing that they were non-dischargeable in Bankruptcy, and after having done a detailed analysis of their ability to repay the loans. Now, assuming they don’t have a serious health or other catastrophic event in their life, they just get to walk away, and they don’t have to do anything for anyone or anything, financially or otherwise? I, personally, am hoping that there are some quid
pro quos, or something like that, in the details of these proposals.
In the next column we will look at impulse buying.
John Ninfo is a retired bankruptcy judge and the founder of the National CARE Financial Literacy Program. Find his previous weekly columns at http://www.mpnnow.com/search?text=Ninfo or at http://www.monroecopost.com/search?text=Ninfo.