Weekly Market Update

PROPOSED BUDGET CUTS TO EDUCATION

Thursday, May 25, 2017

A significant cut to college education programs that make college more affordable, particularly for low-income students, and major changes to federal student loan programs are among $9.2 billion in proposed cuts to the U.S. Department of Education. Details released Tuesday show $59 billion in funding for education -- a 13.5% decrease. The budget proposes to eliminate subsidized student loans, a program that pays low-income students' interest payments while they're enrolled. Repayment options may be reduced as well, leaving one repayment plan that caps monthly payments at 12.5% of income and forgiving remaining balances after 15 years for undergraduates and 30 years for graduates. In addition to the proposed overhaul of the student loan program, the White House budget also recommends cuts to programs that help students afford school while in college, including federal work-study. Though Congressional approval is required for any proposed changes, the list of cuts signals the Trump administration's approach towards college costs and student debt.

In Other News

  • The Duchossois family is giving University of Chicago Medicine its biggest ever donation: $100 million to establish an institute devoted to improving health and preventing disease by optimizing the body's own defenses. The gift announced Wednesday will create The Duchossois Family Institute. The institute will support research and interventions based on how the human immune system, microorganisms, and genetics interact to maintain health.
  • Falls Church-based Inova Health System and University of Virginia announced their partnership to contribute to the research and development of nine projects that help predict, prevent, and treat diseases. This partnership will be part of a larger project between Inova Health System and the Charlottesville university that started six months ago.
  • In recent findings by the Consumer Financial Protection Bureau, researchers discovered that while the federal government spent nearly $1 billion to extend terms on student loans to millions of borrowers, many of these students default within three years. Debt collectors, however, are paid for both non-default and default loans, suggesting that much of the money is going to waste.
  • The Republican-led Joint Finance Committee will delay a scheduled vote on the University of Wisconsin System's budget amid disagreement over Gov. Scott Walker's proposal to cut tuition by 5%. Under Walker's budget, in-state undergraduate students at UW System schools would see a tuition freeze in the first year and a 5% cut in the second, funded by a $35 million increase in general purpose revenue.
  • On Tuesday, the Treasury Department auctioned $26 billion of two-year notes with a 1.316% yield, and a price of 99.87. The bid-to-cover ratio was 2.90.
  • Stock futures saw small, cautious gains on Tuesday after a bombing at a Manchester, England concert set Wall Street on edge. Despite the incident, stocks closed higher, as investors showed signs of relief by the release of President Donald Trump's budget proposal.
  • Last fall, A.I. competitors Amazon, Microsoft, Facebook, IBM, and Google banded together to form the Partnership on AI to Benefit People and Society, a collection of companies and non-profits that have committed to sharing best practices and communicating openly about the benefits and risks of artificial intelligence research. Apple joined the group as another founding member earlier this year.

Rating Agency Update

  • Moody's assigned A3 to Samford University's Series 2017-A Bonds. The outlook is stable.
  • Moody's assigned Ba3 to Life University's Series 2017A&B Bonds. The outlook is stable.
  • S&P assigned A+ to Lafayette College's Series 2017 Revenue Bonds. The outlook is stable.
  • S&P assigned AA to Carnegie Mellon University's Series 2017 Bonds. The outlook is stable.
  • S&P assigned AAA to the Board of Regents of the Texas A&M University System's Series 2017B&C Revenue Financing System Bonds. The outlook is stable.
  • S&P assigned A+ to the University of Alabama Huntsville's General Fee Revenue Bonds. The outlook is stable.
  • S&P assigned A+ to University of Vermont & State Agricultural College's Series 2017 General Obligation Bonds. The outlook is stable.
  • S&P assigned BBB to Molloy College's Series 2017 Revenue Bonds. The outlook is stable.
  • S&P assigned A- to St. Ambrose University's Series 2017 Private College Facility Revenue and Refunding Bonds. The outlook is stable.