Here's the latest personal finance news, how it may impact your financial plan and what you can do to maintain your financial well-being.
Interest Rates Are Expected to Stay High
In its September meeting, the Federal Reserve Open Market Committee (FOMC) declined to hike its interest rate again. But in August, the core inflation rate, which excludes food and energy prices because they're more volatile, increased at a faster clip than expected—though it's still on a downward trend year over year.
As a result, the FOMC indicated that it would increase its rate once more before the end of the year. Its projections also include two rate cuts in 2024, but that's two fewer than it indicated a few months ago.
Why It Matters
The federal funds rate directly influences interest rates consumers pay on most debt, including credit cards, auto loans, student loans and personal loans. Mortgage rates are also indirectly affected by the federal funds rate and the prevailing inflation rate.
With debt levels climbing to record highs, consumers will continue to feel the sting of high interest rates for at least another year unless the inflation rate starts to decrease at a quicker pace.
What You Can Do
Student Loan Payments Are Restarting, but Not for Some Borrowers
Federal student loans will officially resume payments in October, but some borrowers will get a little extra time. If you've graduated recently, for instance, you'll receive a six-month grace period from your graduation date, which may be later than the October restart.
Additionally, some reports show that borrowers who made payments during the payment moratorium may have later due dates based on how many payments they made. Even borrowers who made payments before the pause began could qualify for a delayed due date if their loan servicer received the payment after it went into effect.
Why It Matters
If your due date has been delayed due to a grace period or previous payments you've made, you might not need to worry about making a payment in October. That said, interest began accruing on student loans in September and will continue to accrue whether or not you make a payment this month, so it can still be worth making a payment to avoid extra interest charges.
What You Can Do
- Check your student loan balance and due date.
- Learn about how capitalized interest on student loans can affect you.
- If you're struggling, consider ways to extend your student loan payment pause.
- Understand how student loans can affect your credit.
Auto Loan Debt Has Surpassed Student Loan Debt
For the first time since 2010, auto loan debt has outpaced student loan debt, according to the Federal Reserve Bank of New York. Experts say the reversal is primarily due to the federal government pausing interest accrual on federal student loans and the blistering rate at which vehicle prices increased in 2021.
With persistently high inflation, more Americans are defaulting on their auto loan payments. According to Experian data, 30-day delinquencies increased to 2.72% in the second quarter of 2023, surpassing pre-COVID levels.
Why It Matters
As federal student loan payments resume and interest rates remain high, consumers may find it increasingly difficult to keep up with auto loan payments. Falling behind on payments can damage your credit score and result in repossession, which can disrupt your life in several other ways.
What You Can Do
- Read up on what to do if you can't afford a car payment.
- Learn about different ways you can lower your car payment.
- Learn how to pay less interest on your car loan.
- Consider getting out of an auto loan you can't afford.
Good Credit Can Contribute to a Healthy Financial Plan
While there are aspects of your financial situation that are outside of your control, building and maintaining a good credit score can help you weather challenges and save money in the long run.
With Experian's free credit monitoring service, you'll get access to your FICO® Score☉ and your Experian credit report. With this information in hand, you can gauge your credit health and target areas of your credit profile that you can improve over time. And with real-time alerts whenever your report is updated, you can spot potential issues and fraud and address them quickly.