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.
Federal Reserve Cuts Interest Rates for the First Time Since 2020
In its September meeting, the Federal Open Market Committee (FOMC) slashed the federal funds rate by 0.5%, marking the first major rate cut since March 2020. It's also the first time since July 2023 the committee adjusted the rate, which reached its highest level in more than 20 years after a sharp series of hikes implemented in an effort to curtail inflation.
Additionally, FOMC members anticipate another half a percentage in cuts over the committee's two remaining meetings in 2024, as well as four more cuts in 2025 and two more in 2026.
Why It Matters
The Federal Reserve's federal funds rate has a direct impact on the interest rates financial institutions charge on various consumer loans. Though rate cuts may not impact consumers immediately, with interest rates starting a downward trend, you can expect annual percentage rates (APRs) for credit cards, personal loans, auto loans and more to follow suit.
At the same time, the federal funds rate affects the interest rates banks and credit unions offer on their deposit accounts. If you've stashed money in a high-yield savings account, for instance, you'll likely start earning less interest on your money.
What You Can Do
- Learn more about the federal funds rate.
- Understand how the Fed rate cut impacts your finances.
- Evaluate your savings and debt.
- Consider whether to lock in a high CD rate now.
Inflation Nears the Federal Reserve's Target
In August, the consumer price index (CPI) rose by 2.5%, the smallest increase since February 2021. Down from 2.9% in July, the inflation metric continues to close in on the Federal Reserve's target of 2%. On a month-to-month basis, the index rose by 0.2%, the same growth rate as July.
The Personal Consumption Expenditures (PCE) price index, which is the Federal Reserve's preferred inflation metric, also reached 2.5% in July.
Why It Matters
Persistently high inflation rates have pummeled consumers' wallets over the past few years. The FOMC's decision to start cutting interest rates in September after more than a year of uncertainty signals conviction that the economy is on the right track.
But while inflation continues toward a healthy level, it doesn't mean prices are universally going down. In particular, gasoline prices dropped by 10.3% and used vehicles are 10.4% less expensive than they were a year ago. However, shelter costs are up 5.2%, and transportation services are 7.9% more expensive.
As a result, it's still important to watch your spending and find ways to cut back on expenses.
What You Can Do
- Understand how inflation works.
- Look for the next inflation report on October 10.
- Read up on ways you can fight inflation.
- Look for ways to reduce your risks when borrowing money.
FAFSA Available Only on a Limited Basis
In the past, the Free Application for Federal Student Aid (FAFSA) was made available to all students on October 1 each year. But, after a late release last year, the Department of Education has announced a slow release for the 2025-26 school year.
More specifically, the application will become available to a limited number of students and colleges on October 1 and then slowly expand that availability. It's expected that the form will be accessible to all students on or before December 1.
Why It Matters
Certain types of federal student aid are awarded on a first-come, first-served basis. As such, it's crucial that you submit your application as quickly as possible once it becomes available.
If you're an incoming freshman considering multiple schools, the delay could potentially impact your decision process. As a result, it's important to contact each college's financial aid office to get updates on when the FAFSA will become available to you.
What You Can Do
- Learn more about financial aid.
- Find out how much money you can get through the FAFSA.
- Learn about how to pay for college if your financial aid falls short.
- Get details on how to regain eligibility for aid if you've lost it.
Mortgage Rates Continue to Slide
The average interest rate for a 30-year fixed-rate mortgage hit 6.09% in mid-September, according to Freddie Mac, the lowest point since February 2023. Comparatively, interest rates hit a 23-year high in October 2023, maxing out at 7.79%.
The government-sponsored enterprise noted in its most recent update that it expects lower rates to improve demand for home purchases and refinance loans. While mortgage rates aren't directly influenced by the federal funds rate, experts anticipate that they'll continue to decline along with other consumer loan rates.
Why It Matters
Mortgage interest rates have been uncomfortably high for nearly two years, disrupting the housing market and pushing mortgage payments to record highs.
It's unclear if and when rates will return to the record low level that homebuyers and homeowners enjoyed in 2020 and 2021. However, the recent downward trend gives borrowers more reason to be optimistic.
What You Can Do
- Learn how to deal with high mortgage rates.
- Read up on how mortgage interest works.
- Consider whether to buy a house when rates are high.
- Understand the pros and cons of refinancing a mortgage loan.
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.
On-Ramp Period for Federal Student Loans Has Ended
The on-ramp period instituted by the Biden administration a year ago has come to an end. The U.S. Department of Education announced the relief program shortly before federal student loan payments resumed a year ago after a three-and-a-half-year pause.
During the on-ramp period, student loan payments would still be due, and interest would continue to accrue. However, federal loan servicers would not report missed, late or partial payments to the credit reporting agencies or put unpaid loans in default.
Why It Matters
Starting this month, federal student loans may be reported to the national credit bureaus as delinquent after 90 days of missed payments. Additionally, your loans may go into default if you fall behind by 270 days or more.
If you've taken advantage of the on-ramp period and you're still concerned about your payments, consider taking advantage of other federal relief options. For example, you can discuss income-driven repayment plan options with your loan servicer or check to see if you qualify for forbearance or deferment.
What You Can Do
- Learn more about repaying your student loans.
- Look into income-driven repayment plans.
- Consider forbearance or deferment.
- Get details on how to qualify for student loan forgiveness.