The Latest Personal Finance News for May 2025

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.

Education Department to Resume Collections on Defaulted Student Loans

The U.S. Department of Education announced that it will resume collections on defaulted federal student loans. On May 5, the federal agency will resume the Treasury Offset program, which may withhold federal tax refunds and Social Security payments to pay the debt.

The Education Department also plans to send email notices to all borrowers in default explaining the development and urging them to restart monthly payments, enroll in an income-driven repayment plan or register for loan rehabilitation.

Later this summer, the Office of Federal Student Aid will start sending the required notices to begin wage garnishments. If you're affected, your employer may withhold up to 15% of your disposable pay.

Why It Matters

According to the Department of Education, more than 5 million borrowers are in default, with 4 million more in late-stage delinquency (91 to 180 days past due). The federal agency hasn't collected on defaulted loans since March 2020, when the CARES Act was passed.

In addition to costly fees and interest charges, borrowers in default may face garnished wages and federal benefits. That said, it won't occur immediately. Once you receive the notice for the Treasury Offset program, you have 65 days to avoid a federal benefit offset by getting on an approved repayment plan, paying the debt in full or making a valid objection.

If you've received a notice of wage garnishment, you have 30 days to negotiate a repayment plan with your loan servicer and send the first payment. Alternatively, you can request a hearing to object to the garnishment.

What You Can Do

Key Inflation Number Hit a Four-Year Low in March

The consumer price index (CPI) came in lower than expected in March. Overall, prices increased by 2.4% from a year ago and fell 0.1% from February.

More important, the core CPI, which excludes volatile food and energy prices, came in at 2.8%, the lowest level since March 2021.

Why It Matters

The latest inflation numbers are encouraging, but they don't include tariffs announced by the Trump administration at the beginning of April. While it's not certain the import taxes will remain in effect for an extended period, full implementation could cause price levels to increase by another 1% to 2%, according to Morningstar.

What You Can Do

Consumer Sentiment Reaches Second-Lowest Level Since 1952

Consumer sentiment has fallen for the fourth straight month, plummeting 11% in preliminary results for April to 50.8, according to the University of Michigan. That's the second-lowest reading since 1952—the lowest was in June 2022, when inflation peaked at 9.1%.

What's more, the share of consumers expecting rising unemployment hit its highest point since 2009, while year-ahead inflation expectations surged to 6.7%.

Why It Matters

The preliminary survey was completed before the Trump administration's partial tariff reversal on April 9 and before the news that the economy contracted in the first quarter of 2025. However, it's a good indicator that both economists and consumers are concerned about the broader economic impact of tariff policy.

While it's unclear how long the import taxes will remain in place, it's a good idea to prepare your finances for a potential recession.

What You Can Do

Good Credit Can Contribute to a Healthy Financial Plan

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About the author

Ben Luthi has worked in financial planning, banking and auto finance, and writes about all aspects of money. His work has appeared in Time, Success, USA Today, Credit Karma, NerdWallet, Wirecutter and more.

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