As Americans face rising costs on just about everything, the amount of debt they're taking on is going up, too. Credit card balances recently reached a record $1.28 trillion. And according to credit-reporting company Experian, 38% of U.S. consumers now have a personal loan, with the number of these loans on credit reports reaching 67.5 million. Both of those figures represent the highest levels since Experian started collecting data in 2017.

For some, the strain of staying afloat is becoming more evident. The financial stress index from the National Foundation for Credit Counseling (NFCC), which reflects the financial ability of consumers to repay unsecured debts, recently hit its highest level since the NFCC began tracking it in 2018.

“I'm not surprised. I see a lot of people dealing with short-term financial pressure, and it's been going on for a while,” says Leah Hadley, a wealth adviser in Cleveland. A large, unexpected bill can leave households with no choice but to take on debt if they don't have a cash buffer to absorb the extra expense. (Or they may tap their retirement savings. Last year, about 6% of eligible participants in Vanguard 401(k) plans took a hardship withdrawal — an all-time high.) And while the unemployment rate was recently a relatively low 4.3%, the average time it takes job seekers to find work is the longest it has been since 2019. During an extended bout of unemployment, families may rely on credit or retirement savings to make ends meet.

But economic challenges are only part of the picture. Even financially comfortable households are borrowing more frequently rather than paying cash, says Derik Farrar, head of everyday borrowing at U.S. Bank. Some are taking on loans strategically to fund, for example, a badly needed home renovation, while others are incurring debt to keep up with lifestyle inflation — say, upgrading to high-end cars or taking luxury vacations.

Another factor is how much easier it has become to borrow, and to borrow larger amounts, with the click of a button. Financial technology companies such as SoFi, Prosper and LendingClub, for example, let consumers take out personal loans online in as little as 24 hours, without ever speaking to a representative. Buy now, pay later (BNPL) plans from fintechs such as Affirm, Afterpay and Klarna have surged in popularity in recent years, allowing shoppers to delay payment on purchases big and small by signing up for a plan at online checkout. And major retailers, airlines and hotels tout their credit cards to customers, promising ample rewards on their spending — but with the potential to rack up high-rate debt, too.

While borrowing may be quicker and more convenient, the challenge of paying it back remains. Even a decent income isn't surefire protection against debt trouble. People seeking credit counseling now have an average household income of about $70,000, up from $40,000 before the COVID-19 pandemic, according to data from the NFCC.

Ideally, you'll have an emergency fund with at least three to six months' worth of living expenses, stored in a safe, easily accessible place, such as a bank savings account. But if you exhaust those funds — or haven't built them yet — you may have to look to other sources of cash in a pinch. Or, if you need extra money to finance a big project, such as a kitchen remodel, you may be looking to narrow down the best borrowing strategy.

If you decide to borrow, the key is understanding how the loan fits into your finances and how you'll repay it. This guide breaks down the main borrowing options and how to use them effectively.

Questions to ask before getting a loan

Before taking on a loan, step back and ask a few key questions. The answers can help you decide whether borrowing makes sense and, if so, determine how you'll repay the debt.

1. What are you borrowing for? Productive vs unproductive debt

Anytime you consider taking on debt, ask what you're getting in return and how long that benefit will last. For example, borrowing to renovate your home or launch a business can improve your finances over time, boosting your home's value or increasing your income and net worth.

Debt that covers short-term spending, such as shopping for designer clothes or going on a vacation, is less valuable and doesn't build wealth. Farrar frames the former as productive debt and the latter as unproductive, adding that unproductive debt should be minimized.

2. Can you reduce how much you need to borrow?

If you decide to get a loan, try to maximize how much of the expense you can cover yourself, limiting the amount you borrow. Even a small reduction in the loan balance can lower your monthly payments and make the loan easier to repay.

Start by reviewing your budget and identifying areas to cut back on discretionary spending, such as dining out or subscriptions. “People don't always realize how much they're spending until they actually sit down and look at their budget,” says Michael McAuliffe, president of Family Credit Management, a nonprofit debt-relief organization in Rockford, Illinois.

You can also look for ways to bring in additional income through part-time or gig work. This is especially important if you're borrowing to cover ongoing expenses. “In this situation, more loans are not the answer. People need to change their long-term habits,” says McAuliffe.

3. Can you afford to pay off the debt?

Make sure you can comfortably handle the monthly payments on any future loans. This is especially important with secured debt, which is backed by an asset; missing payments can put your home or retirement savings at risk. And keep in mind that being able to make the minimum payment doesn't necessarily mean the debt is affordable in the long run.

McAuliffe says that he has seen clients underestimate their total outstanding balances by tens of thousands of dollars. For that reason, it's important to look beyond the minimums and have a clear plan for paying down the balance. A debt-repayment calculator can help you estimate how long it will take based on your target monthly payments.

4. Are you getting the best terms?

Once you've decided to borrow, the next step is to make sure you do so on the best possible terms. A little preparation can lift your chances of approval and help you qualify for lower interest rates.

Start by checking your credit reports and making sure your accounts are in good standing. You can get your report from each of the big three credit-reporting companies (Equifax, Experian and TransUnion) weekly for free at AnnualCreditReport.com. Are there any mistakes dragging down your credit score, such as a credit card issuer reporting a missed payment that you made on time?

You'll also want to gather basic documentation, such as recent pay stubs, bank statements and tax returns, especially if you're applying with a new lender. “The more you borrow, the more you’ll need to verify,” says Farrar. Working with a bank or credit union where you’ve already developed a relationship can improve your chances of qualifying. However, check with a few other lenders to see whether any of them offer you a better rate. Some lenders also provide prequalification tools that let you estimate potential rates without undergoing a credit check.

Types of loan: Consider your options

When it comes to a loan, the right choice for you depends on how much you need, how quickly you can repay the debt and what assets you have available to borrow against. Here are some options to consider.

Zero-interest credit card offers

For short-term borrowing, a credit card with a 0% introductory interest rate on purchases can be one of the most cost-effective options. These offers typically allow you to carry a balance for 12 to 21 months without owing any interest. If you pay off the balance in full before that window closes, it’s essentially a free source of borrowing. A few of the top options include Chase Slate, U.S. Bank Shield Visa and Wells Fargo Reflect, which all offer new customers a 0% rate for 21 months.

The trade-off: If you’re still carrying a balance after the promotional period ends, interest starts up, usually at a high rate, flipping an initially attractive offer into one of the most expensive sources of borrowing. The average credit card rate is about 24%, according to LendingTree. No-interest credit card offers make sense for smaller purchases that you can pay off relatively quickly, such as car repairs or furniture.

“I don’t have a problem with 0% offers as long as you treat them as a short-term bridge,” says Hadley. “You need a plan to get rid of the debt before the deal expires.”

Home equity lending

If you own your home, you may be able to borrow against its value through a home equity loan or a home equity line of credit (HELOC). To qualify, you typically need to have equity — in other words, the difference between the value of your home and the outstanding balance on your mortgage — of at least 15% to 20%. You'll also need to provide proof of income and have a decent credit score, usually of at least 680.

Home equity loans, which provide you with a lump sum of cash up front, come with a fixed interest rate and a set schedule of monthly payments that do not change. Average home equity loan rates were recently about 8%, according to Bankrate, though your rate will depend on how much you borrow, the length of the loan term and your creditworthiness. A home equity loan can make sense for a large, one-time purchase or expense, such as a home renovation project.

A HELOC is a revolving credit line that offers more flexibility, allowing you to borrow at your convenience, repay and borrow again over time. “Even if you don't see a need right away, having a HELOC in place can give you access to cash in an emergency,” says Kenyon Sutton, a financial coach in Jacksonville, Florida. If you set up a HELOC and then lose your job, for example, you can still borrow against it. HELOCs recently had an average rate of 7%, according to Bankrate. But the rate is usually variable, meaning your monthly payment can go up and down based on market conditions.

Because your home secures these loans, they typically come with lower interest rates and open the door to larger borrowing amounts than unsecured loans. While unsecured personal loans tend to max out at $50,000, home equity lending could allow you to borrow in the six figures or higher, assuming you have the equity to back it up.

The trade-off is the level of risk. If you miss payments, you could eventually lose your home. These loans also charge up-front origination fees of around 0.5% to 1% of the borrowed amount. And you can't turn to home equity loans if you're in a hurry. They take time to launch because the lender has to evaluate your home's value.

Personal loans

With a personal loan, you get a lump sum of cash and pay back the loan on a set schedule, usually between one and five years. You can see the scheduled repayments and total cost of the debt when you apply.

On average, interest rates on personal loans (at about 12% for those with decent credit) are lower than standard credit card rates. But unlike some credit cards, personal loans don't come with an initial 0% period, so you owe interest immediately. With that in mind, personal loans often make sense for borrowing that will take a few years to pay off, such as home improvements or a new appliance. Borrowers also commonly use personal loans to pay off their high-rate credit cards, refinancing the debt at a lower interest rate. You need to show proof of income to qualify for a personal loan, so don't count on getting one to cover expenses if you lose your job.

Personal loans are widely available through both online lenders and traditional banks or credit unions. Online lenders tend to offer a faster application process and approval, with funds often available within a day or two. Banks and credit unions take longer to process loan applications, but they can offer lower interest rates. And you may have a better shot at qualifying by getting in-person assistance from a representative, especially at financial institutions where you have a long-term relationship.

“Online is faster, but there's no one to advocate for you. There's less flexibility on the borderline,” says Sutton.

Buy now, pay later plans

BNPL plans split purchases into smaller payments, typically charging no interest during this time. The standard BNPL plan lasts six weeks, though it can be stretched out to 24 months or longer for larger purchases. Used responsibly, BNPL can be a tool to spread out the cost of the occasional big-ticket purchase — say, to buy a new dishwasher after your old one breaks down. But BNPL's convenience too often leads borrowers to overuse it, spending more than they can afford on food delivery, clothes or other discretionary purchases.

“The problem isn't the first BNPL purchase, it's that they keep adding up,” says Farrar from U.S. Bank.

You also need to pay attention to the fine print. In some cases, “no interest” offers come with a catch. For example, if the balance isn't paid off in time, borrowers may owe substantial penalties or retroactive interest.

401(k) loans

If you have a workplace retirement plan, there's a good chance it allows you to borrow from your balance. Roughly 79% of 401(k) plans offer loans, according to research from John Hancock. If your plan is among them, your employer determines how much employees can borrow through the program rules, up to the IRS limit of 50% of your vested account balance (the amount you could keep after leaving the job) or $50,000, whichever is lower. You must repay the loan within five years.

Unlike many other types of borrowing, getting a loan through your 401(k) doesn't require a credit check. The interest rate depends on the plan, but typically, it's the prime rate plus one or two percentage points. Recently, that equaled 7.75% to 8.75%.

While those features might make a 401(k) loan sound like an appealing route to take if you need cash, there is a substantial downside: The money you borrow is also out of the stock market until it's repaid.

“People focus on the interest rate, but there's much more to the story,” says Hadley, the Cleveland wealth adviser. “You're missing out on any potential growth during that time.” Considering the S&P 500's average return over the past 30 years is about 10% per year, that's an additional opportunity cost of borrowing on top of interest.

There's also an added risk if your job situation changes. If you leave your employer, the loan typically needs to be repaid within a short time frame — about 90 days, depending on the plan. If it isn't, the remaining outstanding balance is treated as a withdrawal, triggering income taxes on the unpaid amount plus a 10% early-withdrawal penalty if you are younger than 59½.

Because of these risks, 401(k) loans are typically best used only if more-favorable options aren't available to you — say, because you can't qualify for other loans.

How to get on top of your debt

1. Start with a clear payoff plan

As you create a plan to whittle your debt, consider trying the “snowball” method, which involves ranking the debts by size. You make the monthly minimum payment on all of them, and any extra funds go toward the card or loan with the smallest balance. That way, you pay off one account as quickly as possible, banking a win that motivates you to continue to the second-lowest balance, and so on.

Alternatively, the “avalanche” method targets the loan with the highest interest rate first. After that, you tackle your other loans in descending order of the interest rate. This strategy saves you the most in monthly interest charges over time.

2. Consolidate cautiously

Debt consolidation involves combining multiple existing loans and credit card balances into one larger loan, with a single monthly payment and often a lower interest rate. You may, for example, use a personal loan or home equity loan to pay off multiple credit cards and other high-rate debts. But if you go this route, make sure to make changes in the spending habits that landed you in debt in the first place.

"People take out a consolidation loan, and then the credit cards are still available," says Michael McAuliffe, president of Family Credit Management.

"They don’t mean to, but they charge them back up," causing people to sink even further into debt.

3. Reach out to current creditors

Lenders may offer hardship programs, such as deferred payments or rate reductions for borrowers who have lost their jobs, face a sudden medical emergency or are dealing with other temporary setbacks.

4. Turn to credit counseling

If the situation becomes difficult to manage on your own, a nonprofit credit-counseling agency can help create a structured plan and negotiate with your creditors on your behalf to lower interest rates or get more time to pay off the debt. You make one monthly payment to the service, which uses the money to pay your creditors.

The agreement typically forces you to temporarily shut down most of your credit cards for future purchases, and enrolling in a debt-management plan can have a short-term negative impact on your ability to borrow in the future. You can find a local credit counselor through the NFCC or the Financial Counseling Association of America (FCAA).

This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to Kiplinger Personal Finance Magazine to help you make more money and keep more of the money you make.

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If you have stellar credit, it opens a lot of doors in your financial life. It can help you qualify for credit cards and loans and snag the lowest interest rate on them. Landlords may consider your credit before offering you an apartment. Your credit health may affect your home and auto insurance premiums, too.

Your credit score is a three-digit number that gauges how well you’re managing your credit. FICO and VantageScore are the two primary companies that create credit scores, with lenders more commonly checking FICO scores before approving an application. Standard score models from both companies operate on a scale of 300 to 850; a score of 740 to 799 is typically considered very good, and a score of 800 or higher is deemed excellent.

There are plenty of sources to check your score. Credit-reporting company Experian, for example, provides a FICO score after you enroll. You could also use a credit-monitoring service like myFico, which sends you updates when there are changes. Take the steps below to give your credit score a lift — and to unlock the best terms on loans, insurance and more.

1. Pay your bills on time

Your payment history is the most influential factor in your credit rating, accounting for 35% of a FICO score. So it’s crucial to pay all of your bills by their due date.

If your credit card or loan payment is late by 30 days or more, the lender may report it to the credit-reporting companies, and that can significantly damage your score. (And if you pay just one day late, you may rack up late fees from the biller.)

Payments that are more than six months overdue may be placed in third-party collections, which is even more harmful to your score. Most negative information, including late payments and collection accounts, stays on your credit report for seven years.

Signing up for automatic payments of your bills helps ensure they are paid on time. You may also be able to set up phone or e-mail alerts to notify you when a due date is approaching.

2. Reduce your credit card balances

On credit cards, your utilization ratio — the percentage of available credit that you’re using — is another important element; how much you owe makes up 30% of your FICO score, and a key part of that is utilization, which is calculated both on individual credit cards as well as in the aggregate across all your card accounts.

You can determine your credit utilization ratio with an online calculator, such as the one from Bankrate.

Low utilization indicates that you can responsibly use credit and helps improve your credit score. A FICO study found that "high achievers" with a perfect credit score of 850 have an average revolving credit utilization rate of 4.1%. If you can’t keep your utilization below 5%, aim to limit it to 20% to 25%, says credit expert Gerri Detweiler. Paying off your credit card balance twice a month can help.

One way to decrease your utilization ratio is to get a higher credit limit, as long as you don’t increase the amount you charge on your card. For example, if you typically spend $1,000 a month on a card and your credit limit is $2,000, your credit utilization is 50%.

If your limit rises to $5,000 and your monthly spending remains at $1,000, the rate drops to 20%. Especially if your income has gone up and you’ve consistently made bill payments on time, you may be able to successfully raise your credit limit by requesting it through your credit card account online, says Detweiler.

3. Keep card accounts open (when it makes sense)

Even if you no longer use a credit card, leaving it open can help you maintain a high credit score. One reason is that if you close a card account, your overall credit utilization may rise because you’ll lose some of your available credit.

Eventually, shutting down a card could also lower the average age of the accounts on your credit report. The length of your credit history makes up 15% of your FICO score, and scoring models examine how long your oldest and newest accounts have been open in addition to the average age of all your accounts. Generally, a higher average account age is better.

For those with a perfect FICO score, the average age of their oldest account is 30 years, according to the FICO study on high achievers. After you close an account in good standing, it typically remains on your credit report for an additional 10 years. Once it’s removed, your average account age may decline.

Instead of closing a card, Detweiler recommends asking your card issuer to switch your account to a different card that better suits your needs, while preserving the entire account history on your credit report. Alternatively, you could leave your old card open and use it to make recurring payments for one or two bills so that it stays active.

But keep in mind that in some situations, closing a credit card is the best move for your overall financial health. If you’re tempted to overspend by having the card around, for example, or if you’re paying an annual fee for benefits that you don’t use enough to make the fee worthwhile, terminating the account may be the right choice.

4. Apply for new credit cards cautiously

New credit makes up 10% of your FICO score. When a creditor checks your credit file in response to your application for a new credit card or loan, a "hard" inquiry appears on your credit report.

If you apply for multiple credit cards in a short period, the resulting cluster of inquiries on your credit report can drag down your score because this behavior indicates to lenders that you may have trouble paying your bills.

That doesn’t mean you should avoid applying for new credit cards altogether; the impact of a single hard inquiry on your score is minimal. And opening a new card can improve your credit profile in the long run, as long as you make on-time payments and carry a low debt load, especially if you don’t already have any other revolving credit accounts, says Ted Rossman, principal analyst at Bankrate.

Note that if you’re shopping around for the best deal on a mortgage, car loan or student loan, newer models of the FICO score count multiple inquiries from lenders within 45 days as only a single hard inquiry, minimizing the hit to your score.

Older versions of the FICO score (which some lenders still use to evaluate applicants) have a shorter, two-week window for rate shopping.

5. Review your credit reports for mistakes often

Errors or fraudulent accounts that appear on your credit reports can hurt your score. You can request a free credit report weekly from each of the three major credit reporting companies — Equifax, Experian and TransUnion — at annualcreditreport.com.

Look for mistakes such as an incorrect balance or credit line listed on an account or a record of late payments even though you have not missed a bill. Also check for unfamiliar accounts that you never opened, a sign that an identity thief may have taken out credit in your name.

If you find a problem, file a dispute with each credit-reporting company that’s listing it, and contact the lender or other entity that supplied the erroneous information.

A financial professional can help you create a personalized plan to manage debt, strengthen your credit profile and work toward your financial goals.

Use the tool below, powered by Bankrate, to connect with a financial professional who can help you create a plan for your specific financial needs:

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If you have a kid heading to college, you have probably half-watched two years of student loan headlines. Forgiveness on, forgiveness off, repayment plans launched and then struck down. Most of it was easy to tune out.

But if you're now sitting down to figure out how to pay next year's bill, you'll discover one of those changes matters a great deal. The Parent PLUS program, the loan most families counted on to cover whatever grants, savings and student loans left behind, now has a limit.

The change comes from the One Big Beautiful Bill Act, which became law in July 2025. For the first time, Parent PLUS borrowing is capped.

If you take out your first PLUS loan for a child starting a program on or after July 1, 2026, you can borrow $20,000 a year per student, up to $65,000 in total.

The cap follows the student, not the parent, so if both parents want to borrow for the same child, they share a single $20,000 a year.

That detail surprises people, but the bigger shift is what the cap replaces. PLUS used to have no ceiling at all. A parent who passed a basic credit check could borrow right up to a school's full cost of attendance, however high that number climbed. Families leaned on it.

For a lot of households, it was less a loan they chose than a gap-filler they assumed would always be there.

Why $65,000 falls short fast

Sixty-five thousand dollars sounds like plenty until you hold it against a real tuition bill. At an in-state public university, it might stretch across all four years. At a private college running $80,000 or $90,000 a year, it barely dents the gap PLUS used to close.

The old program rose with the price of the school. The new one ignores it. A family sending a child to a $25,000 school and a family sending one to a $90,000 school get the same $65,000, which means the households that stretched hardest for an expensive school are the first to hit the wall.

Before you stew over this in the abstract, put numbers to it. Add up four years of cost, then subtract grants and scholarships, the federal loans your student can take out, and what you can realistically pay from income and savings.

What is left is the slice PLUS used to absorb. A college cost and net-price estimator turns that from a vague worry into a figure you can plan around.

What actually changes on July 1, 2026

A few specifics decide who this hits and who it skips.

• New Parent PLUS borrowers are capped at $20,000 a year and $65,000 total per student
• The caps apply to your first PLUS loan for a program that starts on or after July 1, 2026
• If your PLUS loans went out before that date, you can keep borrowing under the old, uncapped rules, but only for three more years or until your child finishes, whichever comes first

That last line is worth sitting with. A parent already borrowing for a current student is in a completely different spot from one whose first PLUS loan lands for a freshman in fall 2026. Same school, same major, very different ceiling, all because of timing.

Graduate and professional students get squeezed harder

This is not only an undergraduate story. The same law ends Grad PLUS loans for new borrowers on July 1, 2026. Graduate students will be limited to $20,500 a year and $100,000 total, and professional students in fields like medicine, dentistry and law will be limited to $50,000 a year and $200,000 total, all under a federal lifetime cap of $257,500.

For professional school, those ceilings fall short of reality. A year of medical school often runs past $50,000 once you count living costs, and Grad PLUS used to make up the difference up to the full cost.

Now a gap opens, and it lands on the students least able to absorb a surprise, the ones still years away from the income their training will eventually produce.

Readers of my previous articles will know the refrain: The steeper your climb to a high salary, the less room you have for a financing mistake along the way.

What to do before the rules change

None of this calls for panic borrowing, and it certainly does not mean piling on debt to beat a deadline. It means trading the old assumption — that PLUS will cover it — for a plan. Start here.

Run the gap first. Before loans enter the picture, set the full four-year cost against everything you will not borrow: Grants, scholarships, 529 money and what you can pay from income. The number left over is the one that matters, and a borrowing-gap planner keeps you from guessing at it.

Use the student's federal loans before the parent loans. Loans in the student's name carry protections and income-driven repayment options that Parent PLUS and private loans do not. Parent borrowing should fill whatever gap remains, not lead.

Know your grandfather window. If you already hold PLUS loans, you may have three more years of uncapped borrowing. Find out when it ends so a junior-year tuition bill does not catch you flat.

Do not build the whole plan on PLUS. For an expensive school, the money above $65,000 has to come from somewhere: Savings, a cheaper school, more scholarships or private loans you take on knowing exactly what you are trading away.

None of those choices gets easier if you push it to the August before senior year. Look hard at repayment options and what each loan type costs over time while you build the plan, not after the money is gone.

The bigger picture

Parent PLUS was never meant to be the whole strategy. It became one because it had no limit, and a backstop with no limit is an easy thing to lean on. The caps do not make college cost more. They take away the cushion that let families avoid looking the price straight in the eye.

That is uncomfortable. It is also a nudge in the right direction. The parents who come through this in good shape will not be the ones who rushed to borrow before the deadline.

They will be the ones who ran the numbers early, picked schools that fit those numbers, and treated borrowing as one piece of a plan instead of the thing that swallowed whatever the plan left behind. The ceiling is here. Better to measure your distance from it now than to find it the hard way.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

To curb record-breaking credit card debt, the Trump administration has backed a proposal to temporarily cap credit card interest rates at 10% for one year.

While the proposal has stalled for now, the underlying debt problems for consumers haven't. According to the New York Fed, Americans are shouldering $1.25 trillion in credit card debt.

And while a change like this could bring relief to borrowers, some estimates suggest it could limit access to credit for millions of Americans.

For those carrying balances, the appeal is straightforward: Lower rates mean less money is going toward interest, and more is going toward paying down principal. In practice, that difference can be significant.

For example, if someone is carrying a balance of $20,000 and making a monthly payment of $500, at 20% interest, could spend hundreds less on interest over the course of a one-year rate cap at 10%.

While a temporary rate cap likely wouldn't eliminate long-term debt entirely, lowering interest charges, even briefly, could help ensure more of their payments go toward the principal.

Over time, that kind of difference can accelerate the process of getting out of debt.

But while this proposal looks good on paper, the broader reality is more nuanced.

Improving financial habits

Lower interest rates can reduce the cost of debt, but in many cases, it's not enough to improve financial habits. A report from Bankrate found that just 47% of Americans have enough liquidity to cover a $1,000 emergency expense, and 58% say they have less or the same amount of emergency savings compared with a year ago.

This raises questions about how much a rate cap could do to change long-term financial behavior.

In some cases, lower rates could even introduce new risks.

Lending decisions are typically based on a person's monthly debt obligations relative to their income, rather than their total debt. When interest rates are lower, those payments decrease, which can make it easier to qualify for more credit even if total debt continues to grow. That can increase overall debt instead of reducing it.

Impact on lenders

Beyond borrower behavior, a 10% cap could have broader implications for the lending system.

Lenders rely on interest rates to price risk, especially for borrowers with lower credit profiles. If that flexibility gets reduced, it can change the way credit is extended. This could force some lenders to tighten underwriting standards.

An analysis from Unleash Prosperity found a 10% interest rate cap could limit access to credit for an estimated 100 million Americans. It could also impact a large portion of existing credit card accounts.

Regardless of whether a cap is implemented, the fundamentals of managing debt remain the same.

How to manage debt

Not all debt is created equal, and how it's used matters.

Credit cards are often best used as a short-term tool rather than a long-term solution.

When paying down debt, prioritizing higher-interest balances first can make a difference. As each balance is paid off, those payments can then be applied to the debt with the next-highest rate.

For larger amounts of debt, structured loans with fixed rates and terms can offer more predictability.

If borrowing costs do come down, continuing to make the same payments can help accelerate the process of becoming debt-free.

If a 10% rate cap is implemented, how it's used will determine whether real progress is made.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Several months ago, I reviewed Wealth Your Way: A Simple Path to Financial Freedom by Cosmo DeStefano, a financial strategist, retired CPA and fellow Kiplinger.com contributor.

The book's central idea is that financial freedom is achievable through simple, consistent habits, not just a high income. Building wealth and staying out of financial trouble result when we maintain those habits and behaviors — instead of chasing get-rich schemes.

I'm pleased that sales of Wealth Your Way have been robust. After my article ran, I heard from readers who felt that, with today's economy and political situation, most people are just not going to ever get ahead.

If you're feeling that way, what book should be delivered to your door next? I would recommend this antidote to that pessimism: The recently published How to Get Rich in American History: 300 Years of Financial Advice That Worked (& Didn't) by historian Joseph S. Moore, who teaches American History at Kennesaw State University in Georgia.

When I began reading this book, I just could not put it down. Moore makes America's financial history jump off of the pages, bringing life to history, placing you right there — when great and terrible things were happening. The stories read like they could be fiction, but they are not.

We learn that speculators and con artists have been present from the beginning days of our country. While failed schemes are depressing, Moore consistently shows that the very essence of the American character is the persistent belief that tomorrow can be better than today.

He is passionate about finance and how it shaped our country and believes that by understanding its history, we will be better able to avoid the investment decisions that harmed so many across three centuries.

I interviewed Moore via Zoom and was left with the feeling that if I were a student at his university, I would take every course he teaches.

The deeper I got into How to Get Rich in American History, the more it became clear this book is the ideal companion to DeStefano's Wealth Your Way.

Here's why: Moore explains the origins of American concepts and goals regarding wealth from the earliest years of our country , while DeStephano serves as a GPS guide to achieving financial independence today.

History provides key insights into the present

If anyone thinks there was a time when people never went to bed haunted by debt, certain that the investment they'd made would pay off handsomely, well, Moore pours cold water on that myth.

We have always dreamed of prosperity while being stalked by speculative manias, economic uncertainty on a national level and panic over money — not having enough and seeking a quick fix.

You know the saying, "The more things change, the more they stay the same."

Moore shows how Americans have dealt with identical temptations generation after generation: Overconfidence, greed, the belief that real estate values always go up (until they don't) fear and despair during market crashes.

We had the Colonial land speculation, railroad booms, the roaring 1920s. Every era of American history had financial prophets with "you will make a killing" opportunities.

Before the Global Financial Crisis in 2008, Wall Street argued that bundling subprime mortgages into CDOs (collateralized debt obligations) diversified risk. Experts claimed modern financial engineering had ended the boom-and-bust cycle. The mantra was, "This time, it is different."

We all know what happened after that.

Moore points out that when investors believe "this time, it is different," logic and clear thinking fly out the window.

Yet, following each crisis, we have found a path to prosperity.

"There is something in our hearts, in our souls, something so positive and unique to America," Moore told me. "No one has to make America great again — it is and has always been great!"

Especially valuable for younger readers

Many of today's young adults are living a financial nightmare: A terrible job market, excessive student loan debt and significantly higher prices. Plus, the American dream of owning a home seems shelved for many of them, possibly permanently.

Moore reminds us all that virtually every generation dealt with the unexpected: Frightening economic challenges, depressions, bank runs, recessions, and wars. Yet, we've survived them all. We will survive AI, as well.

When it comes to juggling the financial tug-of-war each of us faces going to the supermarket — can we afford this? Do we need it? — DeStefano's guidance shows us a path out of the darkness by focusing on sound, repeatable financial habits, emotional discipline and long-term planning.

Both authors make a strong case to not fall prey to self-anointed financial gurus making predictions that must be acted on now.

Common sense

Ask any bankruptcy lawyer, "What gets a lot of people in trouble?" They will say that, often, it is a desire to impress neighbors, romantic interests, anyone and everyone with how "successful" they are.

Meanwhile, the expensive cars might be leased, and luxury items might have been bought on credit cards that are maxed out — all is for show.

Both authors make a case that financially successful people understand that more is less. Some of the wealthiest people in the country live in modest homes that they own, drive cars that are paid for and have something that money can indeed buy: A good night's sleep.

With How to Get Rich in American History and Wealth Your Way on your nightstand, you could be headed for some sweet financial dreams!

Dennis Beaver practices law in Bakersfield, Calif., and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to Lagombeaver1@gmail.com. And be sure to visit dennisbeaver.com.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

If it feels like your credit card balance is not going down, even though you're making payments each month, you're not imagining it.

Elevated interest rates, the higher cost of living and increased month-to-month card balances can make paying off debt feel more like running in place than making progress.

It's an experience millions of people are navigating right now — juggling multiple accounts, rising costs and the quiet fatigue that comes from trying to stay on top of it all.

For years, advice around paying off debt has emphasized willpower: Spend less, pay more, repeat. Those things matter, but they don't fully reflect what many people are dealing with day to day.

Many feel overwhelmed by their balances and discouraged by how slow progress can be. These feelings often lead to guilt, repeated attempts to reset, and a return to the same habits that contributed to the debt in the first place. It becomes a cycle that is hard to break.

That cycle is often reinforced by the way debt is structured. Balances are spread across multiple cards, each with different interest rates, due dates and minimum payments.

Keeping track of everything can feel like a constant mental strain. When managing debt feels complex and time consuming, people are more likely to avoid it.

The good news is that getting out of debt does not require perfect discipline. It requires clarity, structure and a system that is realistic enough to follow over time. The steps below focus on building a plan and maintaining progress in a way that reduces friction and helps you stay engaged.

Planning

1. Start with a clear picture

This step is simple, but it's often the hardest to take. List every balance, interest rate and minimum payment.

It can feel overwhelming at first, and many people put it off for that reason. But clarity is what turns a vague, stressful situation into something concrete and manageable.

Once you can see the full picture, you can start making real progress.

2. Define what you can realistically pay each month

Before choosing a payoff strategy, figure out how much you can consistently put toward your debt.

Review your income and essential expenses, then identify what's left over. This number doesn't need to be ambitious — it needs to be sustainable. A plan that works on your best month but falls apart on your hardest month won't stick.

Even a modest, consistent payment above the minimum can make a meaningful difference over time.

3. Choose a strategy that works for you

Decide how you want to tackle your balances. Two common approaches are the snowball and avalanche methods. The snowball method focuses on paying off your smallest balance first, which builds momentum with quick early wins.

The avalanche method prioritizes the highest interest rate, helping you save more over time. You can also just take a customized approach based on what feels most manageable or motivating. All of these can work, but the best strategy is the one you can stick with consistently.

4. Identify what is driving your debt

Take time to understand how the debt built up, whether from overspending, an emergency, a move or a period of higher expenses. This is not about judgment, but awareness. Use that insight to make more intentional choices and avoid repeating the same patterns.

Stay focused on the progress you're making. Picture the relief of eliminating those monthly payments, and what that money could do for you instead. Keeping that outcome in mind can help you stay motivated and avoid burnout.

Progress

1. Look for ways your lender can help

At the start of your payoff journey, explore options that could make repayment easier. Call your credit card issuer to ask for a lower APR. It doesn't always work, but it works more often than people expect.

If you're struggling financially, ask about hardship programs, as many lenders offer temporary relief.

You can also adjust your payment due dates to better align with your pay schedule. And set up autopay (at least for the minimum) to avoid late fees and protect your credit score.

2. Use tools to reduce the friction

Managing multiple balances, payments and due dates can be time consuming and mentally draining. The more complicated it feels, the easier it is to put it off or give up altogether.

That's where technology can help. Tools like Cleo's Debt Reset are designed to bring everything into one place, help build a plan that adapts as your situation changes and track progress automatically.

The goal isn't to do the work for you, but to simplify the process so you can stay consistent.

3. Consistency over perfection

Getting out of debt takes time and doesn't need to be about doing everything perfectly. Progress comes from staying consistent over time. There will be moments when progress feels slow, or times when you need to adjust your plan to address financial demands or needs. That's normal.

Your plan should be something you can easily return to, even after a setback. Recognize your small wins along the way to help reinforce your progress and keep you engaged. Ultimately, progress doesn't come from perfection, it comes from consistency.

This isn't an easy journey, but it's one you're capable of finishing. Stay patient, stay consistent and keep moving forward.

Over time, the progress will add up, and you'll have more than just a lower balance to show for it.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Picture this: You and your spouse find the perfect home. You're eager to make an offer, but before you do, you visit a mortgage banker for a pre-approval. They run the numbers, and you sit back and relax, knowing you, the meticulous bill payer and responsible card user, are in a good spot.

But then, his eyebrows furrow. He shows you an item on your credit report, a charged-off Macy's credit card. The only problem is that you've never had a card with them. Your spouse is surprised, too.

You file an appeal with the credit bureaus using the Consumer Financial Protection Bureau (CFPB), You wait. Nothing happens. This is a reality many face now.

Unmasking the culprits: Identifying the drivers of declining resolutions

Here's the issue: Mistakes on credit reports are increasing. And this is coming at a time when credit bureaus are not resolving disputes at the rate they were in the past. This can leave people with incorrect information on their report, which can hurt them financially when they need to borrow money. There isn't a simple fix as there are multiple moving parts.

First, the number of complaints filed by the CFPB (PDF) rose to a record 5.9 million in 2025. The CFPB receives complaints from customers having trouble correcting incorrect information on their credit reports. In turn, the agency will file disputes for legitimate complaints.

What's causing the increase in complaints? A joint investigation conducted by Consumer Reports and WorkMoney found that almost half the people who volunteered to check their credit reports discovered errors.

Next, you have credit repair agencies flooding each of the three bureaus with sometimes erroneous disputes. What happens is these agencies promise a temporary score bump through credit washing. This is when, if the bureau can't respond to a complaint within 30 to 45 days, it must remove the item from the credit history, even if it's accurate.

Then, there's what's going on inside the CFPB. Recently, under the new leadership of Russell Vought, the bureau has changed how customers file complaints when they find erroneous information on their credit reports. They changed the policies due to what they call a high number of illegitimate claims.

How have the policies changed? By requiring the following, per the National Consumer Law Center:

• If you want to dispute an item, you must provide personal information, such as your birth date and demographic information
• Go through two-factor authentication (when you receive a text or email code to log in), and you're limited to how many complaints you can make per phone number
• Restricting some IP addresses from allowing the user to submit a complaint, making it harder for those without home internet access to do so

Then, there's the effectiveness in helping customers resolve their complaints. A ProPublica investigation found a significant drop in the number of customer complaints resolved by two of the major credit bureaus.

It prompted four senators, led by Elizabeth Warren, D-Mass, ranking member of the Senate Banking, Housing and Urban Affairs Committee, Tammy Duckworth, D-Ill., Andy Kim, D-N.J., and Lisa Blunt Rochester, D-DE, to write letters to each bureau. In them, Warren says, "That credit bureaus are not helping customers."

The mistake that could cost you thousands

Your credit history is your financial barometer with lenders. However, if you have inaccurate information with one and it isn't resolved, it places you at a huge disadvantage when you need to borrow money, especially if those errors contribute to a lower credit score.

Here's a look at how much a $25,000 car loan (assuming no money down) costs you at different interest rates:

As you can see, there's a huge difference in total loan costs. If someone steals your information and uses it to run a few balances up, you could easily fall into the subprime category. This could cost you an extra $5,644 for this car loan.

How do you prevent this from happening to you?

Thankfully, it's easier than ever to monitor your credit health. There are tools, such as myFICO, that can alert you to any changes in your credit report, such as a new inquiry or a new account opened.

Some credit cards also offer credit-monitoring tools. Capital One has CreditWise, which alerts you to any score updates, as well as changes in your credit profile. You can also access a free credit report from each bureau weekly through AnnualCreditReport.com.

If you notice any errors in your report, do the following:

• Freeze your credit while you go through the dispute process (generally speaking, it's a good idea to keep your credit frozen all the time, except when you're applying for something that needs a credit check, such as a loan or credit card)
• Contact the bureau(s) reporting the inaccurate information and follow their dispute process
• This includes writing a letter to support your case (the FTC has an excellent sample letter as a guide)
• Send the letter via certified mail with a return receipt requested
• The credit bureau(s) have 30 days to respond
• If they deny your request, you can file an appeal
• Contact the lender that reported the error to file a dispute – if they determine it was in error, they'll have the item removed for you

Keeping on top of your credit health is now more integral than ever. With errors in credit reports increasing and fewer consumer protections available, the onus is on you to stay abreast of any changes and act promptly. Doing so can save you thousands of dollars in future loan costs and protect you from incurring debt that isn't yours.

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Wealth Wise is Kiplinger's advice column on navigating retirement-related dilemmas. Questions from real people, for real people. Got a question? See below for how to send it to us.

DEAR WEALTH WISE: We are both 61, still working, and earn $400k a year. We've accumulated substantial unsecured debt and want to pay it off using an equity loan from our primary home. However, because of our debt-to-income ratio, we can't get approved for an equity loan from our credit union. We have a second home (the reason for our high debt ratio), which we bought with our single daughter and that serves as her primary home. My husband holds the power of attorney and manages his 90-year-old father’s finances and assisted living expenses.

Should we use money from his father’s account to pay the unsecured loans — improve our DTI — and then get an equity loan to pay back what we took from his father’s account? — Up to Our Ears

Dear "Up to Our Ears": It's not a given that earning a high salary makes debt easy to manage. Even with a generous income, you may find yourself overwhelmed with monthly debt payments.

Here, we have a 61-year-old couple earning $400,000 who needs help managing their debt. A home equity loan is commonly a great consolidation tool for unsecured debts because it can offer a considerably lower interest rate.

But this couple has a high debt-to-income ratio (DTI). That means they may struggle to get approved for a home equity loan. And even if they do get approved, they may face a less favorable interest rate due to their borrower profile.

The couple wants to know if borrowing the money from the husband's father's account is a smart course of action. The husband has power of attorney and can easily access that money. But while theft is clearly the last thing on this couple's mind, as they've expressly stated their intent would be to repay every dollar, this approach raises a few red flags.

It's a very slippery slope

When a person gets power of attorney over another person's finances, it's often because they've become incapacitated due to illness, injury, or dementia. As such, they're not in a place to make clear-headed, informed financial decisions.

The person holding power of attorney is often a relative and a trusted person by nature. But here, borrowing a lump sum of money may breach that trust.

"The power of attorney from an elderly father to his son only allows the son to act for his father’s benefit, and it also includes a fiduciary duty that the agent, the son, owes to his father," explains Asher Rubinstein, estate planning attorney and partner at Gallet Dreyer & Berkey.

"Using the elderly father’s money to pay off the son’s loans is a definite breach of the fiduciary duty, as it only benefits the son and depletes the father’s assets. It may also cross the line of criminality."

Kerri Koen, estate planning attorney at Modern Legacy Law Group, agrees.

"Whenever your strategy depends on 'we’ll pay it back later,' you can be sure there are legal and ethical red flags," she says. "Using an elderly parent’s funds under a power of attorney to solve your own debt problem, even temporarily, is almost always a breach of fiduciary duty that will create legal exposure for you and risk to your parent’s care, not to mention the possibility of significant family conflict."

Jonathan Codispoti, Founder at Legacy Wealth Strategies, says the repercussions of taking an unauthorized loan could be significant.

"I understand the logic," he says. "You see a pool of money, you have every intention of paying it back, and nobody technically gets hurt. But the law, the ethics, and the practical risks all point in the same direction."

Codispoti also says that in this situation, the collateral damage could be enormous.

"Your husband could face criminal charges, civil suits from other heirs, and an Adult Protective Services investigation triggered by his father's assisted living facility, which is a mandated reporter," he explains. "If his father is on Medicaid or might apply within five years, the transfer creates a 'look-back' problem that can disqualify him from benefits and leave your family personally responsible for care that easily runs $8,000 to $12,000 a month."

Additionally, Codispoti points out that if you were to move forward with your plan and apply for a home equity loan, you may be asked to document the source of the funds used to pay off your debts.

"Misrepresenting that on a loan application is itself fraud," he says.

An authorized loan may be a different story

It's clearly illegal to borrow from a parent's funds without their consent. But an authorized loan may be acceptable, provided the father is capable of making that determination.

"If they are borrowing from the father and he has the capacity to agree to this, then that would be a better approach," says Koen.

Rubinstein agrees, but with a strong caveat.

"Is the 90-year-old father capable of gifting to his debtor son himself, or giving the son written, notarized permission to use the power as anticipated? If not, then it would be over-reaching for the son to use the power in the way he is considering," he insists.

However, Rubinstein cautions, "Even if the father makes a gift to the son, if the father is frail, someone — another potential beneficiary — could try to argue that the son over-reached and unduly influenced the father to make the gift."

You have other options for addressing your debt problem

Since using the father's funds in any capacity is potentially problematic, a safer move may be to address your debt on your own. The good news, says Codispoti, is that you may have more options than you think.

"Shop the loan," he says. "Credit unions are often conservative on DTI. A mortgage broker can place you with banks or non-bank lenders that underwrite high-income borrowers with elevated DTI from a second property more flexibly. Cash-out refinances and non-QM HELOCs are worth asking about."

Codispoti also suggests addressing the root cause of your issue.

"The second home is driving your DTI," he says. "Hard as the conversation may be, explore whether your daughter can refinance it into her own name, whether you can restructure ownership, or whether selling is the right call."

Take the ethical route

You may technically be able to get a loan from your husband's father without crossing a legal line. Whether that's the right thing to do is very questionable.

"Your father-in-law is 90," Codispoti says. "The money in his account exists to ensure his dignity, comfort, and safety in the final chapter of his life.... Diverting it, even briefly, puts his welfare at risk to solve a problem he didn't create."

A word from Wealth Wise

We know that many Gen X readers, like this couple, struggle to provide support to their adult children and aging parents, all while planning their own retirement. In many cases, something's got to give. As our article explains, selling the second home that the daughter lives in might just be the best long-term option.

Moreover, an unspoken (or perhaps unconscious) implication of the reader's question is that the father, at 90, won't be around much longer. That would free up his assets and make paying back the loan moot. That's a dangerous assumption, given that the Social Security Administration's Life Expectancy Calculator estimates that someone born in 1936 will likely live another four years and that more Americans are living to 100.

So, play it safe: Live with the resources you have now and know that your inheritance will be a welcome windfall someday.

Not all questions submitted will be published, and some may be condensed and/or combined with other similar questions and answers, as required editorially. The answers provided by our writers and experts, in this advice column, are for general informational purposes only. While we take reasonable precautions to ensure we provide accurate answers to your questions, this information does not and is not intended to constitute independent financial, legal, or tax advice. You should not act, or refrain from acting, based on any information provided in this feature. You should consult with a financial adviser regarding any questions you may have in relation to the matters discussed in this article.

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Many professionals pursue law or business school with a clear goal: Higher income and greater financial security.

What often comes with it, however, is a six-figure salary paired with significant debt.

Law school graduates carry an average of about $130,000 in debt, often paid over the course of 20 to 25 years, while MBA graduates average close to $80,000.

These payments may feel manageable early, but they can quickly become a source of stress if your circumstances change, whether due to job loss, career shifts or burnout.

In one study, 75% of young lawyers who borrowed reported that debt altered the career plans they had when they entered law school.

Paying down this debt is often framed as a financial decision. But I encourage you to think about it another way: An investment in stress reduction.

Eliminating or significantly reducing that burden early can open options later, and the first five years of your career offer a unique opportunity to do that. Rather than stretching repayment over decades, a focused, intentional approach can dramatically accelerate progress.

This approach requires discipline, especially after years of living on a student budget. But the trade-off is greater financial control, reduced long-term pressure and the ability to make career decisions without being constrained by debt.

The framework is similar across professions, but how it's applied can vary. Here's how it works, with some special call-outs for MBA graduates and for attorneys.

A five-year framework for accelerated debt repayment

Set your spending framework. The foundation is simple: Live on 80% (or less) of your gross income for the first five years. The remaining 20% or more can be directed toward accelerated loan repayment.

This is a temporary, intentional decision designed to create momentum early in your career. By anchoring your lifestyle below your means from the start, you avoid building fixed expenses that are difficult to unwind later.

Lock in financial priorities first. Maximize contributions to your employer-sponsored retirement plan, particularly if there is a company match. These contributions not only build long-term wealth but also reduce taxable income.

If eligible, contribute annually to a health savings account (HSA), which is available to those enrolled in a high-deductible health plan. HSAs offer a triple tax advantage:

• Tax-deductible contributions
• Tax-free growth
• Tax-free withdrawals for qualified medical expenses

After age 65, funds can also be used for non-medical expenses without penalty (though subject to ordinary income tax).

Establishing these habits early ensures that accelerated debt repayment doesn't come at the expense of long-term financial progress — all while bringing down your taxable income.

Accelerate your loan repayment. Target 20% to 30% of gross income toward student loans. Using a percentage rather than a fixed dollar amount allows your payments to scale with your income, keeping you on an accelerated path as your earnings grow.

Refinancing might also be worth considering if it meaningfully reduces the total cost of the loan.

However, evaluate the full impact carefully, particularly if it involves giving up federal protections such as income-driven repayment plans or temporary payment relief during periods of financial hardship.

Use bonuses strategically. Bonuses provide one of the most powerful opportunities to accelerate repayment.

Rather than using them to inflate your lifestyle, direct 50% to 70% of each bonus toward loan principal. The remainder can be used for investing or planned spending.

This approach allows you to make significant progress without increasing fixed monthly obligations — one of the most effective ways to accelerate repayment.

Protect your plan with liquidity. Maintain a cash reserve of at least three to nine months of expenses.

This buffer allows you to continue executing your strategy even if your income fluctuates or unexpected expenses arise. Without it, there's a risk that progress made on debt reduction could be undone by short-term disruptions.

How this plays out for MBA graduates

MBA graduates typically leave school with less debt and enter careers that offer greater flexibility in compensation, geography and career path. This combination creates a significant opportunity to eliminate student loans quickly.

With lower overall balances, the same disciplined framework can lead to full repayment within a relatively short period, especially when bonuses are used strategically.

In addition, MBA graduates often have greater career flexibility, with the ability to move across roles and industries — such as consulting, finance, private equity or corporate leadership — allowing them to adjust income, workload or career trajectory more easily than in more structured paths.

The primary risk for MBA graduates is lifestyle creep. Early increases in income can make it tempting to upgrade housing, travel or discretionary spending too quickly. Maintaining discipline during the first few years is what allows the accelerated debt repayment strategy to work.

How this plays out for attorneys

For attorneys, the framework is just as effective — but the constraints are different.

Debt levels are typically higher, and early-career paths tend to be more rigid and demanding. Long hours and high expectations can make it easier to justify increased spending, particularly on housing or convenience.

This makes controlling fixed expenses especially important. If you're working 70 to 80 hours a week, your home might primarily serve as a place to sleep. Keeping those costs in check creates a meaningful opportunity to redirect income toward debt reduction.

Liquidity also plays a larger role. Given the demands of legal careers and the potential for shifts — whether through lateral moves, transitions to in-house roles or changes in firm structure — maintaining a larger cash reserve (closer to nine to 12 months) provides important flexibility.

Finally, attorneys should remain adaptable. Partnership opportunities, buy-ins or career changes might require adjustments to your repayment strategy. Avoid locking yourself into a plan that depends on consistently high income without room for change.

What the accelerated debt repayment strategy gets you

Whether you pursue this approach as an MBA graduate or an attorney, the outcome is beneficial: a significantly reduced — or eliminated — loan balance on an accelerated timeline, alongside a strong foundation for retirement savings and long-term wealth.

Beyond law and business, these principles apply broadly to high earners with significant debt. A focused, time-bound approach, combined with disciplined spending and strategic use of income, can dramatically change your financial trajectory.

The impact goes beyond the numbers. Clients who take this approach often find that once debt is reduced or eliminated, their financial lives feel fundamentally different.

Major expenses can be paid in cash, and progress to long-term goals accelerates, but most important, there is a noticeable shift in overall well-being.

The absence of debt creates a sense of stability and confidence that carries into all areas of life — giving you the freedom to make career and life decisions on your own terms.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Question: Our grandson just graduated from college with $45,000 in debt. I want to pay off his student loans, but my husband says we can't afford it. We're 73-year-old retirees with $2.1 million and $4,000 a month in Social Security that covers most of our bills. Who's right?

Answer: You'll often hear that college graduates are drowning in debt. That might not be true for everyone, but the average student loan debt, including private loans, could be as high as $42,673 today, reports the Education Data Initiative.

A balance that large could be difficult to shake for recent grads who aren't diving into instantly lucrative careers. If you're a retired couple who's financially comfortable and have a grandson who just walked away with a $45,000 pile of student loan debt after wrapping up his studies, you might be inclined to help.

If you're sitting on a $2.1 million nest and your $4,000 monthly Social Security check mostly covers your bills, it's clear that you have some wiggle room in your budget. But your husband might not be as convinced.

Here's how to figure out how to lend a hand in a manner that doesn't compromise your financial security or convey the wrong message.

Paying off the loan probably won't change your lifestyle

A $2.1 million nest egg is not the same thing as unlimited financial resources. But if you're mostly able to live on Social Security and that $2.1 million is just your "extra" cash, a $45,000 withdrawal might have a minimal impact, says Deon Strickland, Ph.D. financial adviser at Scholar Advising.

"If you’re looking at the couple, 73 years old, about $2 million in retirement assets, and $4,000 a month in Social Security, you’re probably talking about somewhere around $100,000 a year, give or take, available to spend after tax," he says. "They’re in a position where this decision is not going to dramatically change their lifestyle."

That doesn't mean you should just write a check without thinking things through, though.

As Strickland says, "This really comes down more to the relationship with the grandson and what they’re trying to accomplish. If the grandson has been responsible, appreciates the opportunities he’s had, then maybe there’s a way to help. But it doesn't necessarily have to be just writing a check."

Strickland says you shouldn't feel obligated to pay your grandson's debt in its entirety.

"It could be structured," he explains. "It could be something like, 'If you pay the first $5,000, we’ll match it.' Something that reinforces good behavior rather than replaces it."

Consider your goals carefully

A $45,000 gift to repay student loans might be a small chunk of a $2.1 million pool of money. But for your grandson, it's huge.

Strickland says that if you're looking to make that gift, it's important to tell the right story.

"It’s more about what they want to pass on, not just financially, but in terms of values," he says. "While $45,000 is not going to be a huge shock to their overall financial picture, it is an opportunity to demonstrate how to make good financial decisions."

In other words, if you're going to give your grandson the money, set some expectations and help him realize what that gift represents. It could be the thing that allows him to build savings early on or get a head start on accumulating his own retirement nest egg so that he might one day be in a position to help a grandchild pay off their student debt.

Figure out the path that's best for your cash flow

Even though you can probably afford to pay off your grandson's $45,000 debt without blinking, that doesn't mean you shouldn't try to do so strategically. Brandon Agamennone, CRPC and wealth management adviser at Victory Private Wealth, says you have several options for handling that bill.

"It depends on what you need for your income," he says. But one option is to use dividends or interest from your portfolio to pay off the loan over a few years. Another option is for each of you to give your grandson a $19,000 gift this year, for a total of $38,000, to stay within the gift tax limit. You can then tackle the remaining loan balance the year after.

Another option? "If you have RMDs on a portion of your investment portfolio," Agamennone says, "you could take those and then gift some or all of that amount to your grandson to pay off the student loan."

Make sure your grandson knows what repayment options he has

A $45,000 student loan bill might seem overwhelming to a new college graduate. But before you rush to come to the rescue, you could want to walk your grandson through his options for repaying that debt, either on his own or with assistance.

"I would have the grandson understand college loan consolidation options," says Brian Safdari, founder of College Planning Experts. "Maybe the [grandson] can get some student loan interest deductions while working."

Safdari thinks it's important that borrowers realize that there are different ways to tackle college loans. With federal loans, for example, there are income-based repayment plans that can be more affordable.

"Start with a strategy and a plan first," he says. "Then execute the best plan that provides the family the best outcome."

That plan could involve having you foot some or all the bill, but it's important to dole out that money in the context of a broad plan everyone involved is on board with.

Next Steps to Help Your Grandchild Afford College

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  • Use the 529 Grandparent Loophole to Maximize College Savings
  • We're 75 With $3.2 Million. Our Grandchild Needs Help Paying for College.
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• Balance your retirement security with supporting grandchildren
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Refinancing student loans is often treated as a milestone: Your income goes up, your rate goes down, and you move on.

For high earners, especially physicians and other professionals early in their careers, that moment tends to come quickly. And that's exactly where the mistake happens. Most borrowers don't refinance at the wrong rate.

They refinance at the wrong time.

The appeal is obvious, and that's the problem

Once your income crosses a certain threshold, refinancing feels like a straightforward upgrade. You qualify easily. The rate looks better. The math works. But that framing assumes your financial situation is already settled.

For many high earners, it isn't. Early attending physicians, newly promoted professionals and anyone on a steep income ramp can move from constrained to comfortable very quickly. That shift creates pressure to "optimize" right away, starting with student loans. Lowering your rate feels like progress. But timing still matters.

What you're trading away

Refinancing federal loans isn't just a financial adjustment; it's a structural decision.

You're giving up:

• Income-driven repayment flexibility
• Federal forbearance and deferment options
• Any future path to forgiveness

In exchange, you get a lower rate and a more predictable repayment structure.

For high earners, that trade can make sense, but it should be intentional. Once you refinance, there's no way back into the federal system.

High income doesn't mean stability yet

This is where many borrowers misread their position. A high salary, especially after years of training or career progression, can be a permanent step up. But early in that phase, income is often still evolving.

Take physicians, for example:

• Compensation structures may shift in the first few years of practice
• Bonuses and production-based income can vary
• Geographic or role changes are still common

The same applies to other high-income fields where compensation includes variable components or where career mobility is still high.

Refinancing works best when your income is not just high, but predictable and durable. So the question isn't, "Can I refinance?" but, "Is this the right time to give up flexibility?"

A few signals that the timing is right:

• Your income has stabilized beyond the initial ramp-up
• You have a meaningful emergency fund (at least several months of expenses)
• You're no longer relying on federal protections even as a fallback
• Your financial priorities are shifting toward efficiency and simplification

If those aren't fully in place yet, waiting is not a missed opportunity. It's a way to preserve optionality while your financial picture settles.

Why timing can improve outcomes

Refinancing is not a one-time window. It's a decision you can make and revisit over time. Even just waiting 12 to 24 months can change the equation:

• A longer track record of income can strengthen your application
• Credit consistency can lead to more competitive offers
• A stronger balance sheet reduces the need for federal safety nets

None of this guarantees a better rate. But it does put you in a position to refinance with greater certainty and fewer trade-offs.

Understanding what drives your rate

While rates vary across lenders, a few factors consistently matter:

• Stability of income (not just total compensation)
• Debt-to-income ratio
• Credit history and repayment consistency

This is why two borrowers with similar salaries can receive different offers and why initial rate quotes don't always match final terms. The strongest profile isn't simply the highest earner. It's the most stable one.

The bottom line

For high-income borrowers, refinancing student loans is often the right move. But it's frequently done too early, before income stabilizes, before financial reserves are built, and before the value of flexibility has fully diminished.

The goal isn't just to lower your interest rate. It's to make that decision at a point where you no longer need what you're giving up. If your income is steady, your finances are well established, and you're comfortable stepping away from federal protections, refinancing can be a clean and efficient step.

If not, waiting isn't hesitation. It's discipline. Exercising patience now preserves your options and reinforces your control over your financial future.

Related Content

• Over 50 and Still Paying Student Loans? Here's Some Help
• A Little-Known Tax-Free Way To Help Pay Your Student Loan
• How Long it Actually Takes to Pay Off Student Loans
• How to Find Free Money for Graduate School as Federal Loans Tighten in 2026
• 6 Practical Steps to Help Keep Your Student Focused on College Rather Than the Financial Strain

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

The Federal Reserve left interest rates unchanged at its June meeting. Looking ahead, don't expect a rate cut anytime soon, either. CME FedWatch projects the Fed is likely to keep rates steady again at its July meeting.

The concern about elevated inflation risks, stemming from higher oil costs, suggests that long-term interest rates will likely remain high, as noted by David Payne of the Kiplinger Letter. Even with a resolution for the Iranian conflict, prices won't drop overnight.

For consumers, the Fed's decision has mixed impacts. While it helps savers by keeping annual percentage yields (APYs) higher on savings accounts, it poses a challenge for those carrying debt or needing to borrow for upcoming purchases. I'll explain how this policy can increase borrowing costs, as well as ways to borrow money and avoid higher rates.

How the Fed's decision impacts your credit card APRs, auto loans

The Fed's decision has different implications, depending on the kind of credit you have/want. To illustrate, the annual percentage rate (APR) on credit cards is directly tied to the prime rate.

What is the prime rate? It's the benchmark that banks use to determine how much customers pay for lending products, such as credit cards, auto or personal loans. Since the prime rate is set at the federal funds rate plus 3%, no movement means credit card rates will remain high.

The current average APR on credit cards is 19.56%, per Bankrate. This means if you're carrying a balance of $10,000 and you only make the minimum payment, of around $225, it will take you 81 months to pay it off. It can lead to a hidden cost of more than $8,000 in interest, almost doubling the balance owed.

Meanwhile, lenders will use the prime rate as part of determining the rate you'll pay on an auto loan. If the Fed raised interest rates, it would increase the APR you'll pay for car financing, which could add hundreds to thousands more in total loan costs.

Other factors will also shape what you pay. Your credit score plays a major role, along with the vehicle itself (its make, model and age) and the length of your loan term, all of which lenders use to determine your final rate and total cost.

Does Fed policy impact mortgage rates?

Not directly, as with auto loans or credit cards, but it does play a small part. For longer-term loans, such as fixed-rate mortgages, the 10-year Treasury yield is a better indicator of what you'll pay.

As its name implies, this yield is the government's borrowing cost for a decade. It's a better benchmark because the average homeowner stays in their home around that long, or they'll refinance somewhere along the way.

Who or what influences the yield? Primarily, it's investors who buy mortgage-backed securities. Their expectations on short-term interest rates have an impact because risks are elevated with longer-term investments.

Furthermore, other factors could influence the yield. When inflation becomes higher, as it is now, the 10-year Treasury yield rises. Inflation is currently 4.45%, showing investors are worried about how gas prices will impact the economy.

Another factor is economic policies. When the Fed sets the federal funds rate, it can give investors a window into the future. Holding rates steady could lead to a murky future, in which a wait-and-see approach is best. When confidence in the economy wanes, investors might require higher rates to feel comfortable with their risk.

Is now a smart time to borrow money?

It will be more expensive, but there are things you can do to lower your borrowing costs, depending on your situation:

If you're carrying high-interest debt

With everyday prices rising, it's common for some borrowers to pay the minimum each month. It's frustrating because even though you're making a payment, it doesn't make a dent in your balance.

This is where transferring that debt to a balance transfer credit card with 0% APR can help. Some cards offer generous 0% APR periods of up to 21 months, giving you almost two years to pay down that balance.

There are a few things to consider before taking this approach: Transferring your balance isn't free; usually, lenders charge 3% to 5% of the balance. Some of these cards come with annual fees, which can also take away from your ability to pay off your debt more quickly.

If you decide to go with this approach, I recommend paying as much as you can each month, which can significantly reduce your debt before the introductory period ends. You'll save in interest and take years off your debt repayment. If you have other debts, this can build momentum to help you tackle them next.

You need to make a bigger purchase, but don't have the cash

If you have an immediate need and don't have the cash on hand, it makes sense to consider credit. But there are smarter approaches than using whatever credit card is in your wallet.

To demonstrate, I don't usually recommend store credit cards. They come with sky-high APRs, but if you shop at the same store regularly (Costco, Lowe's, etc.), you might be missing out on some really sweet card perks.

To demonstrate, Costco's Anywhere Visa by Citi offers 5% back on the first $7,000 charged at Costco gas stations. You'll also earn 2% back on Costco purchases. We made this switch because it allowed us to earn cash back on larger purchases and save on everyday costs, such as gas, prescriptions and groceries.

Other store credit cards offer generous interest-free promotional periods from six months to a year. I use these when buying larger appliances. As long as you pay it off within that promotional window, you won't have to incur the higher interest rates.

That said, if your purchase isn't urgent, it might be worth taking a step back and saving first. Even setting aside a portion of the cost can make a difference. Every dollar you pay upfront is one less you'll finance, helping reduce your total interest costs.

One simple way to do this is to treat your savings like a monthly bill. Set aside a fixed amount in your budget and transfer it from your checking account into a high-yield savings account. This creates a consistent habit while allowing your money to grow, with some accounts offering rates up to 4.20% APY.

Use the Bankrate tool below to find the best fit for your needs:

How to use the Fed's decision to your advantage

Ultimately, the Federal Reserve holding rates steady is good news if you’re focused on building savings. But if you’re carrying debt or planning a large purchase, borrowing costs will remain elevated.

To manage that, consider using promotional financing offers, transferring balances to cards with 0% introductory APR periods or delaying the purchase and saving in a high-yield account to take advantage of today’s higher rates while you work toward your goal.

Related content

• How the Federal Reserve Affects Mortgage Rates — and What It Means for Homebuyers in 2026
• After the Fed Meeting, 7 High-Yield Savings Accounts Worth Your While
• Kiplinger Interest Rates Outlook: Long-term Rates to Remain Elevated as Long as Oil Prices Cause Inflation Risk

Spring often brings a sense of fresh starts, and for some families, that includes moving forward with a separation or divorce. If you're navigating that transition, it's easy to focus on the big decisions like housing, custody and dividing assets.

But there's one area that tends to quietly cause long-term financial damage if ignored: Your credit cards. Shared accounts, lingering balances and unclear responsibility can follow you long after the paperwork is finalized. And the reality is, your credit card issuer doesn't care what your divorce decree says; they care whose name is on the account.

Here's how to protect yourself before credit card debt becomes an expensive aftershock of your split.

Joint liability doesn't disappear with a separation

One of the most common and costly misconceptions is assuming that divorce automatically separates debt. It does not.

If you share a joint credit card, both of you remain legally responsible for the balance, regardless of who made the charges or what your agreement says. Even if a court assigns that debt to one person, creditors can still pursue either party for payment.

That means if your ex stops paying, missed payments can appear on your credit report and damage your score. Understanding exactly where you are liable, and where you are not, is the first step in protecting your credit.

Understand who is actually responsible for the debt

Not all credit card accounts are treated the same, and the distinction matters.

Joint accounts vs. authorized users:

• Joint account holders are equally responsible for the debt.
• Authorized users can make purchases, but aren't legally required to repay the balance.

If you're only an authorized user, removing yourself from the account can help protect your credit. But if you're a joint account holder, the responsibility sticks until the balance is paid off and the account is closed or refinanced.

State laws also play a role. In community property states, most debt incurred during marriage is considered shared. In equitable distribution states, debt is divided based on fairness, not necessarily a 50/50 split.

Still, creditors ultimately rely on the account agreement (not state-level divorce rulings) when collecting payments.

Sorting out your finances is hard enough. A divorce can make it even more complicated. Use the tool below, powered by Bankrate, and answer a few quick questions to see personalized offers.

Why your name matters more than the court ruling

If your name is on the credit card account, you are still responsible for making the payment. That is why relying on a court order that says "your ex will pay it" can backfire.

If they miss a payment, it can lower your credit score and increase your credit utilization. It can also trigger late fees and penalty APRs.

In other words, your financial future can be affected by someone else's actions unless you take steps to separate things cleanly.

Take these steps immediately to protect your credit

When a separation becomes real, whether you have filed paperwork or are just starting to live apart, your financial lives can shift faster than you expect. Expenses may overlap, communication can break down and spending habits may change in ways you cannot control. This is one of the most vulnerable times for your credit.

Even a single missed payment or a sudden increase in a joint balance can lower your score and follow you for years. Because credit card accounts update frequently, the impact can happen quickly.

Taking a few proactive steps right away can help you limit new debt, prevent surprises and create a clearer financial boundary between you and your spouse while everything else is being sorted out.

1. Stop using joint credit cards

Continuing to charge expenses on shared accounts can increase balances and complicate negotiations.

2. Freeze or close accounts where possible

Contact your issuer to freeze the account to new purchases or close it entirely. Keep in mind that accounts with balances typically need to be paid down before closure.

3. Remove authorized users (or yourself)

If you’re an authorized user, request removal immediately. If your spouse is an authorized user on your account, consider removing them to limit further charges.

How to separate your finances cleanly

The more organized and intentional you are during this phase, the easier it will be to avoid confusion, missed payments and lingering ties that can cause problems later.

Start by opening accounts in your own name if you do not already have them. This includes a checking account for everyday spending, a savings account for short term goals or emergencies and at least one credit card to help you build or maintain your individual credit history. If most of your financial life was previously shared, this step is essential for establishing independence.

Next, redirect all automatic payments and deposits. Go through your bank and credit card statements line by line to identify recurring charges. Do not forget about things like streaming services, utilities, insurance premiums and subscriptions. Update each one so it is tied to the appropriate individual account. This is also a good time to separate mobile phone plans, cloud storage and any other shared services that could continue billing both parties.

You will also want to create a clear system for handling any remaining shared expenses during the transition. For example, if you are temporarily splitting household bills, decide who is responsible for paying each bill and how reimbursement will work. Putting this in writing, even informally, can help prevent missed payments and misunderstandings.

Separating your finances may feel tedious, but it is one of the most important steps you can take to move forward with clarity and control.

Watch for these common (and costly) mistakes

Even with the best intentions, it’s easy to overlook key details during a separation, especially when emotions and logistics are both running high. Here are some costly mistakes to avoid.

• Assuming your ex will pay: Even if it’s written into your divorce decree, creditors can still hold you responsible if your name is on the account. Whenever possible, aim to remove your name from the debt entirely or ensure the balance is transferred into one person’s sole account.
• Ignoring joint accounts: It’s surprisingly common for people to "set aside" joint accounts during a separation, especially if they’re focused on larger issues. But leaving accounts open and unmanaged can lead to new charges, growing balances or missed payments. Make it a priority to address every shared account, even ones with small balances or no recent activity.
• Missing payments during the transition: Between moving, legal expenses and changes in income, it’s easy for due dates to slip through the cracks. Setting up automatic payments can help protect your credit while you sort everything out.
• Overlooking authorized user accounts: If you’re an authorized user on your spouse’s card, their spending behavior can still affect your credit utilization and payment history. Removing yourself from these accounts can help limit your exposure.
• Closing accounts without a plan: Closing accounts can reduce your available credit, which may increase your utilization ratio and lower your score. Make sure you have a strategy for paying off or transferring balances first.

Being aware of these common pitfalls can help you stay one step ahead, and protect your credit while you navigate a major life transition.

How divorce can affect your credit score

The act of divorcing itself won’t hurt your credit score. But the financial ripple effects can. Your score may drop if payments are missed, balances increase (raising your credit utilization), or even if accounts are closed, which reduces available credit.

On the flip side, taking control early by paying down balances, separating accounts and maintaining on-time payments can help stabilize your credit over time.

Divorce doesn't automatically divide your debt. Instead, you’ll have to take a proactive approach to do that with the partner you're separating from.

Taking clear, early action on credit cards can prevent long-term financial damage and give you a cleaner slate as you move forward.

Related Content:

• More Than Half of Couples Say This One Thing Justifies Divorce (and It's Not Infidelity)
• I'm 61 and Want a Divorce, but I Worry About My Finances. Should We Live Separately but Stay Married?
• Gray Divorce After 50: Managing the Shift to Your Solo 'Second Act'

If you need cash for a major expense, you might be considering tapping your home equity. With a home equity line of credit (HELOC), a home equity loan or a cash-out refinance, you can access the equity in your home and use that money for renovations and other expenses.

But it’s more important than ever to understand the potential risks that come with tapping your home equity. According to the Intercontinental Exchange Mortgage Monitor report, Americans hold approximately $17 trillion in total equity, with about $11 trillion tappable.

High home values and limited inventory have resulted in equity-rich but cash-constrained households. Using your home’s equity can be a risky move, so be sure you understand all of the factors involved before deciding if this is the right decision for you.

Borrowing costs remain elevated, with new pressures in 2026

Home equity borrowing is still relatively expensive, and recent economic conditions are adding more uncertainty to where rates go next.

As of April 2026, average home equity loan rates are hovering around the 8% range, according to Bankrate:

• 5-year home equity loan: 7.89%
• 10-year home equity loan: 8.02%
• 15-year home equity loan: 8.00%

Rates vary based on credit score, loan-to-value ratio and lender.

These rates are noticeably higher than what many homeowners are used to, especially those who locked in mortgage rates below 4% in recent years.

At the same time, the Federal Reserve has held rates steady through its January and March meetings, signaling a more cautious approach to rate cuts. That means borrowing costs tied to the prime rate, including HELOCs, have remained relatively high so far this year.

Geopolitical tensions, including the ongoing war in Iran, are also contributing to inflation pressure, particularly through energy prices. That added uncertainty can make it harder for rates to move lower in the near term.

In this environment, the type of loan you choose matters more. Home equity loans offer fixed rates, which can provide predictable payments. HELOCs typically come with variable rates, meaning your costs could change over time. Meanwhile, mortgage rates, which affect cash-out refinancing, tend to follow the 10-year Treasury yield and remain sensitive to inflation and broader market conditions.

When tapping your home equity can make sense

Tapping your home equity may make sense when you’re using the funds for a clear, high-value purpose. For example, you might finance home improvements that increase your property’s value, helping offset the cost of borrowing over time.

Some homeowners also use home equity to consolidate high-interest debt. Replacing a credit card balance with a rate around 20% with a lower-rate home equity loan or HELOC can reduce interest costs and simplify payments.

Home equity can also help cover large, planned expenses, such as education costs or major medical bills. In these cases, the value of the expense may justify the interest you’ll pay. Used intentionally, home equity can be a strategic financial tool — not just a way to cover everyday spending.

Use the tool below, powered by Bankrate, to explore and compare today's home equity loan and HELOC options from multiple lenders:

When tapping your home equity could be a risky move

Tapping your home equity can be risky. When you use your equity, your home is collateral. If you default on your loan, you could face foreclosure.

HELOCs have variable interest rates. While your interest rate could drop, it could also rise, meaning your payments could be larger than you anticipated, and you might ultimately pay much more in interest than you’d planned.

It’s also possible to overborrow home equity. When paired with market uncertainty resulting in fluctuating interest rates and home values, overborrowing could increase your chance of defaulting on your loan and facing foreclosure. It's always best to borrow no more money than you absolutely need, which will also help minimize what you pay in interest.

Home equity loan vs. HELOC vs. cash-out refinance

Let’s take a look at how three methods of accessing home equity compare:

• Home equity loans are fixed-rate loans, so you’ll have predictable, set payments throughout the loan’s term.
• HELOCs are revolving credit lines that you can draw from, repay and reuse. They offer flexibility, but variable rates mean your payments can change over time.
• A cash-out refinance replaces your existing mortgage with a new, larger loan, resetting your interest rate and loan terms.

Since many homeowners are locked into ultra-low mortgage rates, refinancing tends to be a less attractive option right now.

Timing matters more than most borrowers realize

Timing matters when tapping your home equity. Rates could fall later in 2026, but that’s far from certain. Waiting might help you secure a lower rate, but it could also work against you if home values decline or lending standards tighten.

The key is balancing timing with necessity. If you’re facing a time-sensitive expense, such as an urgent home repair or education costs, waiting for a better rate may not be practical.

How to decide if borrowing is right for you

This simple checklist can help you decide if borrowing against your home equity is right for you:

• Do you have a clear purpose? Tapping home equity is risky, so make sure that your purpose justifies that risk.
• Can you comfortably afford payments? With your home as collateral, you risk foreclosure if you can’t make the payments.
• Are you choosing the right product? Be sure you understand the pros and cons of each home equity product to choose the one that’s best for your situation.
• Have you compared lenders? Rates, terms and loan costs can vary from lender to lender. Compare quotes from multiple mortgage lenders to find the best option.

Think beyond access to equity

Home equity can be a powerful financial tool, but it comes with real risk. Because your home is on the line, it’s important to borrow with a clear purpose and a plan to manage the payments.

The decision isn’t just about whether you can access the funds. It’s about whether using your equity supports your broader financial goals and makes sense given today’s rates and market conditions.

Related Content

• HELOC Rules Are Changing in 2026
• 4 Ways To Use Your Home Equity To Boost Your Retirement
• What Home Equity Is and Why It's a Valuable Long-Term Investment
• How a Home Equity Line of Credit (HELOC) Works

You've probably heard a lot about investing in private equity and debt markets lately. Private assets may even be an option in your 401(k) soon, per an August White House executive order to make them more accessible to individual investors.

These investments can provide portfolio diversification and above-average returns — but they come with formidable caveats: They’re complex, less than transparent, illiquid and sport high fees.

Still, you might be feeling some FOMO if you’re not partaking in the latest portfolio craze.

But maybe you are after all. New research from asset management firm Dimensional Fund Advisors found that the 20 largest U.S. public companies by market value collectively had about $96 billion to $157 billion invested in private companies at the end of 2024, according to financial statements.

That means if you own those companies (and anyone with a stake in the S&P 500 owns a good chunk), you’ve got an indirect stake in private markets, too.

For instance, in 2024, according to DFA, Amazon.com invested $5.3 billion in Anthropic, the startup known for its artificial intelligence assistant, Claude, and planned to invest another $2.7 billion by the end of 2025.

The Wall Street Journal recently broke the news that Amazon was in talks to invest up to $50 billion in OpenAI, the firm behind ChatGPT. As for Anthropic, other tech giants, including Alphabet, Microsoft and Nvidia, have stakes as well.

Moreover, public companies gain exposure to private markets via venture capital partners or in-house divisions, or through wholly owned subsidiaries. Alphabet shareholders, for example, have indirect access to GV, formerly Google Ventures, which means they also have indirect exposure to roughly $10 billion in assets managed by the private equity unit, including a stake in Stripe, a payments processor.

Other large companies with VC arms include Nvidia (NVDA), Microsoft (MSFT), Amazon (AMZN) and Eli Lilly (LLY).

Measuring the degree to which these public companies hold private assets is an inexact science, says Kaitlin Hendrix, director of asset allocation research at DFA. “We’re limited to what we can find in accounting statements,” she says, and companies account for private investments in a variety of ways.

As a result, DFA came up with an estimated range of private-asset holdings for the companies they examined, including a lower, conservative estimate and a more aggressive one.

But it’s likely, she adds, that some private ownership is not captured by the research, including ownership beyond the largest companies. “There’s quite a bit of the market unaccounted for,” she says.

Big investors.

ExxonMobil (XOM) had the biggest stake in private assets, with as much as $41.4 billion invested, according to the upper bound of DFA’s estimate. That’s followed by Alphabet (GOOGL), with as much as $40.9 billion; Amazon ($18.7 billion); Berkshire Hathaway (BRK.B) and Microsoft ($10.1 billion each); JPMorgan Chase (JPM) ($9.1 billion); and UnitedHealth Group (UNH) ($8.7 billion).

Investors who own these public companies, says Hendrix, “can take comfort in knowing they have exposure to private companies without having to deal with meaningful friction when it comes to access, fees and liquidity.”

You can also open the back door to private assets by investing through a reputable mutual fund that owns some. For example, T. Rowe Price Global Technology (PRGTX) and Fidelity Blue Chip Growth (FBGRX), both members of the Kiplinger 25, the list of our favorite actively managed no-load funds, have stakes in private AI companies, including Anthropic and Databricks.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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At the end of 2025, Americans carried a record $18.8 trillion of household debt. While interest rates have ticked lower, a 30-year mortgage is hovering around 6%, and credit cards charge over 20% on average.

Debt is a reality for the vast majority of Americans, making Debt Awareness Week (March 16-22) a good time to remember that, for most of us, the goal shouldn't be "no debt," but rather, making sure your debt is working for you.

That's because while debt can certainly be problematic, it's not inherently good or bad. It's best viewed as a tool that can help optimize your financial strategy.

An auto loan may allow you to buy a car that you need to drive to a job, a business loan could lead to building a successful business, or you could strategically use leverage to gain tax benefits.

How do you keep debt a friend and not an enemy? Here are some tips to help make sure your relationship with debt stays healthy.

1. Know the difference between 'good debt' and 'bad debt'

Debt can be good or bad based on its characteristics and how it's used.

Is it affordable or expensive? Look at your interest rate to figure out how much it's costing you. Higher rates (especially those above about 8%) are more likely to be bad debt, while lower rates tend to be good debt.

How much do you have? In general, lenders like to see debt payments including a mortgage be less than 35% of your monthly gross income, and debt payments without a mortgage be less than 20% of your monthly gross income.

If your debt payments are straining your budget or lenders are wary of lending you money, it's a sign you have bad debt.

What are you using it to buy? If you're using debt for everyday expenses like eating out frequently or vacations you otherwise couldn't afford, you might be fueling a lifestyle out of reach rather than improving your financial situation.

A good use of debt is to buy things that help you generate income (like that car that gets you to work) or for things likely to grow in value (like a business or home).

Considering using this week to inventory your debt (type, amount outstanding, interest rate, payment) and determine how much falls into the good vs bad categories.

2. Optimize any debt you have

Now is a great time to check in on whether your existing debt is optimized, which won't reduce the amount of debt you have, but it could reduce your payments or interest owed.

There are three optimization strategies.

• Refinancing debt. Paying off an existing debt using new debt of the same type that has different terms, such as refinancing a mortgage or auto loan
• Swapping debt. Paying off an existing debt using new debt of a different type that has different terms, such as using a home equity loan to pay off credit card debt
• Consolidating debt. Paying off multiple existing debts using new debt to combine several payments into one, such as consolidating federal student loans)

To make the most of these strategies, you'll generally need to have a good credit score.

And before you move a balance, you should consider any associated fees, the change to the total interest you'll pay over the life of the loan, new terms and conditions and the impact on your credit score.

When optimizing debt, it can be especially helpful to work with a trusted professional like a financial adviser, who can also help you avoid any bad actors looking to take advantage of individuals who have debt.

3. Know when to pay down debt … and when not to

First things first: Always make your minimum payment.

If you're wanting to pay down debt faster because you have problematic debt or simply because you're debt-averse, you might be tempted to put every spare dollar toward paying down debt. But that's not always the best use of your surplus.

For example, if you have nothing in your emergency fund, you might want to prioritize that until you have at least a few hundred dollars or one months' worth of expenses. That way, if an unexpected expense pops up, you're not immediately going back into debt to afford it.

Alternatively, if your debt has a low interest rate, such as a 3% mortgage, you might get a better return on your money by investing it.

Once you determine how much extra you do want to put toward paying down debt, there are largely two strategies for prioritizing which debts to tackle first:

• The avalanche method, where you pay debt with the highest interest rate first
• The snowball method, where you pay debt with the lowest balance first

There are very strong opinions about which of these is best. While we advise starting with the highest-interest debt, paying off small balances can be very motivating for some. Ultimately, you should do what works best for you.

4. Use debt strategically

While many of us need debt to buy a home or car, as wealth increases, it becomes more of a choice. At this point, it can help you build your assets while also potentially providing tax benefits.

If the alternative is selling assets to fund an investment opportunity or make a purchase, you might want to consider whether borrowing would be more advantageous.

For example, selling an asset often comes with a tax consequence. You may owe capital gains tax on a stock sale, and it can be substantial if you have a low-basis investment.

Or you might have to pay income tax if withdrawing from a pretax retirement account. A loan may allow you to stay invested and defer the tax consequence of selling.

Another example is if you own an illiquid asset, which might come with substantial selling costs that a loan could let you avoid.

Using debt responsibly should help you meet your financial goals, rather than hinder them. And Debt Awareness Week is the perfect time to take stock of how debt is — or isn't — working for you.

Related Content

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• How to Use Good Debt (While Identifying and Avoiding Bad Debt)
• A Financial Expert's Three Steps to Becoming Debt-Free (Even in This Economy)
• Extra Cash? Should You Pay Off Debt or Invest?
• Seven Ways to Manage Your Financial Stress

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Buying a new vehicle is a major investment, and the cost of new vehicles has soared in recent years. According to Kelley Blue Book, the average price of a new car reached a record $50,326 in December 2025, making any potential savings on a vehicle purchase even more valuable.

Costco may be known for offering great deals on groceries, appliances and other items, but the Costco Auto Program could help you save on a new or pre-owned vehicle purchase or lease. While the program provides a more streamlined buying experience, it doesn't always guarantee the lowest possible price.

The program offers several additional perks for members, from discounts on parts and service to discounts on RVs. Taking a closer look at how the program works and what these benefits include can help you decide whether it's a good fit for your next vehicle purchase.

What is the Costco Auto Program?

Costco doesn't sell vehicles directly. Instead, it connects members with a network of participating dealerships that offer prearranged pricing. The Costco Auto Program, which has been around since 1989, is free to use with an active Costco membership.

Through the program, members can shop for new vehicles, electric vehicles and certified pre-owned models, all with pricing negotiated in advance through participating dealers.

How the Costco Auto Program works

Once you decide to use the program, the process is fairly straightforward:

• Visit the Costco Auto Program website. To get started, you’ll search the auto program website for the type of vehicle you want to buy or lease. You'll enter your zip code and pick out the vehicle you want.
• Get connected with an approved dealership. After selecting your car, you'll enter your contact information and Costco member number. From there, Costco will connect you with an authorized dealer. That dealer will contact you to make an appointment.
• Review price information. During your appointment, you'll receive prearranged Costco member pricing on the vehicle.
• Complete your purchase. You can choose to complete the purchase or lease, or you can decide not to buy the vehicle after seeing the prearranged price.

Costco vets and trains participating dealerships, with a focus on customer service, to help ensure a more consistent and lower-pressure buying experience. However, Costco doesn't sell vehicles or negotiate individual transactions. You'll complete the purchase directly with the dealership.

Pricing is negotiated in advance between Costco and participating dealers, but it isn’t displayed online. Instead, you'll need to visit or connect with the dealer to receive your prearranged Costco member price and decide whether to move forward with the purchase.

Dealerships pay a fee to participate in the program, which helps support and maintain the service.

How much money can you save?

The amount you can save through the Costco Auto Program varies based on the vehicle model, demand and your location. Some estimates suggest average savings of around $1,000 on a new vehicle purchase, though actual discounts can be higher or lower depending on market conditions.

In some cases, limited-time manufacturer incentives can increase your savings when combined with Costco’s prearranged pricing. For example, the current promotion offers eligible Costco members up to $1,250 on a new Chevrolet Traverse for Executive Members ($1,000 for non-Executive Members), plus any additional incentives they qualified for.

These types of promotions can increase the overall value of the program, especially if you're flexible on timing your purchase.

Additional perks beyond vehicle pricing

The Costco Auto Program also includes perks beyond vehicle pricing that can add ongoing value. Member-only incentives and limited-time promotions can be stacked on top of the prearranged Costco price, potentially increasing your total savings at the time of purchase or lease.

In addition, members receive 15% off parts, service and accessories at participating service centers. Savings are capped at $500 per visit, but these discounts can help reduce maintenance and ownership costs over time, especially for routine services or larger repairs.

Pros of using the Costco Auto Program

Here are a few reasons to consider using the Costco Auto Program:

• Simple purchase process: With the program, you can get a prearranged price on your vehicle. There's no haggling required, and the purchase is simple and straightforward.
• Access to vetted dealerships: Costco has vetted dealerships for customer service, which can give you peace of mind as you shop.
• Predictable pricing: Costco's prearranged pricing is predictable. It typically won't exceed the vehicle's MSRP and may help you save compared to what you would pay at another dealership.
• Reduced sales pressure: Compared to traditional dealerships, the Costco Auto Program offers a lower-pressure buying or leasing experience.

Cons and limitations buyers should know

While there's a lot to like about the Costco Auto Program, it does come with some drawbacks:

• Must use participating dealers: If you want to use the program, then you must buy a vehicle through a participating dealer. That might mean you could miss out on decent deals offered by dealers that don't participate in the program.
• Pricing isn't quoted remotely: In most cases, the preauthorized pricing isn't quoted remotely, and you'll need to make an appointment with a dealer to access that pricing.
• Negotiators could find better deals elsewhere: If you're a skilled negotiator, you might be able to find a better deal on that same vehicle by using a traditional approach and negotiating a vehicle price down, especially if you have an older vehicle to trade in.
• You might face add-ons or extras: Dealers in the Costco program might still offer add-ons or extras. These options can quickly increase your preauthorized price.
• Costco membership required: To use the Costco Auto Program, you’ll need an active Costco membership.

Who the Costco Auto Program works best for

The Costco Auto Program tends to work best for buyers who value simplicity and a more predictable experience. If you dislike negotiating, the prearranged pricing can take much of the stress out of the process.

First-time car buyers may also appreciate the straightforward, guided approach, while busy shoppers can benefit from being able to start the process online and complete a more streamlined transaction at the dealership.

The program can be especially useful for high-demand vehicles, where discounts below MSRP are harder to find. In those cases, even a modest prearranged discount or added incentive can provide value.

That said, the program may not be the best fit for every buyer. If your top priority is getting the lowest possible price and you are willing to visit multiple dealerships, negotiate or use competing offers as leverage, you may be able to find a better deal on your own.

Tips to get the most value from the Costco Auto Program

You can get the most value from the Costco Auto Program if you're willing to do a little extra research:

• Compare Costco pricing with outside quotes: In some cases, you might find the best pricing through the Costco program, but that won't necessarily always be the case. Do some comparison shopping and see if you could save more on the same vehicle at a dealership outside of the program.
• Stack manufacturer rebates and financing incentives: Research available manufacturer rebates and financing incentives. You can stack these on top of the Costco pricing for additional savings.
• Research dealer add-ons: Dealer add-ons, like extended warranties and paint and fabric protection, may seem like a good investment in your vehicle, but they can quickly increase the price. Research these add-ons to determine which are really worth the investment for your situation.
• Verify inventory availability: Before you visit a participating Costco dealership, verify that the vehicle(s) you're interested in are available. Doing so can ensure that you'll be able to test drive the vehicles and complete a purchase if you decide to do so.

Is Costco's Auto Program worth it?

The Costco Auto Program offers convenience and predictable pricing, but it doesn’t guarantee the lowest possible deal in every situation. If you're in the market for a new car, consider how much you value a simpler buying experience versus the potential savings of negotiating on your own.

It can be worth comparing the Costco price with quotes from other dealerships, as well as factoring in available incentives and your willingness to negotiate. Weighing these trade-offs can help you decide whether the program is the right fit for your budget and buying style.

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In these complex times of economic and interest rate uncertainty, many homeowners are choosing to stay put through it all.

Some are strategically holding on to a low mortgage rate in an unpredictable market. Others are prioritizing stability, maintaining their sense of control while the economic pendulum swings.

But staying in place doesn't mean standing still. A growing number of Americans are tapping into one of the most powerful yet underutilized assets they own — home equity. At the same time, many homeowners may not fully understand the tools available to them.

According to a recent survey from TD Bank, 30% of homeowners can't correctly identify what a home equity line of credit (HELOC) is, and 34% can't define a home equity loan.

A HELOC is a line of credit that lets one borrow money using the available equity in one's home as collateral. It offers the flexibility associated with a line, allowing the borrower to draw and repay funds as needed.

Rates are typically lower than other forms of credit, such as credit cards and are variable tied to the Wall Street Journal Prime Rate plus or minus a margin. Once utilized, many HELOCs allow for the balance to be moved to a fixed rate, with a set repayment term and monthly payment.

By contrast, a home equity loan provides a single lump sum amount, also secured by the home. Home equity loans typically have a fixed rate and term from the start, giving homeowners consistent and predictable monthly payments.

The current lack of awareness represents a potential missed opportunity. When used responsibly, home equity can serve as an adaptable financial resource, a strategic debt management tool and can even be an investment in the future.

When homeowners understand how to make their equity work for them, they can make confident choices that align with their financial goals.

A modern financial resource

American households have been under sustained financial pressures, which have only amplified over time. Inflation, interest-rate volatility and lingering debt burdens have left many families searching for ways to create financial breathing room, and home equity products have emerged as potential solutions.

In fact, 86% of homeowners who use home equity products, such as HELOCs and home equity loans, consider them an important part of their financial plan.

Unlike higher-interest forms of borrowing, these products allow homeowners to access the value they've built in their homes, providing a cushion that can be used for major expenses, renovations, unexpected emergencies or other financial needs.

In an environment in which cash-flow flexibility can matter as much as long-term savings, this option might make sense for homeowners.

When used as one piece of a broader financial plan, it can provide both stability and opportunity, two qualities that are often in short supply when markets are uncertain.

A key to simpler debt consolidation

While home equity products can help homeowners with one-time expenses, they're also proving valuable as a tool for long-term debt management amid higher interest rates. For context, according to Experian, the average nonmortgage debt balance in 2024 was $23,066.

To manage these debts and ease the pressure, homeowners might consider consolidating their debt into a single loan with a lower rate, without realizing their home equity could help make that possible.

HELOCs and home-equity loans allow homeowners to consolidate multiple high-interest debts into a single, lower-rate payment. This can free cash for savings, investments or other priorities, transforming home equity from a static asset into an active part of a financial toolkit.

With home equity loans' fixed rates and defined repayment terms, homeowners have the clarity to plan around consistent monthly payments. That can make it easier to build a realistic budget and stay on track to pay off debts within a set time frame.

Reaching higher home values through renovations

Beyond serving as a financial safety net or debt-management tool, home equity products can also empower homeowners to invest in their futures. For many households, the home represents their primary asset; responsible access to this asset is of paramount importance.

Tapping into that equity can be an affordable way to maintain and protect a property's value, whether that means replacing an aging roof, upgrading outdated appliances or remodeling a kitchen or bathroom. These kinds of investments tend to pay off over time, improving homeowners' daily lives while helping their home hold or increase in value.

Knowing that they can proactively improve their financial standing, rather than being beholden to market conditions, can give homeowners a tangible sense of progress and confidence in their broader financial goals.

As markets continue to evolve, more homeowners are recognizing that they don't need to look beyond their front doors to find financial flexibility. With the right strategy, the equity they've already built can become one of the most powerful tools for navigating whatever comes next.

Related Content

• How Much Would a $50,000 HELOC Cost Per Month?
• A New Kind of HELOC Lets Homeowners Fund Remodels on Their Terms
• Four Ways To Use Your Home Equity To Boost Your Retirement
• 13 Home Features That Add Value and Speed Up a Sale
• This Is How You Can Turn Your Home Equity Into a Retirement Buffer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Women have long been the chief operating officers of their households — the ones who remember the dentist appointments, plan the birthday parties and keep everything running thanks to countless tabs open 24/7 inside their heads.

I get it, because I'm a wife and mom first. But we can't let the invisible labor and emotional burden of the day-to-day stand in our way of long-term planning.

Married or not — and it should be noted that more Millennials are unmarried than previous generations at the same age — women need to be the chief financial officers of their households. The stakes are high.

Women, on average, live longer than men. And women are projected to control two-thirds of America's wealth by 2030, according to a 2025 report by McKinsey & Company.

That shift is already underway and makes 2026 an ideal year for women — single, married, divorced, widowed, raising a family or empty nesting — to shore up their finances and plan for their future.

Here are six savvy financial moves women at every age and stage of their financial journey should make this year.

Savvy Move No. 1: Organize your documents now

Often, people wait until tax time to tidy up their financial lives, but this annual ritual represents only part of the picture.

What if everything related to your financial life and life in general — not just the things you need to hand to your accountant or access for your tax filing — was organized all year long, year after year?

Imagine the space in your brain you'd free up knowing that receipts, account statements, insurance policies, powers of attorney and other estate planning documents, birth certificates, passports, Social Security cards and more were all in one place?

You can do this electronically, of course. But there's something about the assurance of having hard copies on hand. You can create your own filing system or check out products like the Nokbox, which offers fireproof boxes with files labeled for everything you need to organize.

You could do this in one afternoon and call 2026 the year you truly got your financial house and your life in order.

Savvy Move No. 2: Tackle debt and make savings automatic

Pay down your debt and begin to save 20% of your gross income.

Many financial advisers will favor saving over paying down debt if you can make more in interest on money you sock away.

And, of course, not all debt is equal. Your mortgage is different than your credit cards.

Still, too much debt can impact you psychologically and make it harder to get to your bigger financial goals, so plan to knock it down so you can build up your savings.

Ways to make your savings automatic include contributing the max to your employer-sponsored retirement plan and directing a certain portion of money each month to your emergency savings (or cash equivalent) account and 529 education plans if you are saving for college.

Making it automatic keeps you from automatically spending it.

Savvy Move No. 3: Build a cash cushion

Building on the savings theme, it's always a good time to beef up the "heaven help us" account. Strive for having six months' worth of living expenses available in case of emergency.

People often think that means in case of a job loss, and that's a big one. But other stuff can happen, too. You could need to step back at work to care for a child or aging parent.

There are other ways to ensure cash flow beyond savings. For example, it's smart to have a home equity line of credit in place for emergencies, just so long as you don't spend it all on home projects, credit card debt or vacations.

This line of credit can be a lifeline and also buy you time to build up your cash cushion.

Savvy Move No. 4: Protect yourself

Review your insurance coverage — life, health, disability, auto, property and casualty. Are beneficiaries up to date? Do you have enough? Are there policies you don't have in place but should?

Ask yourself what has changed. If you're starting a family, it might be time for you or your partner to add a term life policy to replace future income in a worst-case situation.

Or perhaps you have life insurance but not disability insurance. Did you know you are more likely to become prematurely disabled than to die prematurely?

Or, if you have a new teenage driver in the house, you might consider taking out an umbrella insurance policy.

Savvy Move No. 5: Audit and review investments

You should understand the purpose of and timeline for each investment — along with your risk tolerance — so that you can determine the right asset mix for each investment portfolio.

For example, perhaps your first baby is now a high school senior; it's probably time to dial down the aggressiveness of that 529 college savings plan.

Maybe you plan to retire sooner than you originally anticipated, or you just got a dream position and plan to extend your career.

Either way, you will want to adjust the asset allocation and corresponding level of risk on your retirement plan investments.

Savvy Move No. 6: Dare to dream

Please take a moment to dream big. Not just about 2026. But about what you want for your life years into the future.

Why are you working so hard right now? What is your "why"?

Short-term, tactical goals are nice. But the big picture — retiring when you want, vacationing when and where you want, starting a business, buying a beach house, living abroad, setting up a philanthropic organization or foundation — is even richer.

If you know what you're working, saving and investing toward, the better your chances for staying on the path to getting exactly what you envision and deserve in 2026 and beyond.

Related Content

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• I'm a Wealth Adviser: These 10 Strategies Can Help Women Prepare for Their Impending Financial Power
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• I'm a Financial Planner: This Is How Smart Women Can Plan for Financial Freedom Despite Life's Curveballs
• Financial Planning: Sisters Should Be Doin' It for Themselves

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Refinancing replaces your current mortgage with a new loan, often to lower your interest rate, shorten your loan term or lock in a fixed rate. Some homeowners also choose a cash-out refinance, which lets you tap your home’s equity and receive a lump sum for larger expenses.

As housing markets shift and personal finances evolve, many homeowners periodically reassess whether their mortgage still fits their needs. Changes in income, home equity, debt levels or long-term plans can all create opportunities, or reasons to consider refinancing.

Still, refinancing isn’t automatically a win. Closing costs, extended loan terms and aggressive lender offers can quietly add thousands of dollars to your total cost. Before you apply, it’s important to understand the warning signs, run the numbers and make sure a refinance truly aligns with your financial goals.

Warning signs and red flags to watch for

Refinancing can be financially smart, but not every offer is created equal. Some lenders rely on confusing terms, aggressive marketing or hidden costs that can quietly increase what you’ll pay over time.

Be aware of warning signs and red flags that you might see when refinancing a mortgage:

• Too-good-to-be-true offers: If a refinance offer seems to be too good to be true, it probably is. Look out for aggressive pitches and offers designed to be irresistible, such as unbelievably low interest rates.
• No closing costs: Refinancing comes with closing costs, but some offers roll those costs into the loan amount, increasing your debt and the amount you’ll pay in interest. “No closing cost” offers should be reviewed carefully.
• Upfront fees: Most lenders won’t require you to pay any large fees upfront when refinancing a mortgage; you’ll just be responsible for closing costs at the closing. If the loan terms outline upfront fees, you may not be working with a legitimate lender.
• Excessive pressure: Refinancing a mortgage is a big decision, and you should take your time researching lenders before you decide to refinance. If a lender or broker is pressuring you to quickly decide to refinance, walk away.

Do the math: Rates, costs and break-even

Refinancing your home can help you get a lower interest rate, but you’ll also need to pay closing costs. Calculating your break-even point, which is the point at which your interest savings will cover the closing costs, can help you determine whether refinancing makes sense.

To get started, add up all of your closing costs, including lender fees, title costs and escrow services. You’ll also need to determine how much your new mortgage will save you per month; you can do that by subtracting your new monthly mortgage payment from your old monthly mortgage payment.

To calculate your break-even point, divide your total closing costs by your monthly savings. The resulting figure is the number of months that it will take before your savings will cover the closing costs and you’ll break even.

For example, if your closing costs are $6,000, and you’ll save $250 per month, it will take 24 months before you break even on your refinancing.

A common rule of thumb can help you decide when to refinance. If you have a 30-year mortgage, a 0.75% drop in interest rates will usually result in positive savings after three years, often justifying the cost of refinancing. With a 1% drop, you’ll break even in about 20 months.

Generally speaking, if interest rates have dropped by 0.5% or less, refinancing may not be worth it, since you won’t reach your break-even point in a reasonable amount of time.

When you refinance, you have the option to extend the loan term, taking a longer time to pay down your mortgage. Extending the loan term on a 30-year refinance could end up costing you more over time, since it starts amortization over again.

When you start paying on your new 30-year mortgage, your initial payments are interest-heavy, which increases your cost. Even if you have a lower interest rate, the longer mortgage term and interest could mean you’ll ultimately pay more. To avoid this scenario, consider refinancing while maintaining your loan term or even shortening your mortgage to a 15-year term if you can comfortably afford the payments.

Other financial traps you might overlook

Even if you avoid obvious red flags, refinancing can still come with less visible costs that affect your long-term finances. Understanding these potential traps can help you make a more informed decision.

Be aware of several other refinancing traps that could cost you money:

• Closing costs: Refinancing closing costs can range from 2% to 6% of your total loan amount, on average. If you have a $400,000 mortgage, your closing costs could be $8,000 to $24,000. Make sure that you understand these costs before you close on your refinance.
• New loan terms: Your new loan terms could delay your payoff or increase your mortgage’s lifetime interest. Carefully read the refinance terms and make sure you understand how they will impact your mortgage going forward.
• Mortgage insurance and equity requirements: If you refinance with less than 20% equity on a conventional loan, you’ll typically need to pay private mortgage insurance until you rebuild sufficient equity, which increases your monthly costs.

How to shop and compare refinance offers

Different lenders offer different terms and interest rates, so it’s important to shop around and compare quotes from different lenders. Request at least three quotes from different lenders and pay attention to factors like interest rates, closing costs and loan terms.

Consider getting offers from credit unions, online lenders and mortgage brokers, since they may offer lower interest rates and better overall terms than larger traditional banks and lenders.

Who should not refinance right now

Refinancing can offer benefits to some homeowners, but make sure that it makes sense for your specific situation. For example, if your refinance break-even point is in five years, but you plan to move within the next two years, refinancing doesn’t make financial sense, and you’ll pay more to refinance than you’ll save. Think about how long you plan to stay in your home to determine if you should refinance now.

You also need sufficient equity in your home to be able to refinance. According to A+ Federal Credit Union, you’ll generally need at least 20% equity in your home. Some lenders will work with you if you have less equity, but chances are you’ll need to pay private mortgage insurance until you build up 20% equity again, which adds onto the cost of refinancing and pushes your break-even point further out.

If you don’t have a strong credit score, refinancing may not make sense, either. Lenders often consider borrowers with poor credit scores as being higher risk, so they charge a higher interest rate to make up for that risk. If you’re refinancing to take advantage of a lower interest rate, you may not qualify for that interest rate, especially if your credit score has dropped since you initially bought your home.

Practical next steps before you apply

Before you apply to refinance a mortgage, do some calculations to determine if it makes financial sense. The Navy Federal Credit Union’s mortgage refinance calculator makes it easy to see how much refinancing could save or cost you.

Take some time to talk with a trusted financial adviser or mortgage professional about your goals and what you should consider when refinancing. These experts can provide advice tailored to your specific situation and can also help you spot potential financial pitfalls.

Curious about today's refinance interest rates? Use the tool below, powered by Bankrate, to explore and compare some of today's top offers:

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Everybody (rightfully) looks forward to booking a vacation, especially in the dreary days of winter. But the ever-present issue with travel is that, well, it costs a lot of money. Between picking out flights, shelling out for hotels and selecting special destination experiences, the vacation tab starts out high and only continues to climb.

That's where the new "buy now, pay later" options have been coming in handy for many travelers. But does it make sense to use buy now, pay later as a way to afford your vacation?

While there are certainly upsides, there is a lot you need to consider before you press "yes" on "BNPL."

What is buy now, pay later?

Buy now, pay later programs are exactly what they sound like: They give you the option of buying something – whether it’s a clothing item, a piece of furniture, or yes, even a flight — without handing over the full price at this exact moment. Instead, you opt into a payment plan, which may require you to pay in four biweekly installments, pay monthly over a set period of time, or pay the full price at a specific selected date in the future, among other options.

Popular services like Klarna, Afterpay, Flex Pay and Affirm are dedicated to this method and pop up on most websites as a payment choice, and even PayPal has started offering buy now, pay later options come checkout time.

The pros of using buy now, pay later to finance your vacation

The obvious benefit of using BNPL is that you can essentially purchase what you want, even if you don't have the funds for it right now. This can be particularly enticing for travel.

Airfare can rise dramatically, hotels run out of rooms and experiences are booked up as your departure date approaches. Plus, there may be a sale or a special vacation package being offered you need to take advantage of now. You may also be on a saving schedule where you'll have the budget ready to spend on the trip – at the time of the trip itself, not months before it starts.

Another benefit? Unlike credit cards, most (but not all) BNPL services are zero-interest, provided you make on-time payments, of course. Otherwise, most of them will start charging interest on your missed payments.

The cons of using buy now, pay later

Although it's easy to see why BNPL makes sense at first glance, the reality is it's usually not a smart financial decision, especially when it comes to vacations. After all, while we wish vacations were a necessity, the reality is that they're not.

If you can’t pay for it now, it's simply not a wise move to book a trip: You're essentially just kicking the can down the road, accumulating more and more debt that you can't say for sure you'll pay off on time.

In fact, Brady Wright, a Certified Financial Planner with Golden Road Advisors, strongly warns against using BNPL for any purpose, citing the hidden potential fees associated with this kind of service and describing it as "the latest iteration of the same psychological trick credit card companies have been using for decades: 'Get what you want now, worry about it later.'"

"Retailers partner with BNPL companies because they can show you a price tag that's 75% smaller upfront while dangling phrases like 'interest-free' in front of you — and that gets consumers to spend significantly more," he explained.

It's not just about you buying more than you were planning on, either, he warned. It's also about making a profit off any potential lapses on your part.

"BNPL companies are banking on the fact that a percentage of users will miss payments, at which point they can charge substantial fees or interest rates. Miss a payment, and you're hit with compounding interest that can quickly spiral," Wright said.

So, should you use buy now, pay later for your vacation?

While there are situations where it may make financial sense to set up a Klarna plan for a trip (where you know for sure you're going to pay it off the following week and want to take advantage of a travel deal, for example), those occurrences are rare.

In general, if you need to depend on a BNPL plan to book a vacation, it's probably not a good idea to go now. While it may seem like a temporary godsend, these plans add up quickly and can plunge you into a vicious cycle, especially if you miss a payment and the service decides to charge you interest on your remaining balance. We all deserve a vacation, but no amount of relaxing on a trip makes up for the eventual stress that future financial issues will bring you.

"Whether it's credit cards or BNPL, you need to recognize that both forms of debt allow others to profit at the expense of your ability to build wealth and achieve your long-term financial goals," Wright emphasized.

And keep an eye out if your child mentions using BNPL to go on vacation with you or if they're planning a trip on their own: BNPL purchases are the reason behind 28% of total unsecured consumer debt for borrowers aged 18 to 24, according to the Consumer Finance Bureau. Make sure to warn them of the dangers these kind of services pose to their overall financial well-being, and explain what you both need to do in order to have a successful trip:

Work on slowly setting aside money for your travels. Use this Bankrate tool to find the quickest ways to achieve this:

Next, draw up a budget and timeline if needed so you're able to afford it when it comes time to book. Your trip will be happier and more relaxing if it's already paid off by the time you arrive at your destination.

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You worked hard all year and were awarded an amazing bonus. It's time to go on a shopping spree and treat yourself — because you only live once, so why not live it up?

Let me stop you there: Don't spend it all in one place. Of course it's important to treat yourself, but within reason.

There are most likely buckets that need to be filled to help set you up for success with your end-of-year and 2026 financial goals.

Here are five smart things to do with your year-end bonus.

No. 1: Pay down debt

If you've been living beyond your means, it's vital to pay down debt.

Credit cards, which charge extremely high interest rates, should be considered a priority to be paid off first. Otherwise, you're losing money by paying these fees.

Mortgages, student loans, and auto loans often charge lower interest rates, so those are usually fine to pay off monthly.

However, before making another large purchase, it's important to pay down these expenses.

No. 2: Contribute more to retirement savings

If you aren't contributing to or maxing out your retirement savings accounts — think 401(k), IRA, Roth IRA, etc. — then I would look hard at making a nice contribution to one of these accounts.

Keep in mind the contribution limits of 401(k)s ($23,500 in 2025), and traditional and Roth IRAs ($7,000 for individuals under age 50, $8,000 for individuals 50-plus).

Because of compound interest, your contribution can pay off when you reach the point of thinking about retirement. Your future self will thank you.

No. 3: Bulk up your emergency funds

Most financial advisers will likely recommend that you have three to six months of living expenses in your emergency fund in case someone loses a job, gets sick or has an unexpectedly large expense.

This fund allows you to take care of yourself and your family without having to stress or touch investment accounts or those that are hard to access.

A year-end bonus would be a great way to start or replenish an emergency fund. Start small and build on it over time.

Life happens, and it would be great to be more prepared next time you have an emergency.

No. 4: Fund a future expense

Something I started doing is to anticipate and plan for two big expenses that happen every year, way before I need the money: holiday gifts and summer camps for our children.

I started allocating part of my budget every year to set aside for these two major recurring expenses. I budget for the camps through my flexible spending account (FSA), but I have also started putting a portion of my year-end bonus into these future expenses.

I invest the money in a high-yield cash account, then pull my FSA money only twice a year to pay myself back, then invest that, too.

It can be a win/win and help take the stress of high expense periods away from me and my family.

No. 5: Save for a big trip, house project or fun purchases

Most of the other recommendations were very responsible, so here's something a little more fun (in a responsible way).

Have you always wanted to go on a trip, remodel your kitchen or buy e-bikes so you can ride to the beach? Now is the time to start a "fun fund." If you don't plan for it, it will never happen.

Consider putting a portion (or all) of your year-end bonus into a high-yield savings account. Contribute to it regularly, and before you know it, you'll be ready to check that thing off your bucket list.

This year, when you receive that year-end bonus check, take a breath and think about how these funds might impact your financial future.

Instead of buying a toy your kids will forget or an expensive bag that will only be in style for a few years, consider your long-term financial goals.

Saving and achieving your financial goals is fun, too — it just takes a little planning.

If you need more help deciding how to invest your year-end bonus, contact your financial adviser to help you get started.

Related Content

• The Savvy Way to Spend (and Enjoy) Your Bonus
• How to Make the Most of Your Bonus (and Other Variable Income)
• The Best Ways to Use Your Year-End Bonus (and the Worst)
• How Do You Know When It's Time to Change Financial Advisers?
• Three Steps for Couples Navigating the Money Maze

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

With a home equity line of credit, or HELOC, you can use your home’s equity to cover costs like renovations, education or emergency expenses. With Americans collectively holding about $17.3 trillion in home equity, a level not seen in decades, many homeowners now have more borrowing power than they realize.

A HELOC’s flexibility is appealing, but your monthly payment can shift based on your credit, loan terms and interest rate. Understanding how those factors work is key before tapping your equity.

Here’s what a $50,000 HELOC may cost each month and how to decide if this type of financing fits your needs.

What affects your HELOC payment?

Many factors affect your HELOC payment, so it’s important to consider your specific situation and how these factors will impact your rates:

• Credit score: If you have a high credit score, you’re more likely to qualify for a lower HELOC interest rate. If your credit score is lower, though, you’ll probably have a higher interest rate. Keep in mind that even if you have a HELOC already, if your credit score drops during the loan term, your lender might increase your interest rate because they consider you a higher-risk borrower.
• HELOC term: Your HELOC term will affect your rates, too. Shorter terms usually carry lower interest rates, and longer terms will typically have higher interest rates. Most HELOCs consist of a draw period ranging from five to 10 years, during which you make interest-only payments. The repayment period can last 10 to 20 years, and during that period, you’ll be repaying the principal and interest, meaning your payments will increase.
• Loan-to-value ratio: Your loan-to-value ratio compares the amount of your loan to your home’s appraised value. The lower this ratio is, the less risky lenders consider you to be, meaning you’re likely to get a lower interest rate. According to First Merchants Bank, you’ll need a loan-to-value ratio of 90% or lower to qualify for a HELOC. For the best interest rates, your loan-to-value ratio should be 80% or less.
• Prime interest rate: Your HELOC interest rates are based on the prime rate, which is affected by the Federal Reserve’s actions. According to the Wall Street Journal, the average HELOC interest rate as of November 11 is 7.82%.
• Lender margins: In addition to the prime rate, each lender can add their own margins to determine your final interest rate. Lender margins can be negative or positive, and they vary from lender to lender. As a result, it’s best to shop around and compare quotes from multiple lenders before taking out a HELOC.
• Variable rate adjustments: Most HELOCs have a variable interest rate, so your interest rate can change throughout the term of your loan. As the prime rate fluctuates, your interest rate could increase or decrease, too.
• Rate cap: Many lenders implement an interest rate cap to protect you if interest rates decrease dramatically. Often, that cap is around 18%, but that can vary depending on your lender.

How much a $50,000 HELOC costs per month

Here’s an example of what a $50,000 HELOC could cost based on current rates and typical loan terms. The United Nations Federal Credit Union HELOC payment calculator makes this easy.

If you have excellent credit and a low loan-to-value ratio, you might qualify for an interest rate around 7.82%. With a 10-year draw period followed by a 20-year repayment period, your payments would begin as interest-only and later shift to principal and interest.

The table below outlines how those payments break down:

Note: These payments don’t account for potential changes from a variable interest rate. Your actual monthly cost may increase or decrease over time.

HELOC vs. home equity loan: What’s the difference in monthly cost?

Like a HELOC, a home equity loan lets you borrow against your home’s equity, but the structure is different. A HELOC gives you flexibility to borrow only what you need during the draw period, while a home equity loan provides a single lump sum upfront.

Home equity loans also come with fixed interest rates, which means your monthly payment stays the same throughout the life of the loan. That predictability creates a very different cost profile compared with a HELOC’s variable rate and interest-only draw period.

Because of those differences, your monthly cost on a home equity loan may be more stable, while a HELOC’s payment may rise or fall over time.

Use the tool below to explore some of today's top home equity offers, powered by Bankrate:

Pros and cons of borrowing $50,000 from your home equity

There are several pros and cons to taking out a $50,000 HELOC. Its biggest advantage is flexibility. During the draw period, you can borrow, repay and borrow again up to your credit limit. For example, if your limit is $50,000, you could borrow the full amount, repay $15,000 and then borrow that $15,000 again whenever you need it.

This revolving structure makes a HELOC useful when you’re unsure how much you’ll ultimately need, such as when funding education costs or paying for a home upgrade or renovation.

During the draw period, another advantage of a HELOC is that your required payment typically covers only the interest, not the principal. You can choose to pay down the principal during this time, but the option to make interest-only payments keeps your initial costs lower. That trade-off does mean your principal and interest payments will be higher once the repayment period begins.

There are downsides to consider, too. Most HELOCs have variable interest rates, which can rise or fall throughout the loan term. Because your rate isn’t fixed, your monthly payment can change, and you’ll need to be prepared for potential fluctuations as the prime rate moves.

A HELOC also uses your home as collateral. If you’re unable to make the required payments, you could put your home at risk. It’s important to weigh that possibility carefully and make sure you’re comfortable with the long-term commitment.

When a $50,000 HELOC makes sense

A $50,000 HELOC can make sense in several situations. It’s often used for home improvements, particularly if the renovation is likely to increase your property’s value. It can also provide quick access to funds for large or unexpected expenses, such as medical bills, education costs or business startup needs.

A HELOC may also work as a debt consolidation tool. If you’re carrying multiple high-interest debts and qualify for a lower HELOC rate, you could use the line to pay those balances off and replace them with a single monthly payment. Just be mindful that HELOCs have variable interest rates and longer repayment periods, which could result in higher overall costs if rates rise.

As with any borrowing decision, it’s important to consider how predictable your expenses are and whether the flexibility of a HELOC aligns with your financial situation.

Tips before applying for a HELOC

If you decide a HELOC is right for you, it’s important to carefully shop around. Interest rates and rate caps can vary from lender to lender, so get multiple offers and compare them. Make sure that you understand all of the terms of the loan, and if you’re not clear on something, ask for more information.

A HELOC may be helpful in certain situations, but it’s not the right choice for everyone or every scenario. Consider the long-term affordability of this type of loan and make sure that you’re comfortable with the risks before you take out a HELOC.

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Homeowners today are sitting on a historic amount of real estate wealth. Americans collectively hold about $17.3 trillion in home equity, a level not seen in decades.

At the same time, borrowing costs tied to that equity have begun to ease. Many home-equity loans, home-equity lines of credit (HELOCs) and cash-out refinances have recently dipped below 8%, after peaking much higher during the rate-hike cycle.

With 2026 approaching, a year that could bring both lower interest rates and tax-law changes, many homeowners are weighing their options. Should they tap their equity now, or wait in hopes of better savings later? Here is how to think about the trade-offs.

When borrowing now makes sense

Pulling equity out before the year ends can be a smart move in several scenarios, especially if you’re using funds strategically. Here are a few reasons when tapping your home’s equity might make sense.

You’re planning a renovation or essential home project.

If your roof, HVAC system or major appliances are nearing the end of their lifespans, tapping equity can be far more affordable than turning to high-interest credit cards or personal loans. Even slightly lower home-equity rates can translate into substantial long-term savings on large projects.

You’re consolidating high-interest debt.

Credit card APRs regularly sit above 20%, so even a home-equity loan in the 7% range can slash interest costs. For disciplined borrowers who won’t fall back into high-interest balances, tapping equity can serve as a true reset for their budget.

You want flexibility and expect rates to fall.

A variable-rate HELOC lets you borrow only what you need when you need it, and you’ll only pay interest on the amount drawn. If market rates continue to decline into the new year, your HELOC payments could adjust downward accordingly.

You’re confident in long-term home value and stable cash flow.

If your income is steady and your local housing market remains resilient, borrowing today might offer a healthy balance of affordability and liquidity without adding unnecessary financial strain.

Why waiting could be smarter and what’s at stake

Patience can pay off, especially if rate forecasts hold. Here are a few reasons you might want to wait before tapping your home’s equity.

Additional rate cuts might lower borrowing costs.

Some analysts expect the Fed to continue trimming rates into 2026. If that plays out, fixed-rate home-equity loans and even cash-out refinances could become cheaper next year. Shaving even half a percentage point off a large loan can save thousands over time.

Fixed-rate borrowers stand to gain the most by waiting.

Unlike HELOCs, which can adjust downward as rates fall, fixed-rate loans require you to lock in a rate at closing. If you’re planning a major home improvement project next year, delaying could give you more room to secure a better deal.

But waiting isn’t without risk, since your home’s value or local market conditions could shift. In some markets, tighter lending standards or shifts in demand could make equity borrowing more restrictive over time. Unexpected expenses can also come up. If a sudden repair or financial emergency hits, you might be forced to borrow during a less favorable window.

Waiting can save you money, but only if market conditions move in your favor and your financial needs stay predictable.

If you haven't taken out a home equity loan or HELOC yet, use our home equity tool below, powered by Bankrate, to compare rates you can get today:

Common mistakes homeowners make when tapping equity and how to avoid them

One of the biggest mistakes homeowners make when borrowing against their home is using the funds for non-essential or short-lived expenses such as vacations, gifts or lifestyle upgrades. While tempting in the moment, these uses don’t build long-term value and often leave borrowers with years of additional debt.

Another common misstep is assuming HELOC rates will continue to fall. Variable-rate credit lines can be helpful for flexibility, but they’re also unpredictable. If rates rise again, monthly payments can climb quickly.

Homeowners also frequently borrow more than they truly need, simply because lenders approve larger credit limits. Taking the maximum available amount can put unnecessary pressure on your budget and increase overall risk.

To avoid these pitfalls, focus equity borrowing on essential financial goals like necessary home improvements or consolidating high-interest debt, choose the loan structure that aligns with your risk tolerance, and borrow only what’s needed to meet your objective.

Practical advice for homeowners evaluating their options

If you’re weighing whether to pull equity now or wait until 2026, take these steps to make a sound decision:

1. Calculate your current equity (realistically)

Review your latest mortgage balance and compare it with recent comparable sales in your area. Don’t rely solely on automated valuation tools, since they can be overly optimistic.

2. Clarify your purpose

Equity borrowing makes the most sense when it strengthens your financial health: Increasing home value or lowering interest costs. If the purpose is discretionary, it’s better to pause.

3. Shop aggressively for a lender

Rates, closing costs and terms vary widely. Don’t automatically default to your current mortgage provider. A difference of even 0.25% can significantly affect long-term cost. It pays to shop around for a mortgage lender, since each lender might offer different rates, fee structures and support.

4. Choose the right loan structure for your personality and goals

A HELOC works well for gradual projects or flexible cash needs because you can draw funds as you go.
A home-equity loan suits borrowers who want predictable monthly payments and a fixed repayment timeline.

5. Run the numbers before committing

Estimate monthly payments, total interest costs and the potential tax benefits. Under current IRS rules, interest on home-equity debt is tax-deductible only when the funds are used for qualifying home improvements. That’s worth factoring into your calculations.

Tapping your home equity before 2026 can be a strategic way to unlock lower-cost financing, but only if the timing aligns with your broader financial goals. Borrowing now offers certainty and flexibility, especially for homeowners facing immediate needs or high-interest debt.

Waiting, meanwhile, might yield better rates, but also carries risks tied to home prices, market conditions and unforeseen expenses.

The right move depends on your financial stability, long-term plans and comfort with rate fluctuations. Approach the decision carefully, run the numbers, and choose the option that delivers the best balance of cost, stability and opportunity for your household.

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If you have a car, you're probably getting flooded with calls, emails and letters telling you that your car needs an extended warranty. A lot of these are scams, but extended warranties themselves are real and sometimes useful.

While you might be reluctant to pay the added cost, some of these sales materials can make it sound pretty scary to drive without one. But, if you don't check the fine print or choose a reputable warranty underwriter, you could end up paying for coverage that doesn't quite live up to your expectations.

How do extended warranties work? Do you really need one? What should you consider if you are going to buy one? Get the details you need to know below.

How do extended warranties work with new cars?

When buying a new car, you might be offered an "extended" or "wrap-around" warranty. Whether it's worth it depends on what the standard warranty already included with your new car covers.

This varies by make and model, but typically a standard warranty lasts about three to five years or 36,000 to 60,000 miles. In terms of what they do, there are a few things to understand before signing:

• Normal wear and tear is never covered. All warranties only cover defects or damage that aren't considered normal wear and tear. So, something like worn-out brake pads will be on you to replace.
• Covered components: Some warranties might be "comprehensive" or "bumper-to-bumper," meaning all parts and systems are covered. Others might apply to specific systems like the powertrain, infotainment system or battery.
• Owner responsibilities: Often, warranties come with the condition that you keep up with routine maintenance like oil changes and tune-ups. If you fall behind, the warranty could be voided.
• Exclusions: Even if a certain system is included, some specific components of it might be excluded, or there might be certain situations in which they'll be excluded. Read through these exclusions carefully.
• Upgrades can lead to denied claims. If you take it to a shop after the fact to modify it in any way, dealerships may claim the upgrade caused the defect and deny your claim. Something as simple as swapping the tires or installing a hardwired dash cam may be enough to cause problems
• "Abnormal use" won't be covered. Even if you have a car made for off-roading, your warranty may not cover damage that happens if you actually take it off-road. In some cases, doing anything more than normal street driving could void the entire warranty.

An extended warranty, meanwhile, would work the same as your standard. The difference is it either includes things that are excluded from your standard warranty or that it extends the time that your vehicle is covered.

How do extended warranties work with used cars?

Unlike a new car, buying a used car usually doesn't come with a warranty. One exception to that is a certified pre-owned car, which is certified by the dealer to meet certain standards and will sometimes come with an extended warranty to back that up.

For the most part, used car warranties work the same way. But there are a couple of unique features that you might find:

• Waiting periods. Sometimes, used car warranties won't kick in right away. Instead, they take effect 30 to 90 days after purchase. The waiting period might instead be a mileage, like 1,000 miles.
• Preexisting conditions. Any issue that existed before the warranty was purchased is often excluded. If you bought the warranty when you bought the car, it can be hard to appeal a claim that's denied as a preexisting condition.

Is it worth it to get an extended warranty on a car?

The answer depends on your risk tolerance. When buying a new car, you already have a standard warranty included in the price, so you can at least wait until that one is near its expiration to explore your options.

For used cars, the answer is trickier because it depends on the condition and maintenance history of the car you bought. For a certified pre-owned car that came with an extended warranty, go ahead and use the warranty if you can.

If trying to get a claim approved turns out to be a huge headache, it might not be worth the money to buy another extended warranty when that one expires.

Reasons to not buy an extended warranty

Some reasons you might opt not to get the extended warranty include:

• You had bad experiences trying to get repairs covered under the original warranty that came with your car.
• You've made modifications to your car that would either void a warranty or render it pretty much useless.
• You've done the routine maintenance on the car yourself, so you don't have official records documenting its maintenance history.
• You do a lot of off-roading, hauling or other things with your car that a warranty underwriter could deem "abnormal."
• You'd just prefer to handle repairs without the stress of a claims process.

Extended warranty vs emergency fund

Depending on whether the car is used or new, an extended warranty can range from about $1,000 to $3,000 for a coverage period lasting three to five years (or a certain mileage).

Would you be better off forking over that cash for a warranty or stashing it in a savings account to pay for repairs as needed over that time frame?

The good news is you aren't stuck with one decision or the other. As mentioned, you can hold off on deciding about that extended warranty until your existing warranty is about to expire.

While you're waiting, go ahead and keep the cash you'd spend on it in a savings account so it can earn interest while you weigh your options.

Mistakes to avoid when buying an extended car warranty

If you would feel more comfortable having that extended warranty, there are some important steps to take to make sure you're getting a fair price and paying for a warranty that is actually usable.

Here are some of the biggest mistakes car buyers make when buying extended warranties:

• Forgetting to negotiate the price. The price you're offered isn't set in stone. Start by offering to pay half (or even less) than the price you're initially quoted and negotiate from there.
• Not vetting the company. You'll get plenty of ads, phone calls and emails offering you an extended car warranty. But they aren't all created equal. You need to buy one from a reputable source, like your car's manufacturer, a local bank or an auto club like AAA.
• Getting pressured into buying an extended warranty right away. At the dealership, the salesman might put a lot of pressure on you to add that warranty right then. Just take your car home, do some research, and compare prices and options from multiple reputable companies. Your dealer's offer might be the best one, but you might end up scoring a better deal elsewhere.

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Question: I'm 61 with a $950,000 401(k) and need $50,000 for home repairs. Should I borrow given today's rates or take a 401(k) withdrawal?

Answer: The nice thing about owning a home is getting to build equity in a place that’s yours. Eventually, that could mean cashing in that equity to improve your financial life or simply enjoying the stability of staying put as long as you keep up with your mortgage payments and property taxes.

The downside of owning a home, though, is that expensive repairs can arise when you least expect them.

A home equity line of credit (HELOC) is a common source of funding that many homeowners rely on for large home repairs. However, the average U.S. HELOC interest rate remains high, at 7.82% as of November 5, according to Bankrate. A newer loan option is a home-equity-backed card, which might offer a slightly lower interest rate than a HELOC for borrowers with excellent credit, but still upwards of 6%.

If you’re 61 and need $50,000 to cover home repairs you can’t put off, you might be wondering if it pays to dip into your savings or borrow the money given today’s elevated interest rates. The answer might depend on how much savings you have.

With a $3 million nest egg, taking a $50,000 withdrawal might seem like a no-brainer. With a $950,000 balance in your 401(k), it becomes a much tougher question. It’s important to review your options carefully.

Use the tool below to explore some of today's top rates, powered by Bankrate:

It could be a good time to capitalize on 401(k) gains

Any funds you take out of your 401(k) is money that can no longer continue growing in a tax-advantaged fashion. When you have a pile of available money and borrowing rates are high, it could make more sense to tap your 401(k) rather than take on an expensive loan you might struggle to pay back.

Additionally, if your 401(k) balance is high, now might be an especially good time to take a withdrawal.

"The market’s near an all-time high," says Prudence Zhu, CPA, CFP, and Founder and CEO at Enso Financial. "With borrowing rates outside your 401(k) shooting up, grabbing a slice of those gains today means you can fix that leaky roof or creaky furnace without gambling on a market downturn."

That said, Zhu warns that if you have a traditional 401(k), as opposed to a Roth, your withdrawals aren't tax-free. Rather, they're taxed as ordinary income. If you're still working, says Zhu, the combination of your paycheck and a large 401(k) withdrawal could bump you into a higher tax bracket.

Zhu also points out that while you might not be covered by Medicare if you're only 61, you could have a spouse who's on Medicare, or who will be in a couple of years. If so, your higher income this year could impact their Medicare premium costs in two years and potentially subject them to IRMAAs.

A 401(k) loan could be a better option than a withdrawal

If you're still employed and plan to continue working, Zhu advises considering a 401(k) loan instead of a withdrawal. These loans allow you to pay yourself back with interest instead of an outside lender.

"That interest actually goes right back into your investments, so you’re essentially dollar-cost averaging your repayments," Zhu explains.

The danger of taking out a 401(k) loan is that if you switch jobs and can't repay it, the remaining balance is treated as a withdrawal. That could trigger a big tax bill.

But if taking a withdrawal in the first place is something you’re considering, a loan might be a fairly low-risk option if you’ve accepted the fact that you might be looking at a huge tax bill and are able to plan for it accordingly.

You’ll need to run the numbers carefully

Taking money out of a 401(k) at age 61 isn't necessarily a bad idea. Since you're beyond age 59½, you won't have to worry about facing an early withdrawal penalty on your money.

One thing to keep in mind is that the more money you withdraw from your 401(k) ahead of retirement, the less annual income your nest egg might provide you with. Additionally, as Joseph Patrick Roop, president at Belmont Capital Advisors, points out, depending on your tax bracket, if you need $50,000 to cover home repairs, you'll need to take a larger distribution.

"I will assume they are working and in the 22% federal and 5% state tax brackets," he says. In that case, "to take a distribution and net 50,000, you will need to take a total distribution of approximately $68,500."

Let’s say you don’t tap your 401(k) for home repair money and you retire with $950,000. Using the popular 4% rule, you'd garner an annual income of $38,000, not accounting for inflation-related adjustments.

If you whittle your nest egg down to $881,500, you’re looking at a baseline income of $35,260 instead. You’ll need to decide if you’re OK with that, based on your projected retirement income needs.

Do what’s best for your peace of mind

If you need money for a home repair, you'll either have to come to terms with taking it from your 401(k) or borrowing it and repaying the loan. For this reason, Zhu suggests you might want to choose whichever option sits best with you mentally.

“Given the hassle and uncertainty of job security plus the risks of loan repayment, sometimes the simplest fix is the best fix,” she says. “A direct withdrawal might just buy you the peace of mind you need, especially when it means a safer, happier home.”

Read More

• I'm 63 With an Aging House That Needs Repairs, but I Might Move to a Retirement Community In a Few Years. Is It Worth Making Those Fixes?
• You May Not Want to Downsize in Retirement: Here's Why
• Tax-Deductible Home Improvements in Retirement
• I Claimed Social Security Six Months Ago at 62, but My Checks Are Too Small. What Are my Options?

Until recently, lenders that sell mortgages to Fannie Mae and Freddie Mac, the government-sponsored enterprises that guarantee about half of U.S. mortgage debt, could review credit scores only from FICO to help determine whether an applicant qualifies for a loan. But now those lenders also have the option of using VantageScore, a competing score owned by the three major credit-reporting companies (Equifax, Experian and TransUnion).

FICO and VantageScore evaluate many of the same criteria to create scores, including an applicant’s record of on-time loan and credit card payments, but their formulas differ.

The version of VantageScore that mortgage lenders may now review, known as VantageScore 4.0, also factors in such alternative data as an applicant’s history of rent payments.

FICO’s newer models, including FICO 10T, integrate more of this nontraditional data, too. (Currently, however, many landlords don’t provide rental-payment info to the credit-reporting companies). Mortgage lenders that extend loans backed by Freddie and Fannie are using older FICO models now, but they will later be able to adopt FICO 10T.

Credit scores that include alternative data could present a more complete picture of an applicant’s credit history and expand the pool of those who get loan approvals, says Keith Gumbinger, vice president of mortgage information website HSH.com.

Curious about today's mortgage interest rates? Explore and compare some of today's top offers with the tool below, powered by Bankrate:

Regardless of which credit score a mortgage lender uses, you can boost your odds of being approved for a loan and capturing a desirable interest rate by following the basic rules to raise your score.

Make all your bill payments on time, and keep the balances on your credit cards low as a percentage of their limits. That’s especially important if you’re getting ready to apply for a mortgage; aim for a credit-utilization ratio in the single digits.

Get your free credit reports from annualcreditreport.com and correct any errors you find that could hurt your score.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Anyone who’s tackled a home remodel knows costs can snowball fast, and today’s prices for materials, labor and financing don’t make it any easier. While mortgage rates have cooled slightly from their 2023 peak, many homeowners are still reluctant to refinance and lose their low rates.

That has sparked a new question: How can you fund a remodel without touching your first mortgage or maxing out credit cards?

Rather than relying on a traditional loan with fixed draws and paperwork-heavy funding, a growing number of lenders now offer flexible, card-based home equity lines of credit (HELOCs) that let homeowners tap their home’s value as needed. These hybrid products work much like a credit card, offering swipe access or digital transfers but with interest rates tied to home-equity lending rather than high-rate consumer credit.

Why homeowners are looking beyond traditional HELOCs

A standard home equity line of credit (HELOC) remains one of the most common ways to fund a home remodel. It offers a revolving line of credit secured by your home’s equity, typically with variable interest rates that are lower than most personal loans or credit cards.

But traditional HELOCs can feel rigid. Lenders often require a minimum draw amount, charge setup fees or impose strict repayment schedules. That’s where Trovy and similar platforms come in.

They combine the lower-rate borrowing power of a HELOC with the convenience and accessibility of a credit card. Instead of completing multiple forms and waiting for funds to transfer to a bank account, approved borrowers receive a Trovy card linked directly to their home-equity line.

With it, homeowners can pay contractors, purchase materials or move funds online, drawing only what they need, when they need it.

How a home-equity-backed card like Trovy works

Trovy’s model is designed for homeowners with built-up equity who want to finance projects gradually. You start by applying online, providing property details and verifying income and credit. Once approved, your line of credit is secured by your home but you don’t have to borrow a lump sum right away.

Instead, Trovy issues a HELOC card that functions like a credit card. You can use it for materials, appliances, contractor invoices and other purchases related to your renovation.

Because it’s tied to your home equity, the interest rate will likely be lower than a standard credit card. Trovy lists variable APRs in the 6% to 12% range, depending on your credit profile and available equity.

Other notable features:

• No minimum draw requirement. You only pay interest on what you use.
• No annual or closing fees. Trovy eliminates several costs that can make traditional HELOCs less appealing.
• Flexible repayment. Borrowers can pay down balances at any time without penalty.
• Tax-deductible interest. When funds are used for qualified home improvements, the interest may be deductible under IRS rules.

For homeowners managing multi-phase projects, say, a kitchen update now and a bathroom overhaul six months later, this flexibility can be a game-changer.

Real-world example: A remodel paid as it happens

Imagine a homeowner planning a $75,000 kitchen remodel. Rather than taking out a lump-sum home equity loan or depleting savings, they open a $100,000 Trovy line of credit. During construction, they use the Trovy card to pay a contractor’s $20,000 deposit and later buy $15,000 worth of appliances.

Because they’ve only drawn $35,000 so far, they pay interest on that amount, not on the full $100,000 line of credit. When phase two begins months later, they can use the same line to cover additional costs. This approach keeps cash flow flexible and helps avoid paying interest on unused funds.

It’s a modern take on the HELOC, built for how most renovations actually unfold one invoice, delivery or supply run at a time.

How Trovy compares to other funding options

The main advantage of a Trovy HELOC card is control. You can access your home’s value at lower rates than credit cards, but without the commitment of a lump-sum loan.

The trade-off is that, like any HELOC, your home is collateral. Missing payments could affect your credit or, in some cases, lead to foreclosure.

When Trovy makes sense and when it doesn’t

A home-equity-backed card is best suited for homeowners who:

• Have significant equity (at least 20%) and good credit.
• Prefer incremental funding over a single lump sum.
• Want a lower-interest alternative to credit cards for big-ticket home upgrades.
• Plan to deduct interest for qualifying renovations.

It may not be ideal if you:

• Don't have good credit.
• Don’t have enough equity.
• Prefer not to secure a credit line with your home.

The future of home-equity access

For homeowners who want to remodel without refinancing or racking up high-interest debt, Trovy’s home-equity-backed card offers a middle ground. You borrow only what you need, and enjoy rates below typical credit cards.

It’s not a one-size-fits-all solution, and borrowers should compare costs and read the fine print. But as more homeowners look for flexible ways to use their built-up equity amid high renovation costs, Trovy’s model offers a modern option in home-improvement financing.

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In my Kiplinger articles about how to build a better retirement plan, I often point out that homeowners who include home equity as an asset in their retirement plan can meet more of their retirement objectives.

The number of retirees who take advantage of a home equity conversion mortgage (HECM), however, has never equaled retirement experts' expectations.

It's not the design or pricing of the product, but rather, in my view, the limitations on how the performance of a HECM is presented and the challenges of integrating a HECM into a broader retirement plan.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

This article and the next discuss how we address these two issues. The answer is not radical — treat a HECM as an important asset class in an overall retirement solution while complying with applicable regulatory rules.

A HECM analysis is similar to that applied to other retirement assets

Here are the questions we have to answer for any asset, with additional questions when using a HECM:

• How does the value of the asset fluctuate with the market? For a HECM, how does the market price of your house increase or decrease?
• How does the asset deliver cash flow, and how is it taxed? For a HECM, what are the interest costs in borrowing that necessary cash flow, and how is that cash flow taxed?
• How do the liquid savings grow or fall to meet unplanned expenses? For a HECM, how does the available line of credit change over time?
• How much does the asset leave as a legacy in different market scenarios? For a HECM, what is the net equity in your house after paying off the mortgage at your passing?

The HECM analysis is similar to those for an investment asset class, with the key difference being that you're borrowing and incurring interest while still maintaining the asset, rather than withdrawing and giving up the potential returns on the investment.

The amount borrowed is not taxable, and interest paid is tax-deductible.

In addition, HECM interest rates are adjustable based on a formula unfamiliar to most homeowners. This is new territory for homeowners and, often, their advisers.

Consider housing price volatility while assessing this asset

To state the obvious, housing prices can vary from year to year, although over the past several generations they have trended up. There are also regional differences to take into consideration.

The region that includes Illinois, Indiana, Michigan, Ohio and Wisconsin, for instance, along with the region of Alabama, Mississippi, Kentucky and Tennessee, both experienced lower pricing growth than the rest of the country from 1995 to 2025.

The broad message for planning is not to try to predict the exact amount of savings or legacy for each homeowner, but to demonstrate the possible impact of the price ups-and-downs on your own plan.

At certain moments during retirement, the price of your house could affect how you use a HECM.

While most investors have a general sense of the volatility of returns of the stock market, they are less aware of changes in housing prices unless they're looking to sell their house.

In our retirement planning, we include the value of the house, particularly because of its impact on the legacy one will pass on.

Set out below is the historical performance of U.S. housing prices over the past 30 years. Included for comparison is the 4.0% return commonly used in HECM illustrations. Note that the compound rate of return that actually occurred over this period was 4.7%.

Even during the period surrounding the 2008 financial crisis indicated in this graph, a homeowner's line of credit grew rather than fell. That feature is enabled by HECM terms and the U.S. Department of Housing and Urban Development's insurance guarantee (more about this below).

The essential take-away is that you'll want to stress-test this asset just like you would your investment accounts.

The tests will show what happens when the housing market dips and how your finances might look over a longer period of time.

HUD insurance reduces market risk for beneficiary

HUD backs every HECM loan, insuring that the borrower's family will not owe money at the passing of the borrower's or eligible surviving spouse, even if the outstanding loan balance is more than the value of the house. HUD insurance covers any difference for the lender.

The family can either sell the home and repay the loan, keeping any excess equity, or pay off the lesser of the loan balance or 95% of the home's appraised value to keep the home.

The insurance also provides for borrowers to continue receiving scheduled loan advances or line-of-credit access even if the lender goes out of business.

This can be valuable protection in adverse housing markets.

Now consider HECM interest rates

HUD requires that lenders illustrate HECM mortgage interest rates assuming a constant interest rate based on conditions when the HECM is set up even though most HECM loans are adjustable, and interest rates change either annually or monthly.

A study we did determined the adjustable rate, with annual adjustments, for a HECM taken out at the start of a 30-year period in 1994:

Note that the adjustable rate for a HECM taken out 30 years ago has been generally lower than the fixed rate illustrated for that same mortgage. That has a couple of effects.

While a lower rate does produce a smaller loan balance, it also lowers the amount of the line of credit over time.

Most importantly, the adjustable rates are a better indicator of how your results will emerge, reflecting both fluctuating interest rates and the cap and floor in the HECM design.

The impact of historical rates on HECM results

With the above background on historical housing prices and adjustable rates, the next step is to measure the overall impact on HECM results.

While there are virtually unlimited patterns of loans, we took an example for a male 65 with a home worth $1 million and no mortgage.

His goals were to supplement income until age 85, create stable and growing liquid savings for long-term care and unplanned expenses and leave a substantial legacy.

As seen in the chart below, even in the 2008-2009 volatile period, our homeowner was able to meet his longer-term objectives for income, liquid savings and legacy.

While similar to the housing market generally, the plan reflects the decline in prices post-financial crisis while still delivering the homeowner with income and liquid savings to supplement his retirement plan and still preserve a substantial legacy.

Maybe most of all, even with volatile interest and housing prices, the homeowner was able to age in place.

Benefits of combining HECM with QLAC

In earlier articles, we've talked about combining a HECM with a QLAC. "QLAC" stands for qualified longevity annuity contract, which provides guaranteed lifetime income with flexibility to select the date annuity payments begin, along with tax savings associated with the ability to defer some required minimum distributions (RMDs).

Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel (formerly known as Building Wealth), our free, twice-weekly newsletter.

This QLAC calculator can help you figure out how it might work for you.

Most of the analysis of the benefits of a QLAC on a HECM have been based on fixed property growth and fixed HECM interest rates. But as discussed above, historical rates show a different picture.

In our next article, we will show how the addition of a QLAC in prior periods would have not only addressed longevity risk, but also reduced risks from fluctuations in housing prices and HECM interest rates.

For your next step, request an illustration at Go2Income. You'll get a better understanding of how the value of your house might fit into a retirement plan that helps you and your family.

Related Content

• For a Richer Retirement, Follow These Five Golden Rules
• What the HECM? Combine It With a QLAC and See What Happens
• Transform Your Retirement Plan With This Powerful Combo
• How Combining Your Home Equity and IRA Can Supercharge Your Retirement
• How Your Home Can Fill Gaps in Your Retirement Plan

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

When Stephanie Rogers needs to make a big purchase for Christmas or an upcoming trip, she turns to a convenient tool handily located at the checkout of nearly all online retailers these days: buy now, pay later plans.

Offered by companies such as Affirm, Afterpay, Klarna and PayPal, these financing services split the cost of purchases into equal installments over a few weeks, usually with no interest charges.

“It seemed like a no-brainer to try it,” says Rogers, 51, a medical retail worker in Troy, Mo. “I like to spread out my payments for cash flow purposes.”

Buy now, pay later plans have been popular among younger generations — Millennials and Gen Zers — for a while, but lately BNPL has been taking off among the over-50 crowd, too.

Afterpay says the number of orders it receives from older shoppers has been rising recently, and 13% of Baby Boomers and 28% of Gen Xers have used one of these plans, according to a 2025 survey from financial services company Motley Fool.

Higher earners have been adopting this payment option as well, with nearly one-third of those earning $100,000-plus now using BNPL, a recent Bankrate study found.

“The conventional wisdom was that young people without much money and without much credit were using BNPL,” says Ted Rossman, a senior industry analyst at Bankrate. “There’s still some of that, but BNPL has also moved upmarket.”

Buy now, pay later plans can be a useful way to get extra time to pay off purchases, especially expensive ones, without incurring interest.

Those are the top reasons consumers, especially older shoppers, cite for using the services, Bankrate found. Younger shoppers were more likely to also appreciate the easy credit-approval process.

But research shows that because the plans make the price of a purchase seem less painful, they lead many people to overspend — a big reason, along with late fees, that nearly 40% of users ultimately regret opting for the service, Motley Fool found.

With credit-scoring company FICO announcing this year it is creating models that will take BNPL payments into account and more BNPL services sending data to the credit-reporting companies, it’s especially important now to know exactly what you’re getting into before you click on this payment option.

How BNPL works

Think of a buy now, pay later service like an old-fashioned layaway plan in reverse. Instead of making payments and then taking the item home, you get your purchase right away, then pay off what you owe over time, with the total typically split into four equal interest-free installments.

You make the first payment when you check out, then a subsequent one every two weeks until the balance is paid off at the end of six weeks.

Many BNPL providers also offer the option of longer-term plans, often ranging from three to 24 months, for larger purchases.

Instead of weekly, payments are due monthly, typically with interest that can range from 0% to as high as 36%, depending on your credit and income, factored into the bill.

To apply, you select the BNPL option at the retailer’s online checkout, answer a few basic questions about yourself, and supply a debit or credit card number.

Within seconds, most people are approved; the industry rejected only 22% of applications in 2022, the Consumer Financial Protection Bureau found. Some BNPL companies may conduct soft credit checks, which do not impact your credit score.

Until this year, using a buy now, pay later plan didn’t affect your credit score either, as long as you didn’t miss a payment or end up with your debt sent to collections. But the industry is starting to change that, with both Klarna and Affirm now sending more BNPL loan data to credit-reporting companies such as Experian and TransUnion.

Meanwhile, FICO is incorporating BNPL data into two of its new scoring models this fall.

The impact is likely to be minor, though. According to a yearlong FICO study, the change to most consumers’ credit scores was within 10 points, higher or lower, after adding BNPL data, similar to the impact of opening a new credit-card account.

Even with the new changes, it will likely be a while before BNPL usage affects your credit in a meaningful way, in part because it takes a while for lenders to adopt the newest scoring models, says Adam Rust, director of financial services at the Consumer Federation of America.

And when it does have an effect, he says, you’ll need to use the service a lot, not just for an occasional purchase, for your activity to really have an impact.

How to use BNPL wisely

Tempted to try out a buy now, pay later plan? Experts suggest these steps to take advantage of the service without it taking advantage of you.

Know your billing schedule

Each BNPL loan has a unique repayment schedule that begins on the day you make the purchase.

With most services, you must set up automatic payments — and regardless of whether it’s required, it’s a good idea to do that and sign up for bill reminders to ensure you don’t miss a due date.

Nearly one in three users has lost track of payments, Motley Fool reports. That can be a costly error, because many BNPL providers charge late fees, commonly around $10.

Fight the urge to splurge

When stores add a BNPL option, it not only makes us more likely to buy but also raises the average checkout total by 10%, according to research published in the Journal of Marketing.

By splitting the payment up into smaller chunks, BNPL makes you “perceive costs as more trivial,” the research found. The plans also spur more impulse purchases, so Rossman advises waiting a day or two before buying so you can reevaluate with fresh eyes.

Set ground rules

Some BNPL shoppers use the plans to finance food delivery, groceries, concert tickets, clothing and other discretionary items with a short shelf life. Don’t be one of them.

Instead, Rossman suggests, restrict your BNPL purchases to higher-ticket items you really need so “you can spread payments out and isolate them from the rest of your finances” — say, if your refrigerator breaks and you need a replacement or you want to manage the cost of pricey dental work.

Limit your purchases to items you’re sure you’ll keep, because 14% of buyers have had problems returning items and getting a full refund, Bankrate found.

The CFPB issued a rule last year requiring BNPL lenders to follow the same dispute-resolution standards as credit cards, but the bureau has pulled back from enforcing that rule. If you’re unsure, pay by credit card instead. “Credit cards have far better protections than BNPL,” says Rust.

Stick to one purchase at a time

Three in five BNPL users have taken out multiple loans simultaneously, with nearly one-fourth holding three or more at once, LendingTree found. That makes keeping on top of payments and avoiding late fees more difficult.

“BNPL is already clunky, requiring you to track several small, constant payments,” says Rust. “If you have multiple BNPL loans from different providers, you just amp that up.”

Consider alternatives

Many credit card issuers also offer their cardholders BNPL services, such as Plan it from American Express and Citi’s Flex Pay. These plans allow you to separate some larger purchases from your balance to be repaid through fixed installments for a fee — often equal to 7% to 10% interest, far less than you’d pay on a typical credit card revolving balance.

Or, if your credit score is 670 or better, you might apply for a credit card with a 0% introductory offer on purchases. Those offers typically last 12 to 24 months, such as ones recently from the Wells Fargo Reflect and U.S. Bank Shield cards.

“Credit cards can be like power tools — really useful or really dangerous, depending on how you use them,” says Rossman. “The same analogy applies to BNPL.”

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Emergency funds play a huge role in financial well-being.

Vanguard research shows that setting aside $2,000 can boost your financial stability by 21%. If you add three to six months' worth of expenses, you get another 13% bump, even after factoring in income, debt and other assets.

An emergency fund is the money you set aside to cover unexpected expenses during unforeseen circumstances, such as a job loss, medical situations and house repairs. But if you're oversaving for this fund, that can be a problem, unlikely as it might seem.

How come? We'll discuss the hidden risks of maintaining an overly large emergency fund, because saving too much could hurt instead of help.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

The problem with saving too much

Vanguard's report speaks volumes. It's wise to save to establish financial stability.

However, oversaving for your emergency fund can be problematic. You're missing out on other monetary opportunities that could potentially grow your wealth and provide a higher quality of life.

Signs you're saving too much:

• You've got more than a year's worth of expenses sitting in savings
• Your investment accounts and retirement funds aren't where they should be
• You focus on stashing cash instead of knocking out high-interest debt
• You feel uneasy about moving money into investments that could grow faster

Among the hidden financial risks of oversaving for your emergency fund:

1. Lost financial growth

When all your extra money sits in a basic savings account, it likely earns little interest.

Better options include a high-yield savings accounts with interest rates of up to 4.35% or in stocks, bonds, mutual funds and real estate investment trusts (REITs).

Andrew Bates, COO at Bates Electric, recommends establishing high-yield savings and investment accounts after building an emergency fund. He believes it's one way to avoid losing the financial growth you deserve.

"Parking too much cash in your emergency fund means you're missing out on real growth," Bates says. "A smarter move is to use high-yield savings for liquidity and put the rest into investments like stocks or REITs, where your money can actually work for you."

2. Potential inflation risk

As prices go up every year, savings slowly lose value, especially if you live in cities hit hard by inflation. As of August 2025, the inflation rate in the U.S. is 2.9%.

If your savings account for your emergency fund earns only 2%, your money is actually shrinking in terms of purchasing power. The more cash you stockpile, the bigger this hidden loss becomes.

Leon Huang, CEO at RapidDirect, suggests beating inflation through investment diversification instead of putting extra money in an emergency fund.

"Keeping too much in low-interest savings is like letting inflation chip away at your money," Huang explains. "Diversifying into assets like stocks and bonds helps preserve and even grow your purchasing power over time.

"Remember, don't let your savings sit idle when they could be working harder for you."

3. Financial opportunity cost

Every extra dollar in your emergency fund is money not working elsewhere. It's just sitting in a low-yield savings account when that money could be growing or improving your finances.

Use it to pay off high-interest debt, prepare for retirement or buy your dream home or start a business, for example.

The message is clear: Oversaving for your emergency fund means missing out on several opportunities.

Learn from Edward White, head of Growth at beehiiv. When he earns extra money from his income or business, he considers balancing various aspects of his finances.

"Cash that just sits in a savings account isn't doing you any favors," White says. "Redirecting that money toward paying off debt, building retirement funds or investing in your next big project creates real financial progress. At the end of the day, money should be a tool for growth, not just a safety net."

4. Psychological mindset trap

There's a line between being financially secure and overly cautious. Having a substantial amount of money can feel reassuring.

However, you could end up being financially trapped. For example, you avoid paying off loans and making investments because you're clinging to that "safety net." Over time, this mindset can hinder your financial progress.

Take it from Raihan Masroor, founder and CEO at Your Doctors Online. He once feared making investments and expanding his business by going digital. However, he quickly learned that this mindset means not making financial progress.

Masroor warns against the psychological trap of oversaving. "Clinging too tightly to cash can make you overly cautious and stall your growth.

"I've learned that avoiding investments or expansion out of fear doesn't protect you, but keeps you stuck. True financial security comes from balance, not from hoarding money."

Finding the sweet spot

The reason you're saving for an emergency fund is to prepare for unexpected situations or manage your fluctuating income. But if you've saved enough to be financially prepared for the rainy seasons, you can use extra cash for other financial opportunities.

Start by saving just enough for your emergency fund. There's no set amount for an emergency fund. The target largely depends on your income and expenses, as well as dependents and overall lifestyle.

According to most financial experts, the general rule is simple: Build three to six months' worth of living expenses.

This means that if you suddenly lose your job, for example, you can cover expenses such as bills and groceries for three to six months, or until you find new employment.

What to do with extra money

Once you hit your emergency funds target, use your extra money for other financial opportunities:

Debt payments (credit cards, personal loans, mortgage, etc.). It's more practical to use your money to settle debts, whether you're paying off credit cards or personal loans. It doesn't make sense to oversave for your emergency fund if you haven't zeroed out your debts.

Specific savings (education, real estate, travel, etc.). Put extra cash into a high-yield savings account, which will exponentially grow your money. You can also use this money to invest in your dream house, finance your children's future education or even find deals on your travel in 2025.

Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel (formerly known as Building Wealth), our free, twice-weekly newsletter.

Basic insurance (health insurance, life insurance, etc.). To protect yourself from financial risks, it's wise to invest in different types of insurance.

Consider getting medical coverage, whole life insurance, a dental policy and/or pharmaceutical benefits. Think of these as secondary emergency funds.

Investment diversification (stocks, bonds, mutual funds, REITs, etc.). It's a good idea to get strategic about your investments by diversifying your portfolio. Not only will this help grow your money, but it also reduces your financial risks.

Wrapping up

Building an emergency fund is one of the first steps to establishing your financial security. But if you oversave for this fund, you might lose investment growth and face inflation risks. You might be psychologically trapped, missing out on many financial opportunities.

Build three to six months' worth of living expenses, then, allocate extra money towards loans, savings, insurance and investments.

When it comes to money, it's a numbers game — be wise about saving and investing.

Related Content

• Saving for Your Emergency Fund: As Easy as 1-3-6
• The Seven-Day Financial Reset: A Simple Plan to Get Control of Your Money, From an Expert
• I'm a Financial Adviser: This Is How You Can Save for Big Goals Even if You Feel Like You're Barely Getting By
• Extra Cash? Should You Pay Off Debt or Invest?

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

The financial professionals who contribute to Kiplinger's Adviser Intel are always here to make sure you have the information you need to make critical decisions about your retirement planning, estate planning and tax planning.

In the past week, they've written about the misconceptions many people have about annuities, how Baby Boomers are facing a very different retirement reality than their parents did and the OBBB's impact on federal student loan programs. One also wrote about how families can prepare heirs for their financial legacy to avoid the "third-generation curse."

This quiz is designed to test what you've learned from them. Let's see what you know! (And don't worry if you miss an answer: You can follow the links below the quiz to brush up on your knowledge.)

Related Content From Adviser Intel

These are the Kiplinger stories featured in this quiz:

• I'm a Financial Adviser: Don't Believe These Five Myths About Annuities
• Student Loan Shake-Up: What the OBBB Means for Parent PLUS Borrowers, From a Financial Aid Expert
• Boomer Retirement Reality Check: The Numbers Look Bleak, But Here's What You Can Do About That
• I'm a Wealth Adviser: This Is How to Prevent Your Heirs From Frittering Away the Family Fortune

With the passage of the One Big Beautiful Bill (OBBB), drastic changes are coming to federal student loan programs. One major change is the new loan limits for Parent PLUS Loans beginning July 1, 2026.

These Direct PLUS Loans, part of the federal student loan program, have been a lifeline for parents helping their children cover the costs of college.

If you have a child who'll be college-bound in the next few years, these changes could directly impact your college financing plans — and could require you to look for other methods to cover financial aid gaps.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

Understanding the Parent PLUS Loan changes

The Direct PLUS Loan program has offered parents the ability to borrow federal student loans to help cover the cost of college when financial aid comes up short.

Last academic year, we saw the average Parent PLUS Loan recipient receive about $20,000 per year.

However, with no annual loan limit, this average can be deceiving, as parents borrowing a PLUS Loan to help them cover the costs of college have been able to borrow up to the student's cost of attendance minus other financial aid received.

Without strict loan limits, and with the current costs of college, parents could be borrowing a small amount or tens of thousands per year, with minimum credit requirements when compared with other types of private debt.

This accessibility has come with consequences. Many parents found themselves carrying substantial debt well into retirement, with the outstanding federal student loan balance for borrowers age 62 and older totaling about $132 billion.

About 480,000 borrowers in this age group carry balances exceeding $80,000, and more than 100,000 of these borrowers owe more than $200,000.

The New Parent PLUS Loan limits

For any student beginning a new program on or after July 1, 2026, Parent PLUS Loans will be capped at $20,000 annually, and a student can receive no more than $65,000.

This is a significant change from the previous unlimited borrowing structure. Students who started programs before July 1, 2026, and parents who have already borrowed Parent PLUS Loans will be grandfathered into the current terms until the student completes their program or for an additional three years.

It's important to note, that these limits are tied to the recipient — the student. While this doesn't necessarily prevent parents from overborrowing, as a parent can borrow these amounts for each dependent undergraduate student seeking an undergraduate degree or credential, it will affect financial planning for the student and their family going forward.

What these limits mean for your family

There are some considerations parents should take — including a mathematical challenge for students attending four-year programs.

If you need to borrow the full $20,000 limit for your child in the first year, you'll use most of the aggregate limit by the time the student completes their third year.

This could leave a significant funding gap for the student's final year of college if other plans aren't put into place.

Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel (formerly known as Building Wealth), our free, twice-weekly newsletter.

Consider this scenario: Your child attends a private four-year university with a total annual cost of $60,000. After grants, scholarships and student loans are offered, the student has a $25,000 gap. It's expected that a gap of this size, if not larger, will continue for all four years.

Under the new rules, you could borrow $20,000 in a Direct PLUS loan as a parent, and you would still need to find a way to cover the remaining $5,000.

By your child's junior year, you would have already borrowed $60,000 of the $65,000 total limit, leaving only $5,000 for your child's senior year.

In addition, you might face tuition increases, which average 5% to 8% annually. If you were feeling a financial strain during freshman year, it might get worse each year — which is why it's crucial to assess affordability from the start of your child's college career.

Protecting your child's educational success

If your child hits a financial barrier they can't mitigate, they can face serious risks. Chances are, if you're borrowing a parent student loan — federal or private — your child is likely to also be borrowing student loans.

Colleges have strict deadlines for when tuition is due, and any delays in payment might result in your child being dropped from classes until the issue is resolved, or the student might be forced to leave the school entirely.

Typically, this leaves families scrambling to find ways to cover the tuition bill — which could lead to high-interest emergency funding.

Even if the issue is resolved, the student could be left with the stress of financial uncertainty, which can impact academic performance.

Unfortunately, if the student did borrow funds and is forced to drop out, that immediately puts them at an elevated risk of default on their loans.

To prevent these outcomes, it's important to have an honest conversation with your child about college affordability.

If your dream school requires borrowing significant debt, consider more affordable alternatives that won't jeopardize degree completion and the financial stability of the family.

Creating your financial action plan

Don't wait until acceptance letters arrive to address affordability. Start these conversations during your child's sophomore or junior year of high school, when there's still time to create savings plans, adjust college lists and explore scholarship opportunities.

Use tools such as Edvisors' financial aid gap calculator to run estimates or use your financial aid offers to determine your financial aid gap. (Note: I am the director of corporate communications for Edvisors.)

1. Establish a college budget

Take some time to look at your own resources, and create a realistic budget for how much you and your child can afford.

It's helpful to calculate realistic annual education costs from each prospective school, including tuition, room, board and other living expenses.

Factor in increases to tuition each year. This will give you a baseline of affordability for you and your child.

2. Develop a loan strategy

Set limits on how much you're willing to borrow. Keeping this open-ended can create issues further down the line.

In addition, look at all your options, such as the Direct PLUS Loan, as well as private student loans.

If you plan to borrow a Parent PLUS Loan, keep the new limits in mind. If you can keep your borrowing to $15,000 or less each year, you can help cover the costs of a four-year program.

3. Explore alternative financing options

Private student loans might fill gaps left by federal loan limits, but they typically need stronger credit qualifications and offer fewer protections than federal loans.

Many times, borrowers might see lower interest rate options with private student loans, but only borrowers with strong credit will qualify for the lower rates.

4. Start saving now

Even if your child is starting college next year, it's not too late to start saving for college.

If your child is in a four-year program, and you find yourself with a financial aid gap, it might be worth it to set money aside while they're in their first and second year to use toward their junior and/or senior year.

Even modest monthly contributions to either a 529 plan or a high-yield savings account can reduce your borrowing needs in the future, which can reduce your need to borrow.

The end of unlimited Parent PLUS borrowing marks a significant shift in college financing. It's hard to say if this is the protection parents need from overborrowing, but it does offer an opportunity to organize and create a plan.

By understanding the changes, creating realistic budgets and exploring all funding options, you can help ensure your child's educational success without compromising your financial future.

Related Content

• The New Rules for Student Loans
• How to Budget for College Expenses Beyond Tuition
• Going to College? How to Navigate the Financial Planning
• You Should Be Investing in a 529 Now for Your Kids' or Grandkids' Tuition
• Nearing Retirement With Student Loan Debt? What You Can Do

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

The ripple effects of each Federal Reserve meeting reach far beyond Wall Street. They shape the rate on your mortgage, the growth of your savings, and even the value of long-term investments.

Ahead of the September Fed meeting, mortgage rates dropped to their lowest level since October 2024. The average 30-year fixed rate slipped below 6.5% for the first time in months, thanks to cooling inflation and growing confidence that the Fed may begin cutting rates in the coming quarter.

The reaction was immediate: refinance applications spiked nearly 60% last week — the sharpest increase in more than two years. As rates shift, understanding who stands to benefit and who may lose ground is the first step in adjusting your financial strategy.

The big winners: Homeowners and buyers

Falling mortgage rates are a welcome break for homeowners who took out mortgages during the peak-rate periods of 2022 and 2023. For those with rates above 7%, today’s environment opens the door to consider refinancing into lower monthly payments.

That relief can free up hundreds of dollars per month, offering a much-needed buffer against other rising costs like groceries, insurance and energy.

Homebuyers also stand to benefit, at least in theory. Lower rates slightly boost affordability by reducing monthly payment burdens, making it easier to qualify for a mortgage. However, inventory remains tight in many markets, and prices are still elevated. This means buyers may find some relief but not a complete reset of the housing affordability crunch.

Curious about today's rates? Explore and compare some of today's best offers with the tool below, powered by Bankrate:

The losers: Banks, investors and savers

Not everyone wins when rates fall. Banks and investors holding older mortgage-backed securities (MBS) face losses as new loans enter the market at lower yields. As older, higher-interest loans get refinanced, the value of those securities drops, reducing bank profitability and potentially affecting investor portfolios with heavy exposure to mortgage debt.

Savers, too, may feel the downside. If the Fed signals a pivot to rate cuts in response to softening inflation and economic data, banks will likely lower yields on CDs and high-yield savings accounts.

For consumers relying on those accounts for a reasonable return, the recent gains in interest income may start to decrease. The era of 5% savings rates could be short-lived if broader rate cuts materialize.

Browse some of today's best savings account offers with the tool below, powered by Bankrate:

What it means for your financial strategy

When interest rates shift up or down, it sends a ripple effect across nearly every aspect of your personal finances. That’s especially true when mortgage rates move sharply. If you're a homeowner, a buyer, or someone with money in savings, now’s the time to pause and ask: What should I do differently?

Here are a few options to consider.

Refinance math: When it makes sense.

If you have a mortgage with an interest rate at least one percentage point higher than current offerings, now is the time to run the numbers. Just make sure you factor in closing costs, loan term changes and how long you plan to stay in the home. Refinancing isn’t always a slam dunk, but for many, it could mean real monthly savings.

Diversifying savings if yields fall.

If CD and high-yield account rates start to decline, look into laddering strategies or short-term Treasury bills to lock in higher yields while they last. Consider moving a portion of savings into I-bonds or other inflation-protected assets if you’re worried about losing ground.

Big picture: why every rate move creates both opportunity and trade-offs.

Whether you’re a homeowner, a saver or an investor, every rate change reshapes your financial landscape. With another decision coming in October, now is the time to revisit your strategy, weigh the trade-offs between borrowing and saving and make adjustments that support your long-term goals.

Falling mortgage rates can provide relief for homeowners and buyers but they also bring challenges for savers and financial institutions. Instead of seeing these shifts as purely good or bad, treat them as a signal to reassess and realign your money decisions.

Related Content:

• My Mortgage Rate is 6.5%. Should I Refinance If Rates Fall By Half a Point 
• Find the Best 30-Year Mortgage Rates Today
• How Much Does It Cost to Refinance a Mortgage and Other Questions to Consider

Mortgage rates have slipped to their lowest level in nearly a year, creating a pivotal moment for homeowners considering a refinance.

Those who bought after 2022, when rates climbed above 6%, now have an opportunity to reassess. Lower borrowing costs can translate into real savings, but the decision hinges on timing, long-term goals and whether the math works out after closing costs.

The current surge in refinancing isn’t just about cheaper payments. It’s being driven by signs of a cooling job market, falling Treasury yields and expectations that the Federal Reserve could enter a rate-cut cycle. Together, these forces are reshaping the landscape and prompting many homeowners to take a closer look at their options.

Mortgage rates fall, fueling a surge in refinancing

On September 11, Freddie Mac reported a 15-basis-point drop in mortgage rates from the previous week — the largest weekly decline in the past year. The average rate for a 30-year fixed mortgage fell to 6.35%, while the 15-year fixed dropped to 5.5%.

Homeowners moved quickly to seize the opportunity. Data from the Mortgage Bankers Association shows refinance applications climbed 60% in early September, rising from 1,010 on August 31 to 1,600 by September 7.

Why refinancing is back on the table

Several factors are contributing to falling mortgage rates. The August jobs report revealed that unemployment increased from 4.2% in July to 4.3% in August, suggesting a slowdown in the labor market. The Federal Reserve often cuts interest rates to help drive employment, and a rate cut could help drive mortgage rates down further.

Additionally, the Treasury yield, which can reflect interest rates, recently dropped to 4.04%. The 10-year Treasury yield, which is the borrowing cost the government pays over a decade, tends to closely correlate with mortgage rates. The recent drop in the Treasury yield means that mortgage rates will likely drop, too.

The falling mortgage rates are a welcome reprieve from the high-rate environment of the past 24 months. Beginning in 2023, mortgage rates climbed significantly, and interest rates for a 30-year fixed rate mortgage reached 8% on October 18, 2023, according to Mortgage News Daily.

Rates hovered between about 6.5% and over 7% for much of 2025, so the recent drop offers exciting opportunities for buyers and homeowners looking to refinance.

What homeowners could gain by refinancing now

If you bought a home when interest rates were higher than the current 6.35% for a 30-year fixed rate mortgage, you could potentially save money by refinancing. When you refinance, you can take advantage of a lower mortgage rate, which means you’ll pay less in interest each month, lowering your monthly mortgage payments.

Locking in a lower mortgage rate also saves you on interest over the life of a loan. Even if the interest rate has dropped just a few points, those savings can add up significantly across the life of a 30-year loan.

When you refinance, you also have the option to shorten your loan term. For example, if you’ve been paying on a 30-year mortgage but want to pay your home off sooner, you could refinance to a 15-year mortgage to speed up the process. By paying your home off sooner, you can again save on interest.

Explore and compare some of today's best refinance offers with the tool below, powered by Bankrate:

Costs and risks to weigh carefully

As refinance applications surge, it may be tempting to join in on the refinancing movement, but it’s essential to carefully consider whether refinancing makes sense for you.

Start by carefully reviewing the costs of refinancing. You will be responsible for paying closing costs to refinance, which typically range from 3% to 6% of your mortgage balance.

If you owe $250,000 on your home and want to refinance, you could pay $7,500 to $15,000 in closing costs. Those costs can vary depending on the lender you use and the type of refinance you choose, so be sure to shop around and compare costs.

Calculating the refinance break-even point can help you determine if refinancing makes financial sense. The break-even point occurs when you start saving money as a result of refinancing your home.

To start, add up all of your costs of refinancing, then determine how much money you’ll save each month. Divide your refinancing fees by the amount of money you save per month to determine how many months it will take before you start saving money.

For example, if your fees total $7,000 and you’ll save $350 a month, you’ll divide 7,000 by 350 for a result of 20 months. In this scenario, you’ll start saving money in just under two years.

Make sure that you meet the requirements to refinance, too. It’s a good idea to have built up at least 20% equity in your home before you refinance. While some lenders will allow you to refinance with less, they will typically require you to carry private mortgage insurance, which will eat into your savings.

It’s ideal to have a strong credit score, too. The better your credit score, the better the chances of a lender offering you the lowest available mortgage rate. It’s also important to keep your debt-to-income ratio as low as possible. That ratio affects your credit, plus each lender may require borrowers to meet specific debt-to-income ratio requirements.

Consider the timing of refinancing, too. If you’re planning to move in just a few years, refinancing may not make sense, especially if you could be moving before you meet that break-even date. If you refinance your mortgage and move soon after, you might never recoup the money you paid for your closing costs, ultimately losing money thanks to a refinance.

Is this window temporary?

The falling mortgage rates may be temporary. Economic instability from a volatile market and unpredictable tariffs could prompt interest rates to increase. If inflation continues to climb, the Federal Reserve might choose to keep interest rates higher to help fight inflation, which could result in higher mortgage rates.

Since it’s difficult to predict how long lower rates will hold, many homeowners are weighing their options now. The recent drop has already sparked a surge in refinancing, but future moves by the Federal Reserve and broader economic shifts could change the picture quickly.

For borrowers, the key is understanding how long it might take to benefit from a refinance and whether it aligns with their financial goals — especially in a market that could shift again in the coming months.

Related Content

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• Mortgage Rates Dip to Year-Low as Jobs Data Disappoints
• My Mortgage Rate is 6.5%. Should I Refinance If Rates Fall By Half a Point

Big changes are coming to the federal student loan program, and if you're a current borrower, a parent planning for college or someone considering graduate school, it's important to know what's ahead.

The One Big Beautiful Bill (OBBB), which became law in July, represents one of the most significant shifts in student lending in recent memory.

The sweeping budget reconciliation law reshapes how families borrow and repay for higher education. The new rules take effect on July 1, 2026, though some programs will phase out gradually.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

While the updates are significant, there's no reason to panic. With the right information and a clear plan, borrowers can make smart choices that minimize costs and protect their financial well-being.

How federal student loan rules are about to change

The OBBB brings the most substantial changes to federal student lending in more than a decade. There are material changes across undergraduate borrowing, graduate borrowing and repayment options.

For undergraduates, federal Direct Subsidized and Unsubsidized Loans, formerly known as Stafford Loans, remain unchanged.

However, Parent PLUS Loans now come with new limits for the first time: a cap of $20,000 per year and $65,000 in total per student.

Historically, Parent PLUS loans have represented roughly one-third of total federal undergraduate borrowing annually, so these new limits represent a significant shift.

While the caps are relatively generous, the average Parent PLUS loan size was about $21,000 in 2024, meaning families who borrow for all four years of a bachelor's degree, particularly those with multiple children or higher-cost programs, could hit the ceiling and might need to explore additional funding options.

Graduate students face the most notable changes, as the Grad PLUS Loan program will be phased out starting July 1, 2026.

Students who have already taken out a Grad PLUS loan for a specific course of study before that date will be exempt and can continue borrowing under current rules to complete their degree or for up to three years (whichever comes first).

This will impact a decent number of borrowers, as Grad PLUS loans have historically also accounted for roughly one-third of total federal graduate borrowing annually.

To help offset the gap, borrowing limits for federal Direct Subsidized and Direct Unsubsidized Loans will increase by roughly 14% to 23%, depending on the type of graduate loan.

However, even with these increases, many graduate borrowers might need to turn to the private lending market to cover the gap between their cost of attendance and available savings, aid or federal loans.

Finally, repayment options will be simplified starting July 1, 2028. Instead of navigating a complex menu of plans, borrowers will choose between just two:

• A standard repayment plan, with repayment periods of 10, 15, 20 or 25 years based on total debt
• The new Repayment Assistance Plan, an income-driven repayment option in which monthly payments are tied to household income, starting as low as 1% and capped at 10%.

The phasing out of some of the current repayment plans will likely mean higher payments for some borrowers.

Already borrowing with PLUS Loans? Here's what you need to know

If you've taken out a Parent PLUS or Grad PLUS loan, or plan to do so before July 1, 2026, you're in a good position.

You'll be exempt from the new rules and can continue borrowing under the current program structure for up to three academic years or until your degree is complete, whichever comes first.

Even so, this is an ideal time to reassess your borrowing approach. PLUS loans are priced annually, and rates reset each May, so comparing PLUS costs with private loan options could uncover opportunities to save.

Many private lenders allow you to check potential rates using a soft credit pull, which won't impact your credit score.

Before considering PLUS or private loans, make sure you've maxed out federal Direct Subsidized and Unsubsidized Loans, which generally offer the most competitive rates and the most borrower-friendly repayment protections.

All borrowers should explore free funding options such as scholarships, grants and institutional aid — tools such as the Citizens Scholarship Search can help you identify opportunities that reduce the need for additional borrowing.

Planning for college? How to borrow smarter under the new rules

For families just beginning the college planning process, these changes make it more important than ever to understand the net price — what you'll actually pay after scholarships and grants — before committing to a school.

Sticker prices can be misleading, and with new borrowing caps on Parent PLUS loans and the elimination of Grad PLUS loans, it's critical to identify programs that are a good fit both academically and financially.

Tools such as Citizens' College Match can help you compare schools by cost, potential aid and overall affordability (the "net price"), giving you a clearer picture of what's realistic before you apply.

If you anticipate needing to borrow beyond Federal Direct Loans, start rate-shopping early. A soft-pull rate quote from private lenders can show you whether you qualify and at what rate, without impacting your credit.

If your credit profile needs work, this gives you time to improve it or line up a qualified co-signer who could help you secure better terms.

Repaying your loans? How to navigate the new plans

If you're already repaying student loans, there's no immediate action required. You can remain on your current repayment plan until at least July 1, 2028, when you'll need to choose between the Standard Repayment Plan and the Repayment Assistance Plan (RAP).

When deciding, look beyond the monthly payment. Compare how each plan affects your total interest cost, time to repayment and overall financial flexibility.

For some borrowers, refinancing federal loans into a private loan might also make sense, especially if you can secure a lower rate or shorter repayment term.

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Many lenders offer flexible refinancing options with terms ranging from five to 20 years, allowing you to customize a repayment plan that fits your budget.

However, refinancing federal loans means giving up access to such protections as income-driven repayment and potential future loan forgiveness programs, so weigh your options carefully before making a decision.

Plan ahead, borrow smarter

While the changes might feel overwhelming, they also create an opportunity for families to take a more strategic, informed approach to borrowing.

The most important steps you can take right now are to understand your options, compare rates and repayment plans and use available tools to chart the best possible path forward.

With proactive planning, you can navigate these changes with confidence and make choices that support both your educational goals and long-term financial health.

Related Content

• Going to College? How to Navigate the Financial Planning
• This Is How the Student Loan Bubble Is Primed to Pop, From a Student Funding Expert
• How the One Big Beautiful Bill Act Will Reshape 529 Plans
• A Little-Known Tax-Free Way to Help Pay Your Student Loan
• The New Rules for Student Loans

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Throughout 2025, the Federal Reserve has kept interest rates steady after cutting them by a full percentage point in 2024. But signs are emerging that change may be on the horizon.

Inflation appears to be cooling, the job market is showing signs of softening, and at the August Jackson Hole, Wyoming, conference, Fed Chair Jerome Powell indicated that rate cuts could be on the table in upcoming meetings.

So why does this matter?

The Fed's goal is to keep the economy balanced — not too hot, not too cold. Think of it like Goldilocks' porridge: just right. The key tool it uses is the fed funds rate, which influences how much banks charge each other for overnight loans.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

This rate affects a wide range of borrowing costs, from credit cards to mortgages, but it primarily targets short-term interest rates.

Longer-term rates, like those on five- or 10-year loans, are shaped by more than just Fed policy. They reflect expectations about future short-term rates, inflation and market demand.

So, a rate cut doesn't automatically mean lower long-term borrowing costs.

Given that it looks highly likely that the Fed will lower rates in the near future, it's worth considering who would benefit from lower rates, who is hurt by them, and what to do if rates are going down.

Who benefits from lower rates?

Theoretically, anyone who is looking to borrow money benefits from lower rates, but due to the nature of the yield curve (the interest rate for different lengths of borrowing), not all borrowers benefit equally.

The type of debt that is most directly affected is variable rate debt with rapid resets. Things that tend to fall into this category are home equity lines of credit (HELOCs) and credit cards on the consumer side and floating-rate loans the corporate side.

Adjustable-rate mortgages also benefit from lower rates, but after the financial crisis, their use plummeted and are fairly uncommon today.

While it is always nice to get a break when a 27.5% credit card interest rate moves to a 26.5% rate, assuming the Fed eventually implements a cut of 1 percentage point, that probably won't help many people.

Arguably, the same is true for things like home equity lines, which tend to carry higher interest than mortgages.

More affordable housing via lower rates is often cited as a reason rates need to be cut now, and home sales are at a nadir in this high-rate environment.

There are a few issues with this argument, however. Most people finance their homes with 30-year mortgages, which are more closely tied to the 10-year Treasury rate, not the fed funds rate.

As markets expected higher inflation in the future, longer-term rates actually rose last year despite Fed cuts. That same phenomenon is happening now. In other words, rate cuts may actually hurt those looking to buy a home.

If mortgage rates do drop, we could see increased demand and further home price increases, offsetting the benefit.

Unfortunately, the real solution to more affordable housing is an increased supply of homes, complemented by lower rates and lower building costs.

For those looking to refinance, lower rates would clearly help, and an increasing number of homeowners are paying high rates. The general rule of thumb is to refinance when you can save 1 percentage point or more on your mortgage rate, which may be a way off for many.

Similarly, lower rates will make car buying cheaper, and the rising number of auto delinquencies shows that this relief is needed.

Who could feel the downside of lower rates?

A surprising fact about America is that we are a net saving population. You frequently see headlines lamenting the low average savings rate of Americans (which is a sad truth), but that belies the point that we do save.

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Importantly, many older and retired people are significant savers, and much of this money ends up in investments tied to interest rates. This means that lowering interest rates actually lowers the net income of the population.

Investors living comfortably by buying CDs and Treasuries will see a drop in their disposable income. The same is true for many corporations that have large balance sheets invested in bonds.

What should you do?

Now is a great time to assess any outstanding debt and monitor when it makes sense to refinance, especially if you have a mortgage rate above 7%. As rates decline, it can become more attractive to borrow an equity line and pay off any higher interest debt, such as credit cards, as well.

More important, perhaps, is thinking about locking in good interest rates now rather than waiting. Review cash positions in your bank accounts and make sure anything above a six-month cushion is generating good interest in CDs or other high-yielding investments.

If you have significant balances parked in high-yield savings, now is a great time to buy things like Treasuries to lock in rates.

Of particular note, for those in high-tax states, municipal bonds are trading at a historical discount and offer an opportunity to get tax-free income at very compelling rates.

As the environment changes, you should actively manage your exposure to interest rates to better position yourself for what may come next.

Bradley Thompson offers securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC (Equitable Financial Advisors in MI & TN), offers investment advisory products and services through Equitable Advisors, LLC, a SEC-registered investment advisor, and offers annuity and insurance products through Equitable Network, LLC (Equitable Network Insurance Agency of California, LLC in CA; Equitable Network Insurance Agency of Utah, LLC in UT; Equitable Network of Puerto Rico, Inc., in PR). Equitable Advisors and Equitable Network are affiliates and do not own or operate New Canaan Group. PPG-8363243.1 (Exp 9/29)

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• Are High-Yield Savings Accounts Still Outpacing Inflation?
• How the Federal Reserve Affects Mortgage Rates — and What It Means for Homebuyers in 2025
• An Investment Strategist Takes a Practical Look at Alternative Investments
• Preparing for the Worst: Retirement During a Recession

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

In 2008, the U.S. economy nearly collapsed under the weight of subprime mortgages — a crisis built on easy credit, government guarantees, a near-religious confidence in ever-rising home prices and a reckless belief that everyone should and could own a home, regardless of their ability to pay.

We learned, painfully, that good intentions can mutate into monsters, and the result was a decade-long financial and social catastrophe.

Fast-forward to 2025, and we're watching an eerily similar pattern repeat itself. This time, the toxic asset isn't a house — it's a college degree.

The Kiplinger Building Wealth program, which will soon be renamed Adviser Intel (with all the same expert content), handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.

An unfolding crisis

Since 1980, college tuition has surged nearly 1,300%, according to Bureau of Labor Statistics data. That's not inflation — that's a crisis. The culprit? The same toxic ingredient that fueled the last financial disaster: easy money.

Just as banks handed out mortgages to virtually anyone with a pulse (remember NINJA loans? No Income, No Job, No Assets), the federal government handed out student loans with virtually no underwriting, no assessment of ability to repay and no accountability from schools that benefit regardless of student outcomes.

The parallels to the mortgage crisis are striking: Inflated demand fueled by easy money led to prices far beyond fundamentals until the whole thing collapsed like a house of cards. The same is happening now in higher education.

Students are encouraged to borrow tens or even hundreds of thousands of dollars without understanding the financial consequences.

But here's the truth — a $250,000 degree in sociology from a midtier university is not an asset — it's a subprime loan in disguise. The borrower might be sincere, the intent might be noble — everyone deserves a college education — but the economics are broken.

We've created an education bubble based on subprime degrees and have flooded the system with artificial purchasing power while expecting no consequences.

Student loan defaults have begun

According to the U.S. Department of Education, more than 5 million borrowers have defaulted on their federal student loans, and that number could rise to 10 million by year's end.

That would put one in four borrowers in default, a level that should terrify policymakers and taxpayers alike. When the government finally stops deferring reality, it'll resort to wage garnishment, seized tax refunds and even stripped retirement benefits from defaulted borrowers.

Policymakers are finally waking up to the crisis. A new law, effective in July 2026, the One Big Beautiful Bill Act, will cap lifetime federal borrowing at $257,500, eliminate the Grad PLUS loan program and impose limits on Parent PLUS loans.

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These are steps in the right direction, but they're too little, too late. The student loan pipeline has already created $1.8 trillion of student debt with little connection to labor market outcomes, per the Education Data Initiative.

The new Repayment Assistance Plan (RAP), while more income-driven, still stretches forgiveness to 30 years and offers limited relief in the face of stagnant wages and inflated tuition.

Who are the most affected?

The tragedy is that just as with subprime mortgages, the most vulnerable will suffer. First-generation students, minorities and low-income families who were lured into debt traps under the illusion of upward mobility could graduate (if at all) into stagnant wages and a mountain of unpayable loans.

The architects of this mess — universities, policymakers and bureaucrats — face no consequences. In addition, government accounting shows federal loans are costly. The Congressional Budget Office projects a 19-cent loss for every $1 lent under federal student loan programs. That's basically a subsidized insolvency.

The housing crisis ended with foreclosures, lost homes, broken families and a decimated middle class. Are we going to wait until the student loan bubble bursts with the same force?

The only path forward is to turn off the faucet. End the era of government-backed lending, and let private markets bring discipline back into the system.

Private lenders operate on one simple principle: Lending should be based on repayment capacity. They underwrite loans based on the value of the degree, the historical outcomes of the institution and the borrower's likely earnings. Lending is done with care.

What we can do

In a world where real capital is on the line, not all degrees get funded. In the private market, money has memory, and prices — whether of homes or tuition — are grounded in economic reality, not fantasy. That's not elitist; that's rational.

• Let students evaluate a college degree by asking a simple question: "Is this worth the cost?"
• Let schools be held accountable for the return on investment (ROI) of their degrees.
• Let policymakers provide legal clarity for income-contingent private loans.
• Let's stop pretending that unlimited government debt is a substitute for sustainable opportunity.

We've seen what happens when we ignore the warning signs. If we don't act now, the next financial collapse won't come from Wall Street, it'll come from college campuses.

However, we have a fighting chance to act before America's next debt bomb explodes. Let's not waste it.

Related Content

• For College Financing, Consider an Income Share Agreement
• How to Budget for College Expenses Beyond Tuition
• Going to College? How to Navigate the Financial Planning
• A Little-Known Tax-Free Way to Help Pay Your Student Loan
• Student Loan Delinquencies Are Hurting Credit Scores — Even for Parents and Grandparents

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Being debt-free is a financial badge of honor. With American household debt at $18 trillion at the end of 2024, it's easy to understand why.

People seek the peace of mind that comes from knowing no one has a claim on their paychecks (except the IRS).

What if living a debt-free life isn't the best option?

A neutral tool

Debt isn't inherently bad or good; it's a financial tool that can be used to further your goals if you understand the processes behind it. When used correctly, it can increase your net worth, enhance your earning power or generate long-term returns.

The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.

The trick isn't to avoid debt like the plague, but to know when and which type is worth taking on.

We'll discuss several scenarios in which taking on debt is a smart, strategic move. Learn which types of debt make the most sense in each case, what to watch for and how to evaluate these decisions.

1. Take on a mortgage in a favorable market

In the first quarter of 2025, the American homeownership rate was 65.1%, a decrease from 65.7% at the end of 2024. This means that fewer people, especially first-time buyers and younger adults, can afford to own the house in which they live.

Higher mortgage rates and a limited housing supply are among the main contributing factors, but the fear of incurring debt also exacerbates this situation.

For most people, homeownership is the biggest financial decision they'll ever make. It's also one of the most misunderstood when it comes to debt.

A mortgage puts you into six figures of debt, but it's also one of the few loans that can make you wealthier over time.

Unlike rent, which goes straight into someone else's pocket, mortgage payments gradually build equity, which grows as your home appreciates in value.

"Over the years, I've helped thousands of people move. Based on my observations, homeowners tend to be more focused on the future than renters," says Adrian Iorga, founder and president at Stairhopper Movers. "They're investing in their property and their community, not just paying to live. That mindset shift from renting to owning makes a big difference in long-term wealth and lifestyle."

When it makes sense

Factors that make taking a mortgage a good investment include:

• Interest rates are relatively low or stable
• You plan to stay in the home for at least five to seven years
• Your monthly mortgage payment is manageable within your income
• You understand all costs involved, in the short and long term
• You're buying in a high-demand or appreciating market

If you're not yet sure if buying a home is the right step, maybe this fact will help you decide: The wealth of a typical homeowner in America is almost 40 times larger than that of the typical renter, according to the Aspen Institute.

2. Invest in education or high return on investment (ROI) skills

College graduates are more likely to be employed than high school graduates and will earn, on average, $1.2 million more over their lifetime.

Most people are aware of this through their own experiences in the workforce, which is why the global student loan sector is currently undergoing a growth phase.

As a parent, you want to ensure your child has all the opportunities they need to be successful in life. Still, the increase in the costs of higher education drives more students towards taking out loans, which ties down a young adult before they start a proper career.

"I've seen firsthand, through my clients, how borrowing large amounts for low-return education can create decades of financial strain," says Conrad Wang, managing director at EnableU. "When debt doesn't lead to real opportunity, it becomes a trap. This is why it's crucial to weigh the long-term value of what you're financing."

This doesn't mean you shouldn't invest in your education or skills. When used strategically, education debt is a high-return investment that continues to support your growth for years to come.

When it makes sense

If you're pursuing a degree or certification in a high-demand, high-income field — technology, health care, finance or the skilled trades — debt can be a smart move. Fields with strong job placement rates and a reasonable cost-to-earnings ratio are especially worth the investment.

Bonus tip: Take advantage of grants, scholarships or employer tuition reimbursement first. If you do take out a loan, devise a clear repayment plan based on your expected income after graduation.

3. Use business debt to further your goals

"Debt and entrepreneurship both carry risk, but when paired strategically, they can unlock serious growth," says Shan Abbasi, director of business development at PayCompass. "As an entrepreneur, you can use borrowed capital to scale smarter, improve operations, and boost revenue. It's all in the intention behind the debt."

Business loans should be used to scale operations, hire talent, invest in equipment or expand into new markets. Borrowing to cover ongoing losses or unclear expenses often leads to deeper debt, not growth. If you don't know how the loan pays for itself, you're better off.

When it makes sense

The best time to think about taking a business loan, such as a Small Business Administration (SBA) loan or a line of credit, is when you already have a profitable or proven business model. Even then, you shouldn't jump on the first funding opportunity that comes your way.

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Explore all options and choose the most cost-effective financing solutions. Put together a clear and realistic plan for how the borrowed funds will generate more income and if you'll be able to repay the loan even if growth is slower than expected.

4. Bet on strategic investments instead of lifestyle upgrades

It's tempting to use debt for a flashy car, a kitchen remodel or that two-week dream vacation to the Maldives. While some purchases might feel like upgrades, they rarely pay you back.

As Michael Melen, co-founder at SmartSites, puts it, "When I started SmartSites, I invested most of my personal finances into building the business. It meant sacrificing short-term comforts like luxury vacations or splurges, but I had a clear vision of where we were headed. That focus paid off. The smartest investment is in your future."

If you're not interested in entrepreneurship, you can focus on things such as energy-efficient home improvements, rental property upgrades that increase cash flow or certifications that boost your earning power.

When it makes sense

Regardless of what type of project you're funding, make sure you can handle the monthly payment without jeopardizing your emergency fund or retirement contributions.

Shop around for the most favorable loan terms, and choose only projects that either increase your income or reduce long-term expenses.

The bottom line

In the real world, strategic debt is a powerful tool for building wealth. Whether it's investing in property, education, business, or smart upgrades, the key is borrowing with intention and a clear ROI.

There is no such thing as "bad" debt; rather, it is debt taken without a plan and for the wrong reasons. Make it work for you, not against you.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Nearly one in four Americans don’t have an emergency fund, according to Bankrate. If you’re among those without enough cash on hand to cover an unexpected expense, you may be tempted to use a credit card cash advance as a quick solution. But you’ll pay for the convenience in high interest and fees.

A cash advance is a short-term loan from your card issuer, allowing you to borrow against your card’s credit limit, with no collateral required. You can typically get the cash at an ATM or a local bank branch. How much you can withdraw depends on your card issuer’s rules. Cash advances may be capped at a few hundred dollars or about 30% of your card’s credit limit.

You’ll pay an up-front fee, usually 
the greater of about $10 or 3% to 6% of the transaction amount. Interest accrues immediately; there’s no interest-free grace period, which most credit cards offer on standard purchases. And the cash-advance interest rate — often in the range of 25% to 30% — is usually higher than the rate that applies to purchases, says credit expert Gerri Detweiler.

Alternatives to a credit card cash advance

Not only do cash advances hit your wallet, they can also hurt your credit score. When you take out a cash advance, the unpaid balance counts toward your credit-utilization ratio — the percentage of available credit that you’re using on your credit card. If your utilization ratio rises because of the cash advance, your credit score may drop.

As an alternative to a cash advance, try asking your bank or credit union for a low-cost loan to help cover emergency costs, Detweiler suggests.

Another option: Open a credit card with a 0% introductory rate on purchases. The Wells Fargo Reflect card, for example, charges no interest for 21 months.

But if you take this route, be sure to pay off the balance before the 0% window closes. After that, you’ll likely owe double-digit interest on any remaining balance.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Sweeping changes are coming to student loans, courtesy of President Trump’s so-called "big beautiful bill." Almost everyone with a federal loan for higher education will be affected — including the more than 9 million Americans older than age 50 with student loans — as well as families who will need to borrow in the future to cover college costs.

The new rules, which kick in next July, reduce the number of payment plans available to families to repay college loans to a single option for parents and two for students, based on loan size or income.

The amount families can borrow will be sharply limited, too. And while many provisions affect future borrowers only, some families who are already repaying loans will be forced to switch plans as well.

The net effect? “The bill simplifies the student loan repayment process, since currently there are a lot of similar plans that cause borrowers confusion,” says Betsy Mayotte, president and founder of The Institute of Student Loan Advisors. “But it will also cause many borrowers’ payments to go up fairly significantly, and its limitations on the amounts that parents and students can borrow will reduce access to college and choice of schools for many families.”

Whether you’re currently paying off education loans, you’re helping a child manage student debt, or you will need to borrow for future college bills, the new law will likely shake up your plans. Here’s what you need to know about the changes to come.

If you are repaying parent loans now

Some 3.6 million Americans are currently paying back a loan — an average of $31,750, according to the Department of Education — taken out under the federal Parent PLUS program to help their child get a college degree.

Under the present system, you have a few options for repaying the loan. They include the standard plan, with fixed monthly payments for 10 years and, for borrowers who owe more than $30,000, a plan that stretches fixed payments over 25 years.

Parents who consolidate PLUS loans from different school years into one federal loan are also eligible for an income-based plan that can lower payments. Any remaining balance is forgiven after 25 years — or as little as 10 years if you qualify for public service loan forgiveness as a government or nonprofit employee.

All that is due to change. Starting in July 2026, there will be only one repayment plan for new parent borrowers, with fixed monthly payments spread over 10 to 25 years, depending on how much you owe. You will also no longer be able to switch to an income-based plan by consolidating loans or have access to public service loan forgiveness.

What to do

If you’re paying back a PLUS loan under a standard repayment plan and the monthly amount is manageable, you don’t have to do anything. But if you’d benefit, now or in the future, from lower monthly payments — say, if you’re likely to retire while you’re still repaying the loan — or if you might qualify for public service loan forgiveness, your best bet is to consolidate your PLUS loans into a single federal loan, then enroll in an income-based repayment plan before the new law shuts down this strategy.

“The drawbacks to consolidation are few and doing so now will preserve your access to an income-driven plan if you need it in the future,” says student loan expert Mark Kantrowitz.

One caveat: Income-Contingent Repayment (ICR), the only income-based plan available to parents now, could result in a higher monthly payment than a standard 10-year plan. Once the law takes effect, though, borrowers will move to the lower-cost Income-Based Repayment plan (IBR), with payments likely capped at 15% of discretionary income, Kantrowitz says.

If you are helping a child with student debt

If you’re looking to advise a child who is currently paying off federal student loans, or you’re among the millions of older adults still repaying debt for your own education, prepare for steeper monthly payments soon.

That’s because the new law eliminates three of the four income-based repayment plans now available to student borrowers — including the popular SAVE (Saving on a Valuable Education) and PAYE (Pay As You Earn) options, which cap monthly payments at 5% to 10% of discretionary income and typically result in the lowest monthly payments. Anyone enrolled in those plans, as well as the ICR plan, will need to switch to IBR, the sole remaining income-based plan, by June 30, 2028. Anyone now on an IBR plan can stay on it.

Current borrowers could also move to the law’s new income-based option called the Repayment Assistance Plan (RAP). Under RAP, monthly payments range from 1% to 10% of a borrower’s income, with a minimum payment of $10. The government will waive any interest that the payment doesn’t cover and provide a subsidy to ensure the principal is reduced by at least $50 a month. Any balance remaining after 30 years will be forgiven, versus 20 or 25 years under existing IBR plans.

What to do

For a student with a typical debt load (about $38,000 in 2024) who earns between $30,000 and $80,000 a year, RAP will generally result in a lower monthly payment, according to the Student Borrower Protection Center. But at higher incomes, the existing IBR option looks better on a monthly cost basis and also gets you debt-free five to 10 years sooner.

“If your child decides to move to RAP, they must be certain it’s their best option, as they may be unable to leave the plan once enrolled,” warns Fred Amrein, founder of PayForED, a software platform that helps borrowers navigate student loans.

If you are planning for college costs

The new law puts a cap on parent and graduate student borrowing, limiting the amount and kinds of financing families can use to pay future education costs.

While current rules allow you to borrow enough with a Parent PLUS loan to cover the full cost of attendance, minus any financial aid your child receives, the lifetime federal loan limit under the new law is $65,000 per student.

The new legislation also limits graduate students to $100,000 in loans, or $200,000 for professional programs such as law or medical school.

What to do

If your child is already in college, don’t stress too much about the new loan limits.

There’s an exception in the law that allows current PLUS borrowers to take out loans under the old limits for the time it takes to earn the degree or three years, whichever is less. To avoid borrowing more than you can comfortably afford, though, exhaust other forms of financial assistance first, and limit PLUS loans for all your children to no more than the equivalent of your annual income, Kantrowitz says.

Have an incoming college freshman this year? Be aware that the new limits may impact financing for senior year, because the exception expires on July 1, 2028, says Amrein.

For parents of younger children, affordability should become an even greater focus when choosing a college, Amrein says. So will strategies to cut costs, says Mayotte, such as attending a lower-priced school for the first two years, then transferring into the desired college, or commuting to school rather than living on campus.

Says Kantrowitz, “Students and families need to be much more price sensitive because they can’t count on Parent PLUS loans to pick up the slack.”

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Medical debt might seem as though it’s a problem limited largely to people who lack adequate health insurance coverage.

But even those who have a health plan could find themselves struggling to pay bills.

According to a 2023 study from health care advocacy organization The Commonwealth Fund, 30% of adults with employer coverage were paying off debt from medical or dental care, as were 33% of those with Medicare, 33% of those with an individual or Affordable Care Act marketplace plan, and 21% with Medicaid.

Cutbacks to Medicaid funding in the One Big Beautiful Bill Act, which became law over the summer, have raised concerns that more people will find themselves immersed in medical debt.

“It’s such a common burden because of the complexity and lack of affordability in our health care system, even if you have insurance,” says Ruth Landé, vice president of provider relations at Undue Medical Debt, a nonprofit organization working to alleviate the burden of medical debt.

If you rack up big bills while you’re still subject to your health plan’s annual deductible, you might be on the hook for thousands of dollars before your insurance coverage starts — especially if you have a high-deductible plan.

Even after insurance kicks in, the out-of-pocket costs for co-payments, co-insurance, or charges for out-of-network care can stack up.

Hospital stays and surgeries or serious illnesses that require inpatient care, such as appendicitis or a heart attack, often have hefty costs for patients. Bills for room charges, surgeons, anesthesia, or imaging can quickly accumulate.

Emergency room visits are also a driver of medical debt, although thanks to the federal No Surprises Act, patients can’t be billed more than the in-network rate for emergency care, even at an out-of-network hospital or if some of the providers are in network and some are out of network.

Treatment for chronic illness is another common culprit. Conditions such as diabetes, cancer, heart disease, asthma and autoimmune disorders require regular care, tests and medications, and ongoing expenses for treatments such as insulin, chemotherapy and dialysis can add up.

Insurance plans might cover only certain treatments, medications or specialists. Some newer or specialized drugs or therapies might be only partially covered — or receive no coverage at all — and the specialists you prefer to visit might not participate in your insurer’s network, resulting in substantial out-of-pocket expenses for you.

Costly medical bills might feel insurmountable, but the worst move you can make is to ignore them or forgo care that you need out of fear of going into debt.

According to the Commonwealth survey, nearly two in five working-age adults had delayed or skipped needed health care or a prescription drug in the past year because they couldn’t afford it. If you’ve received a medical bill that you can’t pay, or if you’re already in debt, you can take action to get some relief.

Confirm that the charges are accurate

Make sure that you truly owe the charges you’re being asked to pay. Review copies of your bills, explanations of benefits (EOBs) and other communication from your insurance company and health care providers as soon as you get them.

Insurance companies typically send EOBs in the mail, but you can also usually find them by logging in to your account on the insurer’s online portal. If you can’t locate an EOB for a medical service you received, call your health care provider to be sure it has your insurance information and that it billed the insurance company.

Look for problems such as duplicate charges, charges for services you didn’t receive, incorrect information about you and any medical conditions you might have, and billing for an out-of-network provider when you visited an in-network one.

If you notice that your insurance company paid for a service you didn’t receive, you should point that out, too; even though you might not owe any money, incorrect billing can still be a problem for you because it could cause denials of future claims if the insurance company thinks you already had certain treatments.

Keep in mind that if you get a bill long after you received a medical service, it might be because of ongoing disputes between health care providers and insurance companies, says Landé.

Reach out to the provider or insurance company as soon as possible if anything looks out of place or you don’t understand your charges — and consider doing so by e-mail to keep a paper trail. If your insurance company is denying coverage that you believe you deserve, you can appeal it.

If your health care provider or insurance company fails to resolve inaccurate bills, you can file a complaint with your state’s department of health (find its website at www.usa.gov/state-health), its department of insurance (https://content.naic.org/state-insurance-departments) or, sometimes, its attorney general (www.naag.org/find-my-ag).

These entities can review your complaint, and they might contact the provider or insurer to investigate, though the extent to which they take action to help you will vary by state.

For example, the Illinois Department of Insurance reviews complaints about insurance billing and can take corrective action if necessary, as does the New York State Attorney General’s Health Care Bureau.

Create a payment plan

Once you establish that you’re responsible for a bill, the next step is to figure out a plan to pay it. If you can’t afford it up front, make that clear to the health care provider.

“Providers often just don’t know the economic circumstances of folks. But if they do, they can classify your care as charitable care or offer financial assistance,” says Landé.

Even if you have health insurance, you might qualify for assistance. They might forgive a portion of your bill or, in some cases, the entire amount. Most providers also allow patients to set up zero-interest payment plans.

If you need some extra guidance, consider reaching out to a nonprofit organization such as Dollar For, which offers free help navigating medical financial-assistance applications.

Although it might be tempting to pay a medical bill with a credit card — especially if the bill is unexpectedly large and you don’t have money readily available to pay it — avoid doing so at all costs, says Landé.

If you carry a balance from month to month on your card, you’ll likely pay interest on that debt at a steep rate — an average of 20%, according to Bankrate.

Manage a debt in collection

If you don’t work out a plan to pay a medical bill, the provider might eventually turn the debt over to a collection agency. In some cases, a collection agency might track you down and legally require you to pay under the threat of being sued. Sometimes debt collectors also threaten wage garnishment, meaning your employer could withhold some of your pay to cover the debt.

If you have a medical debt in collection, pay only what you can afford. Don't stop taking medications, visiting your doctor, or paying for housing and utilities. A good general rule is to spend no more than 3% to 6% of your gross income on out-of-pocket medical bills, says Landé.

Debt-collection agencies can work with you to create a payment plan. You might also want to get help from a credit counselor. To connect with one, go to the website of the National Foundation for Credit Counseling.

If a debt-collection lawsuit is filed against you, respond either personally or through an attorney by the date specified in the court papers.

To preserve your rights and the chance to fight a court order, respond promptly. Consider enlisting the help of a legal aid organization such as the Legal Aid Justice Center.

Know your rights

Your state could offer legal protections when it comes to the collection of medical debt. Many states restrict health care providers’ ability to sue patients for their medical debt, often by regulating whether or how they can send debt to collection agencies.

On the federal level, the Fair Debt Collection Practices Act bans debt collectors from using abusive, unfair or deceptive methods.

In recent years, both policymakers and the credit industry have made efforts to lessen the impact that medical debt has on your credit.

Some states (California, Colorado, Connecticut, Illinois, Maryland, Minnesota, New Jersey, New York, Rhode Island, Vermont, Virginia and Washington) have laws in place that prevent or restrict the reporting of the debt to the credit-reporting companies (Equifax, Experian and TransUnion).

In January, under the Biden administration, the Consumer Financial Protection Bureau finalized a rule that banned the inclusion of medical debts on credit reports and prevented lenders from using medical information in credit decisions.

The rule was supposed to go into effect in March. But under the Trump administration, the CFPB no longer supports the rule, and it faces legal challenges from credit-industry groups.

Still, the credit-reporting companies have made policy changes that limit how medical debt might appear on credit reports. Credit reports no longer list medical debts that have been paid, unpaid medical debt that is less than a year old, or medical collections of less than $500.

Major credit-scoring models have altered their formulas to lessen medical debt’s negative effects on the scores. Unpaid medical debt has a smaller impact on FICO scores than other unpaid debt, for example. (Note that if you paid a medical bill with your credit card, that debt is typically not classified as medical debt.)

Make a plan now to avoid debt later

If you have solid health insurance, you can make moves to help you avoid falling into debt in the first place. Preventive care, such as regular check-ups, can ward off expensive health issues. Most health insurance plans must cover certain preventive-care services at no cost.

“Take advantage of your annual wellness visit or annual physical and get to know your preventive benefits,” says Tatiana Fassieux, education and training specialist for California Health Advocates.

Get to know your family history, too, says Fassieux. Even if you’re healthy now, being aware of whether certain medical conditions run in your family may help you assess your risk for future needed care, she says. The U.S. Surgeon General’s “My Family Health Portrait” tool can help you gather information about your family health history and learn about your risks.

If you anticipate that your health care needs might increase in the coming years, consider how your insurance plan would cover you. Compare premiums and deductibles to find the balance of monthly costs and maximum out-of-pocket expenses that will work for your budget.

If you expect to use health care services frequently, you may want to steer clear of a high-deductible health plan unless you have enough money in savings to fully cover the deductible. HDHPs have been associated with statistically significant lower use of evidence-based clinic visits, laboratory tests and prescription drugs for individuals with chronic illnesses, according to a recent study by the Journal of the American Medical Association.

For planned medical services, you should familiarize yourself with the up-front costs — and that starts with knowing the ins and outs of your insurance coverage. Before you receive a treatment, verify that all the providers involved are in-network under your plan. It’s not uncommon for one provider, such as your primary care doctor or surgeon, to be in-network, while others, such as the anesthesiologist or radiologist, are not.

Reviewing coverage in advance with a provider who will be on your care team may help you avoid unexpected costs.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Whether you're buying gas, groceries or clothes, you now have the option to defer payments over several months through installments, rather than pay in full at the time of purchase.

These Buy Now, Pay Later (BNPL) services, from firms such as Klarna and Affirm, can be tempting when money is tight: Their promise of interest-free borrowing is compelling.

Traditional 0% interest loans have been common for decades. Thousands of people take advantage of them to fund expensive home repairs or renovations.

By enabling large expenditures without having to spend down a savings account, they help buyers afford what they need, such as a roof replacement, and help the sellers make more sales.

The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.

However, that 0% interest comes with a well-disclosed catch: Pay off the loan by the deadline or be charged interest from the beginning of the loan.

For those organized and responsible enough to meet the deadline, these loans can be a wise financial decision: Why not keep your money working for you as long as possible?

However, failure to repay loans on schedule has resulted in financial hardship for less organized people.

It's important to carefully consider your approach to credit before taking out any loan, but especially for loans with unfavorable terms, should you miss a deadline.

New 0% territory

The relatively new "0% loan" environment of BNPL, with shorter-term, lower-cost purchases, represents a seismic shift in the marketing and use of such loans. Often, payments must be made every week until the loan is discharged a month or two later.

As such, BNPL is frequently marketed to would-be borrowers for much smaller loans. It's now even possible to buy lunch on a six-installment weekly repayment plan.

What's worrying is that taking out small loans for lunch might not seem like debt. This is dangerous thinking. Anytime you borrow money that you are required to repay, regardless of whether or not interest is charged, it is debt.

Viewing it otherwise can lead you into trouble, as you may keep racking up "not debt" to the point where you can no longer afford the weekly payments.

That's when the risky side of BNPL rears its head: As with traditional 0% loans, missing a payment can result in painful financial penalties.

A missed payment can lead to late fees of about $30, according to Consumer Reports. If you financed a $5 sandwich, for example, that's the equivalent of 600% interest for just one late payment.

With many short-term BNPL loans, you have six opportunities to miss payments. That could turn into a very expensive sandwich.

Pros and cons of BNPL

Used responsibly, BNPL can be a good stand-in for a depleted, or never-started, emergency fund. Most financial advisers tell their clients to have a healthy emergency fund to cover unexpected expenses, such as car repairs or hospital bills.

But it can be difficult to set aside money for the "what-ifs" in life, and more than one unplanned expenditure can drain your savings quickly.

If you're in need of emergency purchasing power, BNPL can be useful as long as you know you can keep up with the required payments.

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The problem lies in using BNPL for ordinary purchases, such as lunch, gas or groceries. As with other transactions in which cash doesn't change hands, it's easy to lose track of how many purchases you've made and how much you've spent.

Without careful recordkeeping, it's all too easy to overspend, resulting in burdensome installment payments and an endangered credit score.

How to avoid financial trouble

To avoid this happening to you, make sure you understand the terms of any loan you take out:

• Beyond the interest rate, what penalties will you incur if you accidentally miss a payment?
• What other fees or costs are associated with the loans?
• Do you need the loan in the first place, or are you simply tempted to keep money in your own account as long as possible?

By asking yourself these questions before taking out a loan — BNPL or otherwise — you could save yourself significant unplanned expenses and damage to your credit score.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Last year, the Trump administration resumed garnishing benefits for delinquent student loans and increased the amount withheld from checks to recover past overpayments from 10% to 50%.

That got me thinking — who else can take a part of a retiree's Social Security benefits? The answer is complex, as it depends on the nature of the debt and the specific circumstances involved.

The list of creditors that can take your benefits to repay a debt is small and filled with an alphabet soup of powerful government agencies that are no strangers to collecting debts.

Even if other creditors can't touch your Social Security benefits, some specific, unavoidable obligations can lead to garnishment. These include debts for back child support, alimony, or restitution to a crime victim.

Here's a bit of good news for anyone who might find their benefits diminished by a debt. The law shelters the total amount of all Social Security benefits — and all other eligible federal benefit payments — that have been directly deposited into that account or loaded onto a benefit debit card within the past two months.

The U.S. Department of the Treasury uses Direct Express Debit Mastercard, a prepaid debit card, to distribute federal benefits to recipients who don't have access to a bank account.

Paper checks lack the same creditor protections as benefits received via direct deposit or loaded on Treasury-approved debit cards. Although federal benefit payments are primarily issued electronically, with paper checks being phased out in most cases, the Social Security Administration can issue paper checks in limited circumstances. You have to file a Request for Payment of Federal Benefits by Check (FS Form 1201W) and state why you need the waiver. You should consider using either direct deposit or a benefit debit card, as both methods keep your benefits safer than a paper check.

This article focuses on retirees' Social Security benefits, not Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) income.

How the law protects Social Security retiree benefits

Social Security benefits are generally protected from commercial creditors under federal law. Section 207 of the Social Security Act states that these benefits are exempt from garnishment, levy, attachment, or other legal processes by most creditors. And the federal Consumer Credit Protection Act (CCPA) provides strong protections for Social Security benefits after they hit your bank account.

This means that private creditors, such as credit card companies, personal lenders, or medical debt collectors, typically cannot take your Social Security benefits to satisfy a debt.

Who can take your Social Security benefits

Many federal benefit payments, including retiree Social Security benefits, are not subject to garnishment in most cases. These payments are sometimes called exempt funds; however, these "exempt funds" are not always safe from garnishment.

Here's a breakdown of who can garnish or levy Social Security benefits:

Federal Agencies

• Social Security Administration (SSA): If you have received an overpayment of Social Security benefits, the SSA can reduce future benefit payments to recover the overpaid amount. The SSA currently imposes a 50% garnishment on benefits until the overpayment is repaid.
• Internal Revenue Service (IRS): The IRS can garnish up to 15% of your Social Security benefits to collect unpaid federal taxes. It does not need a court order to do this
• U.S. Department of Education: If you default on federal student loans, the Department of Education can garnish up to 15% of your benefits. There's a rule that ensures you are left with at least $750 per month in benefits. This number was determined in 1996 and has never been indexed for inflation.
• Other federal agencies (via Treasury Offset Program- TOP): The Treasury Department can offset/reduce your Social Security benefits to collect delinquent debts owed to various other federal agencies. This can include overpayments of other government benefits, such as SNAP/food stamps, or debts owed to agencies such as the Small Business Administration (SBA) or the Department of Veterans Affairs (VA) for non-disability related debts. Generally, it can impose a 15% offset without a court judgment.

Court-ordered obligations, typically enforced by state agencies:

• Delinquent child support and spousal Support: State child support enforcement agencies can garnish Social Security benefits to satisfy court-ordered child support obligations. And, overdue court-ordered alimony payments can also lead to garnishment.
  • The total amount that can be garnished from your Social Security benefits depends on your state’s law, but it can’t exceed 60% of your benefits. If you’re more than 12 weeks behind, though, the cap increases to 65%
• Past due restitution to a crime victim: If a court orders you to pay restitution to a victim of a crime, your Social Security benefits can be garnished to fulfill this obligation

Garnishment vs bank levy

There are two ways creditors can access your income: They can garnish your Social Security check before you're paid, or levy the funds once they're in your bank accounts. The distinction matters because the law protects your money differently at each stage.

Before it's been paid to you, your benefit is protected from most private debts. However, once it's in your account, the legal protection becomes limited and varies based on how the money was deposited.

Standard private creditors, such as credit card companies, medical bill collectors, personal loan lenders, etc., cannot directly garnish your Social Security benefits, even if they obtain a court judgment against you. As discussed above, only the SSA, IRS, Department of Education, and the Treasury Department can garnish your check.

If they can't intercept your Social Security check, the next step would be to levy your bank account. That is something a commercial creditor can do within limits. In this case, the creditor is permitted to levy money from your bank account that is over two months’ worth of benefits. If your account has more than two months’ worth of benefits, your bank can levy or freeze the extra money.

That's why the way you receive and store your benefits matters.

Protection in bank accounts

If your Social Security benefits are directly deposited into your bank account, federal regulations require banks to automatically protect at least two months' worth of benefits from garnishment by most creditors. This "look-back" period ensures that a certain amount remains accessible to you. However, if you deposit paper checks or transfer the funds to another account, this automatic protection may be lost.

That's why it's advisable to open a separate bank account to receive your Social Security benefits; there can't be any confusion about where the money in a dedicated account came from.

Important Considerations:

• Mixed funds: If you mix your Social Security benefits with other income, such as wages or gifts, in the same bank account, it can make it harder to distinguish the protected funds. This could potentially jeopardize the protection. It's often recommended to use a separate account solely for your Social Security deposits
• Being sued: Even if your Social Security benefits are protected, creditors can still sue you for unpaid debts and obtain a judgment. While they may not be able to collect from your protected benefits, they could potentially pursue other non-exempt assets you might have

Four steps to help protect your Social Security benefits

Step 1: Use direct deposit or a benefit debit card: Social Security payments that are directly deposited into your bank account or prepaid benefit card are easier to identify and protect. Benefits received via paper checks do not receive protection.

Step 2: Open a separate account: Using a dedicated account solely for your Social Security benefits will simplify the process of proving the funds' origin if challenged.

Step 3: Don't ignore legal notices: If you receive a garnishment notice, don't ignore it. Responding promptly and/or seeking legal advice to understand your rights and potential redress in complex situations is the best way forward. Your debts aren't going away. Many outstanding debts can grow from interest and penalties that accumulate while the debt remains unpaid.

Step 4: Seek legal advice: If you have questions about garnishment/bank levy or believe your benefits are being improperly garnished, you should consult with a qualified attorney to understand your options and potentially challenge the action.

Manage your debt to maintain your benefits

While Social Security payments are generally immune from most forms of garnishment, there are specific exceptions, especially regarding federal debts and court-issued obligations. It's crucial to understand the rules surrounding garnishment and take measures, such as having a dedicated bank account, to protect your benefits, ensuring that this critical source of income remains safe.

It's important to be proactive when addressing outstanding debts. When it comes to overdue taxes, arranging a payment plan can help you avoid the stress of debt collection and an unbudgeted hit to your Social Security benefits.

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Debt casts a shadow on your financial outlook. While having some debt is good, in the case of mortgages or making home improvements to improve your property value, other debt can prevent you from reaching your financial goals.

The key is knowing the difference and recognizing when your money habits are holding you back.

That’s where a little guidance can make a big difference. With the right strategies, you can shift from just getting by to building long-term financial stability.

Radio personality and financial adviser Dave Ramsey targets five behaviors that keep you in the revolving door of debt. Along with these habits, we'll show you ways to break them.

1. Living without a budget

A budget is your financial roadmap, directing you to your goals. However, if you don't have one, it can leave you in the dark about spending patterns and prevent you from reaching your goals.

This is why a budgeting app can come in handy. They're like the nonjudgmental best friend who helps you make sense of where your money goes.

You link your bank accounts, and they track your spending for you. You can also set savings and retirement goals. Some apps, such as Honeydue, can keep you on the same financial page as your loved ones, which is integral for couples or adults caring for aging parents.

If you're looking to try one out, this option from Quicken is easy to use and offers you a risk-free 30-day money-back guarantee.

2. Impulse buying

It's fun to treat yourself; however, if it isn't an occasional treat and more of a regular one, that's money you could be devoting to pay down debt or save.

It's why Ramsey recommends shopping with a plan in mind and cash in hand. Doing this keeps your focus narrowed to the task at hand. What's more, by paying in cash, it forces you to budget your expenses, reducing the likelihood of having the funds for impulse items.

If you're thinking about buying something a little bigger, wait for 24 hours. Taking a step back helps you assess whether the purchase is essential or a want.

3. Not having emergency savings

Life becomes unpredictable, and with it can come unexpected expenses. When those arise, having an emergency savings account is vital, as it helps you avoid going into further debt.

How much emergency savings should you have? Ramsey recommends saving from three to six months of expenses. That way, if a job loss or a high bill comes due, you have the funds to cover you.

If you're looking for quicker ways to reach this savings goal, consider a high-yield savings account. They earn rates far outpacing inflation, and many come with no account minimums or fees.

Use the tool below, powered by Bankrate, to search for some of today's top savings account offers:

4. Over-relying on credit cards

Credit cards can be great financial tools for saving money on everyday purchases. The best rewards credit cards offer cash back on groceries, dining out, streaming and traveling.

However, if you carry credit card debt, you're losing money. The interest fees alone will eat into your payments, especially if you only make the minimum amount. Every dollar you spend on interest is one dollar less you can invest or save.

If you have credit card debt you can't pay off monthly, consider paying cash for all expenses until you can. Doing this achieves several things: One, you won't add to your credit card debt. Two, it can help you spot areas in your budget you might need to trim to pay off your debt quicker.

Meanwhile, if you're struggling with credit card debt, contact your credit card issuer to tell them about your situation. They could customize a repayment plan that reduces interest rates. The benefit of this approach is that it'll close card use while on the plan, thus giving you a narrower focus on tackling debt.

5. Lifestyle creep

Lifestyle creep is when your income rises, so you decide to spend more. I get it, when you receive that raise, you want to treat yourself. However, as your income rises, you want to resist the temptation to spend more so your future self is in a better financial position.

Here are a few signs you might have lifestyle creep:

• Your income increases, but your savings remain the same
• Your impulse buys become a habit, not an outlier
• A failure to reach your financial goals

If you have lifestyle creep, there are ways to mitigate it quickly. The first is to set up a budget and review all of your expenses, as it can help spot patterns of overspending.

Next, set up automatic transfers from your checking account to a high-yield savings account on paydays. Doing this allows you to earmark money before spending, making you much more likely to reach your savings goals.

You should also get to know your money mindset. This is the belief you have about your money, savings habits and goals. Spending time analyzing the decisions you made can help you chart a course of action that helps you reach your goals and pay off debt quicker.

Related content

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Considering buying a new car in retirement? Even with a 25% tariff on many vehicles, and despite General Motors' pledge not to raise prices on its new cars, you might still be wondering if it's the right move.

While avoiding price hikes is never a reason to purchase a big-ticket item, if you are in the market for a new car, how you purchase it will make a big difference in the overall cost of your new ride.

After all, retirees have two options when buying a new car: finance it or buy it outright.

Financing it means taking out a loan from a bank or lender and paying interest over the life of the loan. Buying it means drawing down from your retirement savings, either from a tax-advantaged or non-tax-advantaged savings account.

Which option makes the most sense requires some back-of-the-envelope calculations and in-dealership negotiations, says Denny Artache, president and CEO of Artache Financial Group.

While some financial gurus bemoan the idea of buying a new car because it loses about 10% of its value as soon as you drive it off the lot, if you can get a deal, that argument goes out the window, Artache says.

Plus, buying new gives you peace of mind. With a new vehicle, you are less likely to have the car break down and cost you money for the next five to seven years, beyond the normal maintenance.

“Every time you buy a car below MSRP and are buying something at a 20% discount, you are ahead of the game,” says Artache. “You have to be smart about the rates.”

The case for financing your new car

Financing a new car makes sense when you have a really good credit score and get a deal such as 0% interest for 60 months. Alternately, financing makes sense when the interest rate is low enough that it is cheaper than taking the money out of your retirement savings and paying taxes on the withdrawal.

Let's say you want to purchase a new car for $40,000 at an APR of 2% for five years. You would pay $2,066.63 in interest. At 3% your interest would be $3124.86. (The calculation does not include state and sales tax, title, registration and other fees.)

If you took out $40,000 from your 401(k) and you are in the 12% income tax bracket, you would pay $4,800 in taxes, plus that money would lose the compounding effect of staying invested in your 401(k). If you are in a higher tax bracket, the hit will be even more.

When it doesn't make sense to finance

If you have a low credit score, will pay a high interest rate on your car loan, and are in the 12% tax bracket, then financing may not be the best option. Take that $40,000 car loan over five years, but at an APR of 5%. You would end up paying interest of $5290.96, excluding sales and state taxes and title, registration and other fees. At 7% that goes to $7522.88.

The tax on withdrawing $40,000 from your 401(k) in the 12% tax bracket would be way less at $4,800. If you have a Roth 401(k), the withdrawals are tax-free, but you will lose the compounding effect if you take a drawdown.

When it doesn’t make sense to buy a new car

While buying a new car will give you that peace of mind, it doesn’t make sense to spend money you don’t have, especially if you are on a fixed income.

If you can’t afford a new car, Atache says to consider purchasing a used one. Instead of spending $40,000, buy one for $20,000 and hire a trusted mechanic for $500 to ensure the car will last for 50,000 to 100,000 miles without breaking down.

After all, you may not drive as much as you did when you were younger and won’t put as much wear and tear on your vehicle.

Related content

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• Why You May Not Want to Move Near the Grandkids in Retirement
• Eight Ways To Save on Your Next Luxury Trip
• Why Splurging in Retirement is Totally Worth It

Editor's note: This is the last of a four-part series about wealth planning for different generations. Part one was Talkin' 'Bout My Generational Wealth: Baby Boomers, part two was Come as You Are: Wealth Management for Gen X, and part three was Bouncing Back: New Tunes for Millennials Trying to Make It.

In the last months, I shared wealth planning tips for different generations. This final installment focuses on Gen Z — a generation especially dear to me as it happens to also include my children.

As I think about the financial journey that they are about to begin, I hear Olivia Rodrigo's "Drivers License" in my head, with themes of youthful exploration and the uncertainties that come with it.

Generation Z, born from 1997 to 2012, is entering adulthood in a time of economic and global tremors, technological advancements and a very different career landscape than the one that generations prior faced.

The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.

Just as obtaining a driver's license symbolizes new freedoms and responsibilities, so does the journey toward financial independence.

'Work From Home': Embracing the gig economy

The rise of the gig economy is redefining traditional employment — leading many Gen Zers to work as freelancers, independent contractors or part-timers.

Some of this trend is by choice, and some is a result of the evolving employment market. Like everything, this move to the gig economy is going to provide workers with interesting opportunities, but some daunting challenges as well.

Without a steady salary that a typical full-time employer would provide, it is even more important for this generation to have a sound budget and financial plan in place. Two key considerations are:

Budgeting for variability. Establishing a monthly budget that accounts for fluctuating income is crucial. Allocating funds for essentials, savings and discretionary spending can help provide financial stability should income flow vary due to the nature of your work.

Building an emergency fund that could last for at least six months is a helpful benchmark.

Tax preparedness. Unlike traditional employees, "gig" workers must manage their own tax withholdings. Setting aside a portion of each paycheck for taxes is a prudent way to manage and prevent year-end tax surprises.

Note that in certain cases, they may need to make quarterly estimated tax payments throughout the year to avoid underpayment penalties. Therefore, it is not only about having the liquidity to pay the taxes, but also satisfying the timing of such payments.

When your income is variable, rather than a steady income stream, it can make it harder to manage your day-to-day life. A focus on sticking to a budget and making a financial plan is even more important.

The traditional ease of having a payroll system with automatic deductions is not available for those in this category.

Be proactive! A degree of discipline is required to ensure you're following your budget and financial plan.

'Good 4 U': Maximizing tax-advantaged accounts

Starting early with tax-advantaged accounts can yield long-term benefits.

Understandably, retirement may seem like a far-away idea for this generation just entering the workforce. However, the long-term benefits realized from tax-deferred or tax-free compounded growth are significant.

The earlier you start, the more you can maximize the benefits of these tax-advantaged accounts. Two possible considerations include:

Roth IRA. Ideal for young earners, Roth IRAs allow after-tax contributions to build future tax-free growth. These accounts have an income threshold by which one is prohibited from contributing.

In 2025, that income limit is $150,000 for a single person and $236,000 if you are married filing jointly. If your income is higher, there is a phase-out. So, with an income level of $165,000 or above (or $246,000 for married couples), you are prohibited from making a Roth IRA contribution.

Many early-career Gen Z individuals fall below these thresholds and should take advantage of this opportunity while it's eligible to them.

Health savings account (HSA). Another tax-advantaged account that may not be obvious is the health savings account, or HSA, which offers triple tax benefits — tax-deductible contributions, tax-deferred growth and tax-free withdrawals for qualified medical expenses.

While many young people may not see a need for significant health care expenses on a yearly basis and may therefore assume that this is not applicable to them, a longer view is beneficial.

Having a conversation with your children about the costs associated with a serious health event (cancer, injury, etc.) can be illuminating for them.

HSAs can be flexible because the money held in the account can be invested and withdrawn later in life. With that perspective, an HSA is more like a "retirement" account for future health care expenses.

Note that HSAs are available only to those with high-deductible health plans, meaning a deductible of at least $1,650 for individual coverage or $3,300 for family coverage in 2025.

'When I Was Older': Illuminating retirement planning

The evolution of the employment market and compensation trends suggest that few Gen Zers will have a pension upon retirement.

Independent contractors and gig workers do not have the benefit of an employer-sponsored 401(k) plan or company contribution match. Therefore, this group may have to consider self-created retirement accounts.

In addition to the Roth IRA and HSA mentioned above, a SEP IRA and Solo 401(k) are also good options. The type of account will depend on your income level, contribution amount and your financial circumstances.

Regardless of the vehicle, it is important to be vigilant and make regular and consistent contributions. Without the (often) forced discipline of an employer-sponsored plan, where contributions are automatically drawn from a regular paycheck, the onus is on the individual to ensure proper funding.

'Save Your Tears': Understanding debt management

The rising cost of education has left many Gen Zers with significant student debt. Navigating student loans and other debts requires strategic planning about many factors, chiefly:

Loan awareness. It's essential to understand the terms, interest rates and repayment options of your student loans. Certain loan forgiveness and subsidy programs may be available, depending on your situation.

Although interest rates have risen in the last years, keeping an eye on the prevailing market interest rate is a good idea. If rates do drop, it could present an opportunity to consolidate student debt at a lower rate.

Interest deduction. Not all debt is equal. There is some "good" debt because it qualifies for a tax deduction.

For example, one may deduct up to $2,500 of student loan interest, with income phase-outs starting at $80,000 for a single individual ($165,000 if filing jointly) in 2025. The availability of a tax deduction reduces the effective cost of the debt.

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In contrast, interest on "bad" debt, such as credit card debt, is not tax-deductible. If cash flow is an issue, then repaying non-tax-deductible debt should be a priority.

'Truth Hurts': Prioritizing financial literacy

In this age of information overload, discerning accurate financial advice is vital.

Many young people in my kids' generation get their news and information from social media. Consider the rise of the so-called "finfluencer" — a social media influencer who offers financial-type advice.

Many apps and robo-financial platforms also provide basic financial information. If all else fails, there is also ChatGPT, which is readily available to answer almost any question. There is no shortage of "advice" one can get on this topic.

Financial literacy is more than knowing definitions — it is about creating an understanding about how financial rules and strategies apply to your situation.

It is, therefore, vitally important to verify information through reputable sources and consult with (human) professionals to understand the nuances when necessary.

I often remind young adults of a phrase I learned early on in my career … you don't know what you don't know. That is why it is critical to question what you read and see, verify information with trusted sources and seek out advice with a critical eye.

The bottom line for those in Gen Z? With challenges come opportunities.

Like all previous generations we discussed in this series, Gen Z will navigate the complexities of modern finance and find their own levels of growth and stability.

Just as that driver's license opens the road to new adventures, smart financial decisions will pave the way to a secure and prosperous future.

Wilmington Trust is not authorized to and does not provide legal or tax advice. Our advice and recommendations provided to you are illustrative only and subject to the opinions and advice of your own attorney, tax adviser or other professional adviser.

Related Content

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• A Little-Known Tax-Free Way To Help Pay Your Student Loan

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

When most people hear about building wealth, their thoughts often turn to billionaires, mansions or viral success stories.

A select few imagine themselves beating the market and chasing risky investments, while others think that living like a monk for 10 or so years is the right approach.

In reality, building wealth is none of these things. At its core, building wealth means increasing your net worth (your assets minus your debts) over time and doing it in a way that gives you freedom, stability and options.

Financial prosperity is not something someone stumbles upon on a lucky day. Instead, it's a consistent exercise of developing habits, using smart tools and making decisions that push you in the right direction.

The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.

And here's the good news: If you've got 10 years, you've got time.

Today, I'm here to help you create a blueprint for achieving real financial progress in the decade to come. For deeper insight, I've also consulted with a few industry experts, so buckle up and let's get you started on the path to building wealth.

Set a clear financial baseline and direction

Before you can build wealth, you need to know where you're starting from.

Start by answering these five questions:

• How much do I earn each month (after taxes)?
• What are my expenses (fixed and variable)?
• Do I have any high-interest debt?
• What do I currently have saved, and where is it?
• What's my credit score?

A clear view of these financial aspects helps you identify strengths and weak spots in your financial strategy.

"Most people keep disorganized records and have no real sense of their income, expenses or liabilities," says Ian Gardner, the director of Sales and Business Development at Sigma Tax Pro.

"What I've learned after working with countless tax professionals over the years is this: Understanding your financial baseline is the first step to building wealth."

Get comfortable with budgeting

Once you know where you stand, it's time to build the plan for where you want to go. Here is where a well-designed budget comes in.

Oftentimes, we associate budgeting with restricting spending, but you can change the meaning. Don't look at it as cutting expenses, but as giving your money direction.

You can establish whatever budgeting rules work for your needs, but for beginners, I recommend two easy-to-follow rules:

1. The 50/30/20 rule. This is a simple yet effective way to break down your after-tax income:

• 50% for needs (housing, groceries, bills)
• 30% for wants (dining out, entertainment, travel)
• 20% for savings and debt repayment

It's not a rigid formula, which makes it a great starting point. Once you get into the habit, you can tweak your ratios to match your goals, like shifting more into savings as your income grows or wants decrease.

2. The "pay yourself first" rule. This rule teaches you to treat savings and investments as non-negotiable bills. Automate them if you have to.

"Too many people wait to save 'what's left over,'" says Gary Hemming, Owner & Finance Director at ABC Finance, "and there's rarely anything left.

"Experience has taught me that those who consistently grow their wealth aren't necessarily the highest earners. The ones who pay themselves first are. It's a simple habit, but it builds financial discipline and long-term security."

Savings and investments are some of the most powerful wealth-building tools you have. And yet, we often treat them as optional.

For instance, even if about 60% of Americans have some retirement savings, only 30% are confident they've managed to save enough, according to Gallup.

For automation, I strongly recommend ditching any manual methods you're using to track your cash flow. Budgeting apps like YNAB (You Need a Budget) and Empower make it easy to link your accounts, track spending and visualize where your money's really going.

Break the debt cycle

Before you can grow your wealth, you have to identify and stop the financial bleeding, and high-interest debt is often the biggest wound.

Credit cards are the usual culprits here, with average APRs hovering around 20% to 25%, which far outpace what most investments could earn.

If you carry a $5,000 balance at 24% interest and make only minimum payments, you could end up paying more than $7,000 in interest and still owe money years later.

According to an Experian study, Americans carry an average of $6,730 in credit card debt, and more than 40% of cardholders carry a balance month to month. That kind of debt doesn't just hold you back — it quietly erodes your future wealth.

Jason Pack, chief revenue officer at Freedom Debt Relief, puts it well when he says, "High-interest debt seeps into your entire life. We often see clients who delay major life milestones, like buying a home or starting a family, because debt is dictating their decisions.

"Compounding interest and minimum payments can turn a manageable balance into an out-of-control financial spiral before you even know it."

Looking for expert tips to grow and preserve your wealth? Sign up for Building Wealth, our free, twice-weekly newsletter.

In short, the best thing you can do to start building wealth is to focus on paying off your debt as fast as possible. If you don't know how, consider consulting with a fiduciary financial adviser.

Earn more, learn more: Your wealth grows as you do

If you're serious about building wealth in 10 years, you can't rely solely on managing spending and reducing debt. These are essential first steps, but you also need to adopt a growth mindset when it comes to income and financial literacy.

This is a lesson you can learn from any successful individual, regardless of their field of interest and goals. Michael Melen, co-founder of SmartSites, emphasizes the importance of having a growth mindset: "This has been one of the most important drivers of success for us. Like most beginners, we didn't have all the answers, but our commitment to learning, improving and staying adaptable helped us move forward. A growth mindset creates momentum."

The same goes for your wealth-building journey. Your commitment to expanding your income capacity and knowledge will be your driver.

Whether you're working a traditional 9-to-5 job, freelancing or building a business, always look for opportunities to increase your earning potential.

That might mean:

• Asking for a raise based on performance and market value
• Learning high-value, in-demand skills (like coding, digital marketing or data analysis)
• Starting a profitable side hustle or freelance gig
• Turning a hobby into a small business

Even modest income boosts, such as an extra $300 to 500 a month, can fast-track savings, debt payoff and investing when used wisely.

Financial literacy is a force multiplier

The difference between building wealth with the extra income you earn and blowing it on things that lose value the moment you take them off the shelf lies in knowing how to grow your money.

"Most people don't realize how limited their financial literacy is until it starts costing them," Shawn Plummer, CEO of The Annuity Expert, notes. "I've seen smart, capable individuals miss out on thousands simply because they didn't understand basic financial tools.

"But once they become aware, there's often a mindset shift. They get curious, take control, and that's when real progress begins. In my view, financial literacy empowers anyone at any age."

Learn how compound interest works. Understand risk and reward in investing. Get clear on taxes and how to legally minimize them. The more you learn, the more confident (and profitable) your choices become.

You don't have to go back to school for this, but you should consider looking into reliable courses, certifications and talking to personal finance experts. Sure, one hour with a financial consultant is more expensive than listening to respected podcasts, but these are high-return investments in yourself.

The $500 you spend today may give you the knowledge and confidence to earn $5,000 more next year.

At the end of the day, wealth-building isn't just about what you do with your money — it's about who you become in the process.

Assess your current situation. Cut off debt. Level up your income. Level up your knowledge. And watch how quickly your financial future transforms.

Related Content

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• Is Chasing the American Dream Ruining Your Financial Life?
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• Saving for Your Emergency Fund: As Easy as 1-3-6
• Why Does Talking About Money Still Feel So Taboo in 2025?

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

More than 43 million Americans carry student loan debt, and recent grads aren't the only ones feeling the pinch. Data show that many borrowers are in their 40s, 50s, and even 60s, still paying off their own loans or shouldering education debt for their children.

Now, under Trump’s sweeping tax plan — known by some as the “big beautiful bill” — student loan forgiveness, repayment rules, and related taxes are in the news again.

Not long ago, the Trump administration began moving forward with new proposed rules for the Public Service Loan Forgiveness (PSLF) program. Those rules would essentially bar organizations from qualifying that are involved in activities deemed to have a “substantial illegal purpose.”

The administration says these include illegal immigration, terrorism, or specific medical treatments for minors.

The changes would give the Education Secretary, Linda McMahon, broad discretion to decide which employers no longer qualify for the PSLF program. That could, potentially, force many borrowers to find new jobs or lose their chance at forgiveness.

PSLF, established in 2007, was designed to encourage public service by forgiving federal student loans for borrowers who make 10 years of qualifying payments while working full-time for government or nonprofit employers.

In an executive order calling for program changes, the Trump administration wrote: “Instead of alleviating worker shortages in necessary occupations, the PSLF Program has misdirected tax dollars into activist organizations that not only fail to serve the public interest but actually harm our national security and American values, sometimes through criminal means.”

These proposed sweeping changes are raising questions and concerns about the future of federal student loans and forgiveness. Here’s more of what you need to know.

Student loans forgiveness eligibility: What’s happening?

The Trump administration’s March executive order and new Department of Education rules, if implemented as proposed, will significantly impact PSLF eligibility.

As mentioned, the rules would allow the Department to disqualify organizations from PSLF eligibility if the Trump administration determines that they have a “substantial illegal purpose,” like violations of federal immigration law or anti-discrimination statutes.

Advocacy groups warn that these changes could be used to exclude supposedly controversial nonprofits, depending on how the rules are enforced.

For example, the nonprofit Institute for College Access & Success told Newsweek in a statement that it urges "the Department to reverse course and ensure that PSLF eligibility is never subject to a political judgment by the Executive Branch alone."

In contrast, during President Biden’s term, the Department of Education worked to expand PSLF.

• For example, the administration introduced a temporary waiver that relaxed some strict program requirements, allowing borrowers to count previously ineligible payments and a broader range of public service jobs toward forgiveness.
• Administrative fixes also addressed long-standing issues, like miscounted qualifying payments and forbearance errors, which had prevented many from receiving relief.
• Data show those efforts led to an increase in approvals: more than 1 million borrowers reportedly received PSLF forgiveness under Biden, compared to just 7,000 who qualified before his administration.

At the time, the Biden administration framed the changes as a way to fulfill the original intent of PSLF and offer relief to teachers, nurses, and other public service workers.

Meanwhile, recent reports suggest the Trump administration’s Department of Education, which he has called for eliminating, has halted the tracking and updating of qualifying payment counts for PSLF borrowers.

Borrowers have reported being unable to see updated progress toward forgiveness in their accounts, and new payment counts seem not to be being processed or displayed.

The reason for the disruption is unclear.

Student loan repayment, borrowing limits, and garnishment changes

Adding to the situation, Trump’s so-called big beautiful bill, enacted July 4, 2025, also brings major changes to repayment options and borrowing limits.

• Starting in July 2026, new borrowers will have only two main federal repayment options: a Standard Repayment Plan with fixed payments and a Repayment Assistance Plan (RAP), which ties payments to income but requires up to 30 years of payments before forgiveness.
• Existing income-driven plans will be phased out, and borrowers will need to transition to the new system in 2028.
• Graduate and professional students face new borrowing caps — a $ 100,000-lifetime maximum for many graduate students — and the Grad PLUS program, which allowed borrowing up to the full cost of attendance, is slated for elimination.

Update: In late July, the Department of Education indicated that the Repayment Assistance Program (RAP) will allow for Public Service Loan Forgiveness after ten years of qualifying payments for those workers in public service or nonprofit sectors. That program wouldn't begin until January 1, 2026.

Still, the various changes could push more students toward private loans, which lack federal protections and flexible repayment options.

It's worth noting that despite the sweeping changes, the federal tax deduction for student loan interest remains in place.

Borrowers can still deduct up to $2,500 in student loan interest paid each year, subject to income limits.

But Congress didn’t increase the deduction in the new legislation, even as repayment terms grow longer and forgiveness becomes harder to access.

Also, the Trump tax bill still allows employers to offer up to $5,250 a year in tax-free student loan repayment assistance.

Meanwhile, the Trump administration has signaled a willingness to resume and potentially expand wage garnishment for borrowers who default on their federal student loans.

As a result, borrowers could again see their wages, tax refunds, or Social Security benefits garnished to repay federal student debt.

Interest restart on SAVE program for student loans

Just recently, the Trump administration announced that as of August 1, 2025, interest would resume on federal student loans for nearly 8 million borrowers enrolled in the SAVE plan.

This follows a federal court injunction blocking the SAVE program, with the Department of Education estimating borrowers could see an average of $3,500 in additional annual costs.

In an official press release, Secretary McMahon stated the following:

“For years, the Biden Administration used so-called ‘loan forgiveness’ promises to win votes, but federal courts repeatedly ruled that those actions were unlawful. Since day one of the Trump Administration, we’ve focused on strengthening the student loan portfolio and simplifying repayment to better serve borrowers.”

Student loan forgiveness and taxes?

There's more. A key tax angle is notable now because, while the pandemic-era American Rescue Plan Act (ARPA) excluded forgiven student loan amounts from federal taxable income through 2025, the Trump/GOP tax and spending bill doesn't extend that exclusion.

That means, unless Congress acts, student loan debt forgiven after December 31, 2025, will once again be considered taxable income at the federal level.

That could leave borrowers who were counting on PSLF or other forgiveness programs facing an unexpected tax bill.

Though, as mentioned, under the Trump administration's proposed changes, the number of borrowers who benefit from loan forgiveness could shrink.

Note: While most states have followed federal law regarding taxes on forgiven student debt, some already tax forgiven student debt. More might opt to do so if the federal exemption lapses.

Trump student loans changes: What borrowers can do

With the student loan landscape shifting, here are some practical steps you can take.

Review your repayment plan: If you’re in an income-driven plan, check how and when you’ll need to transition to a new plan under the new Trump tax law.

Understand your state tax liability: Check whether your state will tax forgiven student debt, and plan accordingly.

Monitor communications: Read updates from your loan servicer, the Department of Education, and advocacy groups.

Seek guidance: Consult with a tax advisor or financial planner to prepare for possible tax liabilities or garnishment if you’re at risk of default.

Related

This story has been updated to include new information about the RAP program.

• A Little-Known Tax-Free Way to Pay Your Student Loan
• Student Loan Interest Tax Deduction
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Eighty percent of Americans are concerned about affordability of everyday living costs regardless of income level, according to consumer research from Equitable.

And that was before the stock market took a plunge and tariffs shot up, both of which could kickstart another period of high inflation.

With key purchases and even necessities increasingly out of reach, going into debt might seem likely.

It's incredibly common already: According to TransUnion's Q4 2024 Quarterly Credit Industry Insights Report, American households had an average of $263,923 in mortgage debt, $24,373 in auto loan debt, $6,580 in credit card debt and $11,607 in personal loan debt, not to mention student loans or medical debt.

The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.

The problem? This debt can spiral out of control as interest payments pile up, making loans more challenging to pay back and credit harder to access. After all, Fortune reports, nearly 1 in 5 Americans have maxed out their credit cards.

According to the New York Fed, almost two-thirds of credit cardholders carry debt month over month, paying an average of 23% in interest — meaning these purchases are ultimately far more expensive than the sticker price.

While it might seem like a tough time to manage debt, the reality is that this is a crucial moment to get it under control. In the long run, handling debt effectively offers financial freedom, flexibility and the ability to weather hard times and enjoy your hard-earned money.

Here's how to get started.

Step No. 1: Avoid unnecessary debt

Steering clear of unnecessary loans might seem obvious, and it may not feel like helpful advice when you're trying to manage your existing debt. But especially when times are tough, it's worth remembering that just because you can access a certain amount of credit doesn't mean you should.

Consider what you actually need vs where you can cut costs.

For example, if you're looking to buy a house in the next few months, you may hear lenders refer to the "30% rule," which recommends that your monthly housing payment should not exceed 30% of your gross monthly income.

If you make $10,000 a month before taxes, you might think this means your budget is $3,000 a month and look at property that fits that price range.

A safer approach, however, would be to set a smaller budget that meets your needs, even if it means not getting everything you may want.

Instead of searching with the maximum allowable budget, look at properties with monthly payments that equal just 20% of your net take-home pay (or about $1,500 in this example, assuming a $7,500 monthly income after taxes).

The extra cash you save by avoiding unnecessary debt will not only give you financial breathing room, but also can enable you to pay back other debts.

Step No. 2: Calculate with clarity

To get a handle on how to repay your debt, you need to know exactly what you owe and when.

Assemble specific information about your balances, the interest rates on your loans and the terms of said loans. Calculate how long it will take to pay off your loans at the minimum monthly amount and how much interest will be paid to the lender under this framework.

If you're able, try to restructure your debt. Work with your lenders to see if you can get a lower interest rate. You should also consider whether consolidating or refinancing your debt saves you interest payments over time.

Once you have this information in hand, prioritize:

• Mathematically, debt with the highest interest rate should be paid down first to minimize the overall amount you will pay in interest.
• Emotionally, you can also consider attacking the debt with the lowest balance first, so you have a quick win to sustain you.

Whichever route you choose, you should calculate how much you are able to put toward repayment every month and commit to that plan.

Step No. 3: Make payments and boost income

Once you've done the calculations and finalized your payment plans, the next part is easy (at least on paper): Pay back your debt.

If you can, look for opportunities to boost your income, too, be it through extra hours at work, side hustles or a part-time job. If you receive bonuses or gifts, resist the temptation to buy something you don't need.

Instead, put that amount toward repayment. And if you're really ready to go the extra mile to become debt-free, you can even consider downsizing your home (including by selling and moving to a cheaper rental) or downgrading your car.

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Putting even a little extra money toward your repayment efforts each month can make a big difference.

For example, if you have a $10,000 credit card balance with an 18% annual rate, it will take more than 15 years to pay down that amount (and you would pay nearly $19,800 in interest alone) if you paid $160 a month.

But if you paid an additional $50 a month? You would pay off that debt in half the time — a little over seven years — and would save about $12,000 in interest. It adds up.

Remember, whatever amount you pay, make sure it's at least enough to cover the interest.

All too often, people simply pay their card's minimum payment amount without realizing it might not be sufficient to cover the accrued interest. At that rate, they'll never pay off the balance.

Short-term pain, long-term gain

Paying down debt will require short-term sacrifices, and it can take an emotional toll. But when times get tough, just remember: You're securing a debt-free future and your financial freedom.

I promise it'll be worth it.

This article, which has been written by an outside source and is provided as a courtesy by Stephen B. Dunbar III, JD, CLU (AR Insurance Lic. #15714673), Executive Vice President of the Georgia Alabama Gulf Coast Branch of Equitable Advisors LLC, does not offer or constitute, and should not be relied upon, as financial, investment, debt management or legal advice. Equitable Advisors LLC and its affiliates do not make any representations as to the accuracy, completeness or appropriateness of any part of any content hyperlinked to from this article. Your unique needs, goals and circumstances require the individualized attention of your own tax, legal, debt management and financial professionals whose advice and services will prevail over any information provided in this article. Equitable Advisors LLC and its affiliates do not provide tax or legal advice or services. Stephen B. Dunbar III offers securities through Equitable Advisors LLC (NY, NY 212-314-4600), member FINRA, SIPC (Equitable Financial Advisors in MI & TN), offers investment advisory products and services through Equitable Advisors LLC, an SEC-registered investment adviser, and offers annuity and insurance products through Equitable Network LLC (Equitable Network Insurance Agency of California LLC). Financial professionals may transact business and/or respond to inquiries only in state(s) in which they are properly qualified. AGE-7957140.1(05/25)(exp.05/29)

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.