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 banking and 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.

Related stories

• Wealth Wise Advice: Should We Borrow From Our Elderly Father?
• 4 Ways to Make Debt Your Friend Instead of Your Enemy
• 5 Ways to Boost Your Credit Score
• Should I Take a 401 (k) Loan to Pay for a Home Improvement Project?

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:

Related content

• How to Freeze Your Credit in 3 Steps
• Top Cash Back Credit Cards: Maximizing Your Rewards in 2026
• How to Fix Errors in Your Credit Report

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.

Related Content

• Going to College? How to Navigate the Financial Planning
• New Rules, New Opportunities for Student Loans: An Expert Guide to Preparing for What's Next
• The Right Way and the Wrong Way to Use a 529 Plan That Doesn't Cover the Full Cost of College
• Here's Why You Can Afford to Ignore College Sticker Prices
• Started Pulling in the Big Bucks? If You Refinance Your Student Loan Now, Here's What You'll Miss

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.

Related content

• How to Fix Errors in Your Credit Report
• 5 Common Credit Mistakes and How to Avoid Them
• How to Get Free Credit Reports Weekly

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.

Read More

• How an Elder Law Attorney Can Help Protect Your Aging Parents From Financial Mistakes
• We're 60 with $550K saved and will inherit $3 million. Can we retire now, even if we can't afford it?
• What you Learn Becoming Your Mother's Financial Caregiver
• I Am 55 With a $1.5 Million 401(k). Should I Take a 401(k) Loan to Pay for a Home Improvement Project?

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.

Related Content

• 2026 Changes to Student Loans You Need to Know
• Finances Not Going Anywhere? These 3 Steps Can Help You Find Your North Star
• 7 Creative Ways to Spend Less and Save More In Retirement, Courtesy of a Financial Pro
• Is Fear Blocking Your Desire to Retire Abroad? What to Know to Turn Fear Into Freedom
• This Is How You Can Guide Your Heirs Through the Great Wealth Transfer

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

• The basics
  • Use the 529 Grandparent Loophole to Maximize College Savings
  • We're 75 With $3.2 Million. Our Grandchild Needs Help Paying for College.
  • I Want to Help Pay for My Grandkids' College. Should I Make a Lump-Sum 529 Plan Contribution or Spread Funds out Through the Years?
• Balance your retirement security with supporting grandchildren
  • We Retired at 70 With $4.3 Million. My Wife Won't Spend 'Our Grandkids' Inheritance,' but I Want to Travel.
  • We're 54 With $1.8 Million. My Wife Wants to Start a College Fund for Our Grandson, but I Think We Should Keep Funding Our Retirement.

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

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.

Related Content

• Is Walmart+ Worth It?
• Before You Go to Costco, Try This Grocery Strategy First
• 10 Worst Things to Buy in Bulk at Costco

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.

Related content

• The Best Places to Visit Where The Dollar is Strong
• 'Buy Now, Pay Later' for Everyday Spending? This Financial Pro Thinks It's Risky
• How You Can Get Your Money Back When a Vacation Abroad Goes Awry
• Don't Make These 'Buy Now, Pay Later' Mistakes

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.

Related Content

• 5 Ways to Shop for a Low Mortgage Rate
• How Does the 10-Year Treasury Yield Affect Mortgage Rates?
• 13 Home Features That Add Value and Speed Up a Sale

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.

Related Content:

• What Home Equity Is and Why It's a Valuable Long-Term Investment
• 4 Ways To Use Your Home Equity To Boost Your Retirement
• A New Kind of HELOC Lets Homeowners Fund Remodels on Their Terms

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.

Related content

• Is Mechanical Breakdown Insurance Better Than an Extended Car Warranty?
• Is There a Downside to Switching Your Insurance Frequently?
• Can the 100,000 Mile Rule in Car Insurance Help You Avoid Overpaying for Coverage You Don’t Need?
• Is Your Car Model Driving Up Your Insurance Premium?

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.

Related content

• What It Really Takes to Buy a Home in 2025
• Credit Score vs. Credit Report: What's the Difference?
• Mortgage Calculator: Estimate Your Monthly Payment Easily

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.

Related content

• 'Buy Now, Pay Later' for Everyday Spending? This Financial Pro Thinks It's Risky
• Can Buy Now, Pay Later Plans Help You Build Credit?
• Best Cash Back Credit Cards of 2025

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.

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.

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.

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.

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.

Looking for expert tips to grow and preserve your wealth? Sign up for Building Wealth (soon to be called Adviser Intel), our free, twice-weekly newsletter.

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.

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.

Related content

• Best Rewards Credit Cards of 2025
• How Do Credit Cards Work? Interest and Fees Explained
• What Is a Good Credit Score?

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.

Related

• Going to College? How to Navigate the Financial Planning
• Trump Target Student Loan Forgiveness: What to Know About Taxes and Repayment
• A Financial Checklist for Your College-Bound Kids
• Student Loan Forgiveness: Will You Owe Taxes?

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

• GM Not Planning to Raise Car Prices Despite Tariff Hit, CFO Says
• 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

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
• How to Get a 401(k) Match for Your Student Loan Payment
• Over 50 and Still Paying Student Loans? Here's Some Help

For many homeowners, the family home represents far more than a place to live. It's often the single largest store of wealth on their balance sheets.

Yet, when it comes to planning for retirement, long-term care needs or estate strategies, home equity remains one of the most underutilized assets.

There are several strategies available to homeowners looking to convert their equity into income or financial leverage:

Home equity lines of credit (HELOCs). These revolving credit lines require repayment and are typically best for short-term or planned expenses. They require good credit and reliable income, but they add debt to the homeowner's balance sheet.

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.

Reverse mortgages. This well-known option allows homeowners to stay in their homes while receiving income. The downside is that interest accrues over time, often significantly reducing the remaining home equity.

Reverse mortgages also include such costs as insurance premiums and origination fees.

Cash-out refinancing. Homeowners refinance their mortgages to take out a lump sum of cash. This strategy can be viable in low-rate environments, but in today's high-interest landscape, it can dramatically increase monthly payments.

Shared equity models. These newer solutions offer homeowners the ability to sell a minority share of their future home value in exchange for cash today.

Typically, this method doesn't involve monthly payments or interest. Like a reverse mortgage, they're nonrecourse, meaning there is no personal liability.

The shift: From debt to shared value

Unlike traditional financing options, shared equity solutions aren't loans and don't require servicing debt obligations.

They're designed to be a strategic enhancement to an adviser's toolkit, helping reposition home equity from a passive asset into an active part of a client's overall financial strategy.

Using shared equity solutions is similar to using cash on hand.

Why it matters now

There is an estimated $35 trillion in home equity in the United States, according to the Federal Reserve Bank of St. Louis, with 41% of homeowners carrying no mortgage debt.

Meanwhile, the cost of retirement continues to rise, longevity risk is real, and funding long-term care is an increasing concern.

At the same time, interest rates and market volatility have made it more difficult for advisers and consumers to rely solely on traditional investment strategies.

Liquidity needs often collide with the desire to preserve and grow assets, supported by the fact that in 2024, according to LIMRA, more than $400 billion of new life insurance, annuity and long-term care insurance premiums were primarily funded with cash or through investment portfolio sales.

That reduces liquidity, creating tax consequences and limiting future investment growth opportunities.

Weighing the tradeoffs and tailoring the strategy to you

Each option presents distinct advantages and tradeoffs.

• Borrowing strategies offer immediate access to cash, but the debt can add pressure in retirement.
• Reverse mortgages reduce financial stress in the short term but diminish estate value and can be complex to unwind.
• Shared equity solutions, such as CHEIFS (Cornerstone Home Equity Insurance/Investment Funding Solutions), where I am the co-founder and CEO, provide tax-free cash without adding monthly obligations, but the homeowner shares a portion of the future home value upon sale or refinance.

No one-size-fits-all solution exists.

The right path depends on your financial goals, income, health outlook and estate planning intentions.

• If your priority is maintaining full ownership, a HELOC or refinance might make sense.
• If your objective is to protect cash flow without monthly debt obligations, reverse mortgages or shared equity models could be a better fit.

The key is to align your solution with your broader financial strategy.

Applications for homeowners and advisers

The versatility of home equity optimization through shared home equity products spans a range of planning needs:

Long-term care (LTC) planning. Homeowners can use tax-free funds to purchase dedicated LTC policies or hybrid life/LTC products, ensuring protection against future health care costs.

Lifetime income. Funds can be used to purchase immediate or deferred-income annuities, helping bridge retirement income gaps without drawing down investment portfolios.

Legacy and estate planning. Liquidity from home equity can fund irrevocable life insurance trusts (ILITs), charitable-giving strategies or intergenerational wealth transfers.

In-home health care. Homeowners can secure funding to age in place, enhancing quality of life while retaining independence.

Looking for expert tips to grow and preserve your wealth? Sign up for Building Wealth, our free, twice-weekly newsletter.

In-force policy funding. Clients with valuable existing life, annuity and/or LTC policies can use shared equity solutions to maintain or enhance these assets without cashing out or surrendering valuable benefits.

Pros and cons of shared home equity to consider

Pros:

• No monthly payments or debt service, with no fixed repayment term
• No impact on credit scores or cash flow
• Retention of homeownership rights and lifestyle
• Tax-free liquidity
• Flexible use of funds across planning needs and lifestyle enhancements
• Adviser-driven distribution to align with holistic planning

Cons:

• Future appreciation (and depreciation) of the home is shared with the company you're sharing equity with
• It's not a suitable solution for homeowners planning to sell or relocate in the short term. As the home is partially owned by an investor, it might be more challenging for homeowners to leave their homes as a legacy for their heirs without proper planning

Looking ahead

Optimizing home equity is no longer just about borrowing or downsizing. It's about managing wealth more intelligently to support strategic, tax-efficient financial plans.

Shared equity solutions are modern financing innovations that offer pragmatic alternatives that empower both homeowners and financial advisers to achieve their goals while maintaining control, flexibility and long-term value.

Related Content

• Reverse Mortgages: 10 Things You Must Know
• What Home Equity Is and Why It's a Valuable Long-Term Investment
• How a Home Equity Line of Credit (HELOC) Works
• Refinancing Your Home

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 you want to retire with minimum money worries, you have a few options: Marry really well, pick the Powerball along with the other winning lottery numbers or consider a personalized retirement plan that produces high levels of income while maintaining and growing liquid savings late into retirement.

Most retirees need to solve for a couple of problems. They want lifetime income to cover their budget, including the occasional splurge, and a way to pay for the real likelihood of long-term care, which 70% of us will face. We’ll cover that in more detail below.

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.

A plan that addresses both income and savings

I wrote about how that personalized IRA4Income plan I mentioned above works, in my article What If You Could Increase Your Retirement Income by 50% to 75%?, and here’s a quick description:

IRA4Income is a multi-asset class retirement plan that addresses both income and savings. It will smooth out the effects of market gyrations and unplanned expenses, but for this article, let’s focus on long-term care expense.

Using our Go2Income planning technology, we’ve put the following assets together into IRA4Income:

• An IRA account invested 50/50 in fixed income and stock investments
• Lifetime income annuities with income starting immediately or in the future
• A home equity conversion mortgage (HECM) that generates income and liquidity

This will become important when we need to cover LTC expenses.

How big of an issue is long-term care?

More than two-thirds of retirees will incur an event requiring some form of long-term care.

Here are the median annual costs in 2025, depending on the type of care, according to CareScout and Genworth:

• Home health aide (44 hours a week): $80,000
• Assisted living facility: $73,000
• Semiprivate nursing home: $115,000
• Private room in a nursing home: $132,000

These costs will vary considerably by region. Here’s a projection of average costs considering the duration of a stay for a man, a woman and a couple.

For the purposes of the analysis below, we’ll assume $100,000 per year for five years, for a total of $500,000.

How does a retiree address this challenge?

Long-term care insurance is one solution. However, many don’t qualify or balk at the annual cost, which averages $2,000 to $4,500 per person and usually increases every year.

There often are sizable deductibles, and premium rates are not guaranteed.

Despite these issues, it is worth considering, particularly if you can cover a large portion of the event (deductibles) with your liquid savings.

Another possible solution is to use your liquid retirement savings exclusively, provided it doesn’t have an adverse impact on your retirement income. That’s where IRA4Income comes in.

For a sample male retiree, age 65, with $1 million in IRA savings and $1 million in the value of his house, here are the income and liquid savings with no adjustment for LTC costs.

Looks pretty good. However, that $500,000 event could come at any time.

How to build a self-insured plan

We’ll assume in this example that our retiree doesn’t have LTC insurance. (According to KFF, only 14% of people who are 65 and older do.) So, let’s build a self-insured plan around IRA4Income as follows.

• Set aside a portion of higher income from IRA4Income each year into a new investment account with low income taxes. In our retiree’s case, he’ll take $5,000 per year out of his $75,000 (and growing) income each year.
• When LTC costs appear, withdraw funds from the IRA account first. Since the bulk of the LTC expenses are tax-deductible in his situation, he’s not incurring a large tax bite on these withdrawals.
• Take a portion of the costs out of the new investment account and avoid drawing down on the HECM net line of credit, therefore preserving the highest value of his house to pass to his kids.

Now compare this to building a plan with only an IRA account, allocated solely to investments. Here’s what the savings under these two strategies look like.

In this scenario, the savings run out under the IRA-only strategy, and our retiree will have to sell his house or spend down the assets to qualify for Medicaid to pay for his long-term care.

Looking for expert tips to grow and preserve your wealth? Sign up for Building Wealth, our free, twice-weekly newsletter.

How to get started

Here’s a list:

• Check out LTC insurance. The earlier you buy it, the lower the premiums, although the insurance companies are allowed to increase premiums every year. An IRA4Income plan, with its higher income and savings, means your policy can have a large deductible.
• Get an estimate of costs in your region. The cost of services varies significantly, with the Northeast and West Coast being the most expensive. Insurers price policies based partly on expected future claims, so regions with higher caregiving costs lead to higher premiums.
• When building your own IRA4Income approach, request a plan that considers LTC costs. You can decide which options work best for you and make further adjustments until you have a plan that fits the needs of you and your family.
• Make sure your plans are communicated to family members or an adviser.

If you’re ready to consider an IRA4Income plan, visit Go2Income and create your own plan.

Related Content

• What if You Could Increase Your Retirement Income by 50% to 75%? Here's How
• 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.

Millions of Americans who thought student loan relief would last long-term are now facing a hard reality. When loan collections resumed in May, missed payments began to hit credit reports again.

While much of the focus has been on recent graduates, parents and grandparents who cosigned private loans or hold Parent PLUS loans are also at serious risk of credit-score damage.

If you’re in that group, it’s important to understand how student loans can affect your credit score, how a past due loan can hurt your credit and what steps you can take to stay ahead and protect your score.

What borrowers and cosigners should know

Parent PLUS loans allow parents (and sometimes grandparents) to borrow directly for a student’s education, but the catch is that the debt sits squarely on the cosigner’s credit report.

There are nearly 3.8 million Parent PLUS borrowers, with outstanding balances soaring over $110 billion in recent years. If the student misses payments or if you co-signed a private student loan, your own credit score can plummet just as quickly either way.

A recent analysis from VantageScore shows that resuming student loan reporting led to credit drops of up to 129 points for delinquent borrowers, which can translate to serious financial setbacks for anyone depending on good credit for mortgages, refinances or a new loan.

How delinquencies impact credit scores

When a payment is 30 days past due, servicers may report the late status. Once it reaches 60 or 90 days, the hit becomes more severe. The New York Fed estimated more than nine million borrowers would see significant drops in the first half of 2025 when reporting resumed.

For older borrowers with established credit histories_, a sudden 100+ point drop can disrupt plans like refinancing a mortgage, securing a home equity line or locking in favorable auto loan rates.

You might think, “I’ve managed credit responsibly for decades, surely a blip won’t matter.”

But, credit score shifts can trigger higher interest rates, additional fees or even outright loan denials. For example, a drop from near-800 territory into the mid-600s could increase mortgage refinance rates by a percentage point or more, potentially adding thousands in interest over the life of a loan.

Auto loans, insurance premiums and credit card approvals similarly hinge on credit tiers. Even if you’re financially comfortable, unexpected credit damage complicates reverse mortgages or big-ticket purchases. And since Parent PLUS balances often exceed $30,000 on average, the stakes are high if payments slip.

The importance of monitoring your credit regularly

The best defense is knowing in real time when your credit changes. Sign up for credit-monitoring services that alert you to score shifts or new negative entries.

Check your credit reports from the three bureaus at least once a year and ideally more often now that student loan reporting has resumed.

Many services also notify you if there’s a new inquiry or if a payment status changes. If you see any odd activity like a suddenly past-due status you don’t recognize, contact the loan servicer immediately to clarify or correct errors.

Repayment options and credit implications

Parent PLUS loans offer consolidation into a Direct Consolidation Loan, unlocking Income-Contingent Repayment (ICR), which can lower monthly payments based on income. But keep in mind that this option may extend repayment length and total interest paid.

Private loans vary by lender but sometimes allow refinancing if your credit is still strong and your income is steady. Although refinancing removes federal protections and forgiveness options.

If you anticipate you or the borrower you cosigned for having a tight cash flow, explore deferment or forbearance, but be aware these may pause payments temporarily while accruing interest and still risk credit impact when re-entering the repayment process.

Always weigh short-term relief against long-term credit health.

Communication and coordination with everyone involved

Open dialogue is key: set up a repayment plan where the student contributes if possible or at least commits to alerting you before a missed payment. You can also automate payments via autopay to avoid oversight.

Use shared calendars or notifications to track due dates. If you co-signed a private loan, consider asking the student to refinance into their own name once they have credit established, relieving you of risk.

The simple act of clear communication can prevent surprises that lead to delinquencies.

Steps to take if a payment will be missed

If you suspect a payment may be missed due to budget constraints or miscommunication, contact the servicer immediately. Discuss temporary options like short-term forbearance, but request clarity on how it will be reported to credit bureaus.

If possible, arrange a small one-time payment or extension to avoid passing the 30-day delinquency threshold. Understanding these options early can prevent a small hiccup from ballooning into a major credit event.

For Parent PLUS borrowers, consider consolidation into ICR as noted, or, if applicable, Public Service Loan Forgiveness (PSLF) after consolidation and qualifying employment. If private loans are part of the picture, refinancing should be tackled before credit slips too far.

Some families choose to make a lump-sum payment from savings or gift arrangements to bring accounts current. You can also review your options and brainstorm some next steps with a financial advisor as well for more help and clarity.

Bottom line

If you’ve cosigned a student loan or hold Parent PLUS debt, the return of credit reporting in May 2025 could put your credit at risk. Staying vigilant, communicating clearly and understanding your repayment options can help you protect your credit and avoid surprises.

Related Content

• Could Student Loan Payments Derail Your Retirement Plans?
• Know Why Your Credit Score Changes: 9 Money Moves to Consider
• How to Align Strategies for Student Loans and Retirement

Lending money to friends or family seems like an obvious and easy way to prove you are there for your loved ones. You can show that you understand that life today is expensive as the cost of living continues to increase, and let’s face it, emergencies always spring up.

You are an easy call away and want to help. There's no paperwork or credit checks, and the interest rate is usually zero. Seems pretty simple, right? Nope. It’s not so simple.

What feels like a lifeline can quickly turn into a minefield of emotional tension and broken trust that can cause great schisms, even in the closest of relationships.

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.

A little help for your friends

It’s challenging to get statistics on how much is borrowed privately, because people don’t have to report these situations. The Federal Reserve does report on national household debt from major lenders, including banks, credit cards, mortgages, etc., but it does not monitor private loans. There are also peer-to-peer lending platforms.

Consequently, clear numbers on this don’t exist. An older study by Finder.com estimated that the Bank of Friends and Family lent $184 billion annually. It also estimated that the average loan was $3,239.

Was the process easy and did the loans get repaid? According to a FinanceBuzz survey, only 56% of lenders were fully paid back by family members. Ouch. A bank would never be in that business.

Even with delinquency rates rising, with a potential recession looming, the Mortgage Bankers Association reports that mortgage delinquencies now stand at a little over 4%. U.S. News & World Report also reports that personal loan delinquencies from financial institutions are at 3.5%.

Pitfalls in a money pit

Just think of the emotional baggage that goes along with friends and family not paying back their loans. How many times does your spouse remind you of the money you lent? How do you pretend to be jovial around the borrowers at the holidays after they’ve stiffed you?

You may cringe when you replay their words. “I need the money for only a few months, and of course I’ll pay it back … with interest.”

Strained relationships may go both ways. The borrower may resent the net worth of the lender and may feel victimized, beholden or patronized. This can all cause divisions within families as one or the other party may feel taken advantage of.

This is all very real. According to the FinanceBuzz survey, nearly 1 in 4 lenders say that giving money to a family member had a negative impact on their relationship with the borrower.

The uncomfortable money dance

It can be an awkward situation for all parties when a loved one asks to borrow money. They may not want to explain why they need it, and they certainly don’t want to beg.

You, as the lender, may also feel uncomfortable. You could be irritated because this may not be the first time you were hit up. You can understand why I call this “the uncomfortable money dance.” We know the steps, but each partner is stumbling over their own feet.

The other result of this is that usually these loans are not documented. Verbal agreements can be sketchy, crushing both parties’ expectations, and lots of phrases can fly, such as “Don’t worry, I trust you,” or, “I promise I need the money for only a month.”

Looking for expert tips to grow and preserve your wealth? Sign up for Building Wealth, our free, twice-weekly newsletter.

When a legal agreement doesn’t exist, often the lenders have to resort to discussing a formal agreement later on. And we all know that without written documentation, it’s hard to resolve misunderstandings. In addition to all that, some lenders may lend money they can’t afford to lose.

According to the FinanceBuzz survey, more than a quarter of lenders (26%) had to set up a formal payment plan to get their money back, while 25% reported that lending money led to awkward family interactions and hurt feelings.

How to avoid family loans that lead to family feuds

Set expectations. If you are strapped but want to help, explain that to the borrower. Be clear about when you want the money back, plus all of the repayment terms, such as:

• Will there be an interest charge?
• When and how will payments be made?
• You may also negotiate “gifts in kind.” For example, the borrower could help you with work around your house in lieu of payment.

If you feel more comfortable with giving the money as a gift, with no strings attached, you should make that clear. You don’t want to open the door for them to keep coming back for more.

Don’t enable poor financial habits. Is this situational, or is it habitual? If it’s the latter, it’s time to sit down with the borrower to help them design a workable budget, or recommend going to a financial counselor so that borrowing is not a constant habit.

You might also want to make sure that you are not supporting bad habits such as gambling, drug use or living beyond one’s means.

Put it in writing. Yes, this one could be awkward, but you can explain that your relationship is important and you don’t want any misunderstandings. You can download really simple promissory notes online, or you can access a free loan agreement at LawDepot.com.

A written agreement should outline the loan terms, repayment schedule and any interest, even if it's a small amount. This will make it real for both parties.

Borrowing from friends and family can be a helpful solution in times of need, but it's essential to approach such arrangements with caution and clear communication to preserve relationships and financial well-being.

There is an American proverb that I love: “Before borrowing money from a friend, decide which you need more.”

Related Content

• Intrafamily Loans Can Be a Smart Move to Boost Wealth
• Smart Ways to Give (or Lend) Money to Family
• Gifts vs. Loans: Don’t Be Generous to a Fault
• The Bank of Mom and Pop: The Benefits Afforded by Intrafamily Lending
• How to Teach Your Kids About the Tax Facts of Life

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.

A credit freeze can be a pivotal step to protect yourself from identity theft.

When you have a freeze on your credit reports, lenders can’t view them in response to an application for new credit — and that helps prevent criminals from opening credit card or loan accounts in your name.

But as long as a freeze is in place, you can’t access new lines of credit either.

(Note that you can still pull up your own credit reports when they’re frozen, and lenders can check your reports to manage accounts you already have with them. Additionally, certain other entities, such as employers who want to analyze a job candidate’s credit history or landlords who need to screen a potential tenant’s credit, may be able to access credit reports while a freeze is in place.)

If you’re preparing to shop for a loan or credit card, you can temporarily lift your credit freeze. Just as with placing a freeze, lifting it is free.

How to lift your credit freeze

If you need to lift your credit freeze, ask the lender or institution which credit report it checks. You may get away with removing the freeze at only one of the major credit-reporting companies rather than all three (Equifax, Experian and TransUnion).

If you expect to apply with multiple lenders, however — say, because you’re shopping for the lowest rate on a mortgage or auto loan — you may have to lift the freeze with two or more of the companies.

If you have online accounts with the credit-reporting companies, you can use them to thaw your freeze; log in to your Experian account, Equifax and TransUnion.

Alternatively, you can call Experian at 888-397-3742, Equifax at 888-298-0045 and TransUnion at 800-916-8800. You may need to verify your identity by answering security questions.

In response to online and phone requests, the credit-reporting companies must lift a freeze within one hour (usually, it happens right away).

If you want a written record of your request to lift a freeze, you can send the request by snail mail — but it will take more time than the other methods. (You’ll find mailing addresses for each of the credit-reporting companies here.)

You may have to include identifying documents, such as a copy of your driver’s license, Social Security card or a bill that lists your address, says Rod Griffin, senior director of public education and advocacy at Experian.

A credit-reporting company must lift the freeze within three business days of receiving your request.

When you temporarily lift a credit freeze, you can specify how long your credit report will be available to new lenders for review before the freeze automatically goes back into place. You could set the lift for a single day if you know the date the lender will perform a credit check.

Otherwise, you may want to arrange for the lift to last a week or two to make sure lenders have adequate time to review your report.

During the window that you don’t have a freeze enacted, you’re more vulnerable to identity theft in the form of criminals opening new credit accounts in your name. So you should be extra vigilant in monitoring your credit reports for signs of fraud.

You can get free weekly online reports from all three credit-reporting companies through AnnualCreditReport.com.

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.

Related content

• DIY Credit Protection: Four Low-Cost Ways to Monitor Your Score and Prevent Identity Theft
• What Is a Good Credit Score?
• Best Rewards Credit Cards of 2025

College planning is inherently stressful, a series of crucial choices for both students and their families. However, potential federal changes have introduced additional uncertainty, further amplifying likely anxieties.

While the full implications for Federal Student Aid — the department within the Department of Education responsible for programs including Pell Grants and federal student loans — are still unclear, the Trump administration's proposed restructuring of the Department of Education is causing many families nationwide to brace for potentially significant adjustments to their college planning process.

While trying to stay abreast of potential changes at the federal level — along with the usual college-selection considerations of academic rigor, extracurricular options, cultural and social opportunities, location and chance of admission — another factor looms large. Is the college or university a “financial fit”?

When considering finances, families are faced with two seemingly simple yet complex questions:

• How much will each college program cost?
• How will we pay for it?

Determining your net price

The first step in preparing for the college journey is getting a clear view of how much a program will actually cost, also known as the “net price.” The net price is the total cost of attendance minus scholarships and grants a student may receive.

Start by filling out a Free Application for Federal Student Aid (FAFSA), which will generate a financial profile that includes the Student Aid Index (SAI) — this is the number used by financial aid professionals to determine your eligibility for aid.

However, completing the FAFSA is only one part of the puzzle. Without a financial aid offer letter in hand, it can be difficult to determine other elements of net price, as it may be difficult to discern what financial support is automatically offered based on family income and other eligibility factors.

The college application system can trap families in a costly paradox. You need to apply to learn the true price, but most families can't afford to apply blindly. With application fees soaring, not to mention the time and effort it takes to apply to college, the desire for upfront net price transparency is more than reasonable — it's essential.

The stress of hidden college costs can be overwhelming, but thankfully, solutions exist. Tools like College Raptor's College Match, provide much-needed relief.

In addition to helping identify the right academic fit for college, the tool uses machine learning to offer accurate estimates of attendance costs and potential aid packages.

These tools compile extensive data, giving families a realistic financial preview, eliminating the need to apply blindly and offering clarity before any official forms are submitted.

Other sites, such as the U.S. Department of Education’s Net Price Calculator and The College Board's Net Price Calculator, can also help you determine costs for individual schools.

Net price evaluating tools may also open new horizons into what is financially possible. That dream private college that costs $90,000 and seems out of reach — don’t rule it out. With the right tools, you might discover unexpected financial aid opportunities that bridge the gap.

And the net price evaluating tools should be used at the beginning of the college search process to narrow your application list by providing perspective on both academic and financial fit.

Crafting your paying-for-college game plan

Often, when families think about paying for college, their minds immediately jump to loans, but it is not advisable to treat them as the only option as you figure out how to afford that net price.

Prospective students and families should consider the cost of education over the entire four years. If a family knows that they need to borrow, they should consider Federal Direct Subsidized or Unsubsidized Loans — informally known as Stafford Loans (more on them in the next section) — from the start as the amount available to borrow is capped both per year and in aggregate.

After considering Federal Direct Subsidized or Unsubsidized Loans, consider exhausting all savings, such as a 529 plan, which is a state-sponsored investment plan for education expenses.

In the event that the degree is not completed, it is preferable to avoid taking on additional debt. While the tax-advantaged 529 education savings account has new options to move leftover money into a retirement account, there are limits.

Potential penalties for non-education withdrawals remain, meaning if your student forgoes further schooling, accessing those funds may incur tax consequences, but they will still be accessible.

In addition, strategically delaying taking on student loan debt can offer financial advantages. By postponing borrowing, you minimize accrued interest, reducing the overall cost.

For example, waiting until your sophomore year to take on loans shaves off a year of interest, resulting in long-term savings.

After you have utilized Federal Direct Subsidized or Unsubsidized Loans and/or savings, consider work-study options. Federal work-study programs and/or non-sponsored part- or full-time jobs can help students generate income to directly pay their tuition each semester.

These programs can be a great way to earn money while also enriching your college experience, particularly if you find work that is enjoyable or helps to advance your studies or career goals.

Weighing loan options and benefits

If loans are unavoidable, prioritize Federal Direct Subsidized or Unsubsidized Loans. These loans, aka Stafford Loans, are your best bet. Stafford Loans typically feature highly competitive interest rates and the most borrower-friendly terms, particularly with respect to repayment options and potential forgiveness.

While not everyone will qualify for a subsidized loan, the key advantage of the subsidized loan is that the government pays the interest while the student is in school and during authorized deferment periods, making it a very cost-effective borrowing option.

But if you don’t qualify for the subsidized loan, the unsubsidized counterpart is typically a good deal and has the same interest rate as the subsidized loan.

How much you can borrow with Federal Direct Subsidized or Unsubsidized Loans is capped — both annually and in aggregate. So, if you still have a gap to fund college after these loans, you’ll be left to choose between Federal PLUS or private loans.

This is where doing proper research is crucial. PLUS Loans do not carry the same pricing or benefits as Federal Direct Subsidized and Unsubsidized Loans and are often less competitive than private student loans.

When compared to PLUS Loans, private loans often provide better value and have unique features like multiyear approval and soft credit pulls, which don’t affect your credit score.

Banks that offer private loans can often offer lower rates and better terms for borrowers than PLUS.

However, not all borrowers who would qualify for a PLUS Loan would typically qualify for a private loan or receive a better rate, so you should research the availability of different private options to compare to PLUS.

You should also keep in mind that PLUS Loans have an origination fee, currently over 4%, which is typically not charged by private lenders.

Some banks, including Citizens, where I am the head of Student Lending, will use soft credit pulls that don’t impact your credit score to pre-approve you and provide a rate quote.

It is advisable to look at the rate, but also other features of the loan including borrowing limits, cosigner requirements, repayment options and loan modifications and forbearance policies in the unlikely case you run into a hardship.

It’s also important that you trust the organization from which you are getting your loan, as you are typically entering into a multiyear relationship.

Begin planning as soon as yesterday

In the face of shifting federal policies and ever-rising costs of higher education, proactive planning and informed decision-making are critical.

Families should leverage available tools to demystify net prices, strategically utilize savings and work-study options and carefully weigh loan choices.

This will enable families to navigate the complexities of the college journey with greater confidence, ensuring that the pursuit of higher education remains an attainable and financially sound investment.

Related Content

• 529s: No Longer the Ho-Hum Investing Device for College
• Direct Tuition Payments: A Tax-Efficient Way to Pay for School
• Coverdell Education Savings Accounts: A Deep Dive
• How an Irrevocable Trust Could Pay for Education
• Sending a Child to College? 10 Money-Saving Tips and Tricks

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.

Many people were caught off guard when inflation surged in 2021 and 2022. And though things have cooled substantially since then, the impact was (and still is) painful for some.

It’s hard to prepare for such a significant surge in prices across such a wide spectrum — from gas and groceries to utilities and housing costs. (And, let’s face it, we had gotten used to the inflation rate hovering around 2% for several years before it spiked to 9.1% in June 2022.)

But the reality is inflation should always be a factor when it comes to planning your finances.

Even when inflation is low, you can expect the cost of goods and services to rise over time and affect your purchasing power.

This is why it’s essential to have a financial plan that helps you keep pace with inflation — whether you’re a young professional working and saving for your future or a retiree trying to get the most from your savings.

Here’s a look at how inflation can affect both your pocketbook and your portfolio, along with practical strategies to help you stay financially resilient.

Erosion of purchasing power

One of the most immediate effects of inflation is the reduction of purchasing power. As prices rise, the same amount of money buys less. That can put a financial strain on just about everyone, especially low- or moderate-income workers and retirees on a fixed income.

Both younger workers as well as retirees and soon-to-be retirees can benefit from thoughtful budgeting, cutting out unnecessary expenses and carefully weighing their priorities before making major purchases.

Younger workers may also want to focus on increasing their earning potential through skill development, career growth and strategic investing.

Impact on investments and savings

Inflation can erode the real value of savings, which makes it crucial to invest in assets that have the potential to outpace rising prices. Market volatility can make “safe” investments (CDs, savings accounts, etc.) seem more appealing to investors of all ages.

But you may actually be losing money if those investments can’t keep up with inflation. A carefully planned portfolio mix that aligns with your time horizon and risk tolerance can help you stay secure while also earning enough to combat rising costs.

For example, investing in diversified and long-term growth assets, including equities and real estate, can help younger workers grow their money for the future.

Signing up for your workplace retirement plan also is an easy way to make investing automatic — and you can take advantage of your employer’s matching contributions to accelerate your savings.

Contributing or converting to a Roth IRA can also be a smart way to mitigate both tax and inflation risk in retirement.

Meanwhile, retirees and soon-to-be-retirees should consider a diversified portfolio that might include dividend-paying stocks, Treasury inflation-protected securities (TIPS) and other income-generating assets designed to keep pace with inflation.

Effects on the broader economy

Although the effects of inflation may feel very personal when you’re paying for your groceries or checking your bank balance, inflation also influences the economy as a whole.

When inflation rises, central banks often respond by increasing interest rates to slow down excessive price growth. Higher interest rates can make borrowing more expensive for businesses and individuals.

This is why, when possible, younger workers should comparison-shop for the best loan offers and lock in lower interest rates. This can help with the cost of buying a home or car or starting and growing a business. Keeping your credit in good standing can help you score the lowest rates.

Retirees and soon-to-be retirees should build a balanced portfolio that can withstand changes in interest rates and inflation. A financial professional can help stress-test your portfolio to determine if you’re prepared for retirement risks like market volatility and inflation.

Dealing with debt in an inflationary environment

While inflation increases the cost of goods and services, it can also reduce the burden of certain types of long-term debt. Those with fixed-rate mortgages and student loans may benefit, for example, but retirees need to be cautious about taking on new debt.

Younger workers with too much debt may want to prioritize paying off high-interest credit card debt while maximizing the long-term benefits of low-interest, fixed-rate loans.

Retirees and soon-to-be retirees can also benefit from managing their expenses and keeping credit card balances low, as well as avoiding excessive borrowing that could strain their retirement income.

Inflation-proofing your plan for the long haul

Investing and saving wisely, managing debt strategically and building a reliable income stream you can live on now and in the future can help ensure long-term financial security.

If you don’t know where to start, a financial adviser can assist you with creating or assessing your overall financial plan. They can also help you identify and implement appropriate inflation-fighting strategies.

Inflation is a natural part of the economic cycle, but it doesn’t have to derail your financial goals. By taking proactive steps to mitigate its effects, both retirees and those who are still working to build their wealth can navigate inflationary periods with confidence.

Kim Franke-Folstad contributed to this article.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

Related Content

• Kiplinger Inflation Outlook: Inflation Slows, But Tariff Effects Still to Come
• Rising Prices: Which Goods and Services Are Driving Inflation?
• How Inflation Is Impacting Retirees in 2025
• 10 Cities Hardest Hit By Inflation: Did Yours Make the List?
• How to Help Shield Your Retirement From Inflation

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.

Whether you’re planning to consolidate credit card debt, renovate your home or embark on a dream vacation, personal loans can be a powerful tool to help you achieve your financial aspirations.

However, not all loans — or lenders — are created equal. Carefully choosing the right loan can help set you up for success. It requires asking the right questions to ensure your loan fits your needs, aligns with your goals and comes from a trustworthy provider.

To help you make confident and informed choices, here are seven essential questions that Americans should ask when evaluating personal loan options.

1. How will it affect my credit rating?

When you apply for a loan, your credit will typically be checked through either a "soft pull" or a "hard pull." A soft pull, often used during the initial application process by some lenders, doesn’t affect your credit score or appear on your credit history.

However, once you accept a loan, a hard pull is usually conducted, which may temporarily impact your credit score and will appear on your credit report. It’s important to verify that a lender’s initial application process involves only a soft pull to avoid any unnecessary impacts to your credit score during the evaluation stage.

Be diligent in understanding how each step of the process may affect your credit.

Additionally, personal loans, classified as installment credit, can complement revolving credit like credit cards and help diversify your credit profile.

Using a personal loan to pay off credit card debt, for example, may lead to an improvement in your credit score when managed responsibly.

2. What should I know before taking out a loan?

A personal loan is not free money — it’s a financial commitment. Take the time to understand interest rates and loan terms, and how factors like credit history and debt-to-income ratio can impact your loan eligibility.

Educating yourself about these elements helps ensure you’re choosing a loan that fits your situation and goals.

3. How quickly do I need the money?

Timing matters. Online lending platforms often offer faster application and approval processes than traditional brick-and-mortar banks.

Some of these platforms will facilitate loan funding in as little as one business day after final approval, depending on your bank’s transaction processing speed.

4. Is this lender trustworthy?

Research is key to finding a reliable lender. Consumers can visit the local or regional Better Business Bureau (BBB) website or call to find customer feedback and complaints about lenders or lending platforms based in their communities or home states.

Similarly, they can explore the Consumer Financial Protection Bureau (CFPB) website and search its Consumer Complaint Database for customer complaints filed with that organization about specific lenders.

A quick online search on sites like Trustpilot can also reveal customer experiences and help you avoid untrustworthy providers.

5. Can I afford the monthly payments?

Borrowing beyond your means can make your financial situation considerably worse. If you accept a loan with a monthly payment that is more than you can manage, you can quickly rack up penalties and late fees and increase your risk of default.

Review all loan costs, including fees like origination fees, and ensure the monthly payments fit comfortably within your budget.

6. What are the repayment terms?

Depending on the size of the loan, it may take months or several years to repay it. The length of your loan term affects both your monthly payments and total interest.

Shorter-term loans have higher monthly payments, but the total interest paid will be lower when compared to longer-term loans.

Carefully review a loan’s terms, including length, payment schedule, the total interest or finance charge and any penalties, during your evaluation process. Choose terms that align with your budget and financial goals.

Also, check to see if the lending platform offers any hardship programs if your circumstances should change during loan repayment.

7. Is this the right financial option for me?

Personal loans are versatile but may not always be an ideal choice for your situation and financial goals.

For example, if you’re a homeowner, a home equity loan or line of credit could offer better terms than a personal loan. Take the time to shop around and figure out what solution best aligns with your financial circumstances, needs and other factors.

While personal loans can help you achieve financial milestones — whether it’s paying off and consolidating debt, covering emergency expenses, or making home renovations — they are just one piece of a larger financial puzzle.

The path to improving your financial well-being requires an ongoing commitment to manage your spending and saving habits. Remember to ask the right questions and choose a loan that supports — not hinders — your journey to financial success.

Related Content

• The Power of Living Within Your Means
• Considering a 401(k) Loan? What You Can Do Instead
• Top Five Benefits of Peer-to-Peer Lending
• Six Tasks That Can Help You Feel Better About Your Money
• Need Help Digging Out of 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.

In a controversial move, President Donald Trump is taking steps to fulfill one of his campaign promises: dismantling the U.S. Department of Education. Trump just signed an executive order designed to significantly reduce the federal government's role in education.

In a recent interview, Trump reportedly said of the department: "I expect it will [be shut down entirely]. You'll have a few people left just to make sure [the states are] teaching English, you know, you say reading, writing and arithmetic."

When signing the order at the White House on March 20, the President added, "We're going to eliminate it, and everybody knows it's right."

It’s important to note that the President cannot immediately eliminate the Education Department due to its establishment by Congress. And recent surveys show a majority (58% and more in various voter surveys) of people don't want to abolish the Department of Education.

However, the initiative reflects Trump's vision of decentralizing education policy. Here’s more of what you need to know.

Education Department executive order

Trump’s order directs newly confirmed Education Secretary Linda McMahon to begin the complex process of winding down the department's operations. The goal is to redistribute its functions to transfer educational responsibilities to state and local governments.

Here are some key elements:

• Decreased funding for specific federal education initiatives, particularly in areas of diversity, equity, and inclusion (DEI) and "gender ideology"
• Development of a strategy to redirect federal education funds to states, local governments, and individual students
• Maintenance of federal support for students with disabilities and underprivileged schools
• Continuation of federal student loan programs

The Trump administration has already significantly reduced the department's workforce by approximately 50% through layoffs and voluntary departures.

While supporters hail this move as a step toward educational freedom and local control, some critics argue that it could lead to inconsistent educational standards across the country and potentially reduce resources for disadvantaged students.

So, as President Trump works to dismantle the Department of Education, many questions are emerging not only about the future of education policy but also key education-related tax benefits.

Are education tax credits at risk under Trump?

As Kiplinger has reported, Republican lawmakers recently circulated proposals for significant changes to the tax code, some of which target popular tax credits.

Among proposals reportedly under consideration are modifications to or eliminating significant federal tax breaks like the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC).

The AOTC currently provides up to $2,500 a year for eligible higher education expenses during a student's first four years of college. The LLC offers a 20% credit on up to $10,000 in annual education expenses with no limit on years claimed.

Those potential reforms, which haven't yet been set in stone, are part of broader tax policy discussions as the administration seeks to make tax cuts from Trump's first term permanent. According to proposals under consideration by House Republicans, eliminating the AOTC and the LLC is estimated to save the government $85 billion over 10 years.

Will scholarships be taxable?

Republican lawmakers are also said to be exploring changes to education-related tax policies, with one proposal targeting the tax-exempt status of scholarships. If embraced, that potential shift could have far-reaching implications for students and families.

• Currently, scholarships and fellowships used for qualified educational expenses are not subject to federal income tax.
• However, a proposed system could introduce tax on various forms of educational financial assistance, possibly including some state-sponsored programs.

That could significantly affect college affordability, particularly for families who depend on scholarships to fund higher education.

Under the potential new approach, scholarship funds that are currently tax-free when applied to tuition and required course materials might be reclassified as taxable income for students.

According to proposals being floated by the House Budget Committee, Republicans estimate that they can save $54 billion over 10 years by eliminating the exclusion of scholarship and fellowship income from taxation.

What happens if Trump closes the Department of Education?

The potential closure of the Department of Education under President Trump's administration has sparked widespread concern about the future of crucial educational programs and services in the United States.

One pressing issue is the fate of the federal student loan program, which manages a vast amount of student debt affecting millions in the United States.

What happens to student loans?

• If the Education Department is effectively shuttered, the administration of these loans would likely shift to another federal agency. This could possibly be the U.S. Treasury Department, though Trump has now said student loans will be handled by the U.S. Small Business Administration.
• This transition could substantially change loan servicing, repayment plans, and forgiveness programs.
• Borrowers would still have to repay their loans but would face significant uncertainty and chaos regarding their existing loans and future financial aid.

The impact on students with disabilities is another major area of concern.

The Department of Education plays a crucial role in enforcing federal laws that protect the rights of students with disabilities and ensure they receive appropriate accommodations and services in schools.

With the department's workforce significantly reduced, there are worries about how effectively these protections can be maintained and enforced nationwide.

• The potential weakening of federal oversight could result in inconsistent implementation of disability rights across different states, potentially leaving students without adequate support.
• The allocation and management of federal funding for special education programs is another critical issue.
• The federal government provides substantial funding to states for special education services. If the Department of Education is eliminated, it's unclear how this vital funding would be distributed and overseen.

It's also worth noting that many states are already struggling to fully fund special education services. So, any disruption in federal support could exacerbate these challenges, potentially leading to reduced services for students.

National Education Association (NEA) president, Becky Pringle stated the following in a release:

"If successful, Trump’s continued actions will hurt all students by sending class sizes soaring, cutting job training programs, making higher education more expensive and out of reach for middle class families, taking away special education services for students with disabilities, and gutting student civil rights protections."

As this situation unfolds, educators, parents, and students are unfortunately left with many unanswered questions about the future of federal education policy and financial support and, yes — tax policy as well.

Related

• Education Tax Credits and Deductions
• What is the American Opportunity Tax Credit
• Tax Breaks for Parents of Children With Disabilities
• Are Scholarships Tax-Free?

To help you understand what is going on in the economy and beyond, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we publish many (but not all) of our forecasts a few days afterward online. Here’s the latest...

The car market is getting back to normal. Slowly. Sales are rebounding. Inventories are no longer abnormally scant. Financial incentives, which dried up during the pandemic, are reemerging. Still, it’s a tough environment for buyers. Here’s what to know if you might be in the market.

1. Sales and costs
Total sales should grow a bit this year: Figure on about 16.3 million, up slightly from 2024’s already-solid 15.9 million vehicles sold. Interest rates on car loans should decline, albeit only slightly, after the Federal Reserve’s cuts last year and a bit more Fed easing later this year. Slightly lower financing costs also bode well for sales.

2. Inventories
Buyers can expect a bit more selection as dealer inventories rebound — also good for sales. Among the most popular categories of cars this year, according to Joseph Yoon, consumer insights analyst at Edmunds.com:

• Big and compact SUVs. Roomy three-rows and, on the other end of the spectrum, small ones. Families with kids are often looking to upsize. Retirees and empty nesters often want to downsize.
• Pickup trucks of all flavors. Nothing new, considering how dominant trucks once meant for work have become in recent years.
• And hybrids, which had a banner year in 2024 and figure to stay in demand. “Consumers have made it pretty clear” that they’re interested in electrification, but not necessarily pure electric vehicles, notes Yoon. Hybrids like Toyota’s RAV4 and Honda’s CR-V are thriving as buyers look to save gas but not abandon it. More hybrid versions of popular models are rolling out, particularly from Toyota — hybrid Tacomas, Tundras, 4Runners, etc.

If you’re looking to score a big discount, EVs are the place to shop, Yoon says, provided that you are open to going electric. Between federal and state tax credits and discounts from manufacturers, there are juicy deals to be had. Note that any talk of doing away with the $7,500 tax credit on certain EV models could spur a huge wave of buying.

Brands with the most inventory in stock now, according to data from Cox Automotive, which could help buyers: Ford, Tesla and Stellantis-owned ones like Ram and Jeep. By contrast, inventories are tight at Toyota, Lexus, Honda and BMW, with scant room to haggle.

3. Buying advice
Some general buying advice, especially for folks who haven’t shopped lately:

• Be prepared for sticker shock, both on the prices of new cars and the rates on auto loans, says Yoon of Edmunds. The pre-COVID days when salespeople were ready to negotiate and loans could be had with 0% interest are long gone. Assess your buying power accordingly.
• Be flexible about what you want vs what you need. If you set your heart on one particular model or trim level, it could be hard to find, or cost a pretty penny.
• Lay the groundwork before you walk into a dealership. Identifying the car you’re interested in and contacting the dealer before you go in to see or drive it can help expedite the purchase. Otherwise, you’ll be competing with lots of buyers.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

Related Stories

• Is Leasing a Car Cheaper Than Buying? Know the Costs
• Top 10 Electric Cars in the US — Most Popular EVs
• 5 Models That Show Hybrid Cars Might Be Right For You
• EV Charger Tax Credit: What You Need to Know

This is shaping up to be the year that thousands of U.S. workers will need to put away their soft pants and return to the office — at least for a couple of days a week.

A summer 2024 survey of chief executive officers by accounting firm KPMG found a sharp turnaround in views toward remote work. More than three-fourths of CEOs expect employees to return to a traditional in-office schedule within three years. Earlier in 2024, only one-third of CEOs predicted a return to an in-office model. Only 17% of CEOs expect their employees to have a hybrid schedule, and just 4% expect their employees to be fully remote, according to the summer survey.

The news isn’t all bad for the comfy-pants crowd. Eighty-six percent of CEOs said they would reward employees who return to the office with favorable assignments, raises and promotions. And research by the Flex Index, a technology research firm based in San Francisco, found that while the number of companies that allow a fully flexible workforce has declined since 2023, the percentage of companies that use a hybrid model increased in 2024.

Employers’ willingness to allow their employees to work from home, at least some of the time, also varies significantly by industry, according to research by Stanford economist Nicholas Bloom, who has studied remote work for more than two decades. Workers in the technology and finance industry, for example, work from home an average of 2.39 days a week, while workers in the hospitality, transportation and retail industry work from home less than one day a week, according to Bloom’s research.

Do workers want to return to the office?

Companies that mandate a return to the office face pushback from employees who place a high value on a flexible work schedule.

A 2024 workplace benefits survey by Charles Schwab found that many workers say having a flexible work schedule is an important benefit, particularly for younger workers. Fifty-seven percent of workers said they would forgo anywhere from 5% to 15% of a salary increase in exchange for a more flexible work arrangement. The survey also found that the ability to work from home was a must-have benefit for 27% of men and 36% of women, and more than half of Generation Z workers and 46% of millennials viewed flexibility in work hours and location as an essential benefit.

A survey by Payscale, a compensation consulting and research firm, found that more than 60% of companies with return-to-office mandates have encountered resistance from their employees. Payscale’s research also revealed that providing flexible work arrangements can help companies attract and retain talent. Payscale discovered, for example, that companies with remote work environments have much lower turnover than those with traditional office hours or even hybrid work arrangements.

Lexi Clarke, chief people officer at Payscale, says the company went fully remote in fall 2022 but provides coworking spaces in Seattle, Boston, and Denver, where most of its employees are located. The coworking offices provide a way for managers to meet with their teams and give employees an alternative if they’d prefer to work in an office, she says. “We use remote work as a lever to help us find the best talent,” she adds.

Employees who want to maintain a remote or hybrid work schedule should talk to their employers about ways in which a flexible work environment improves their productivity, Clarke says. Research supports that position. A survey of productivity growth between 2019 and 2022 by the U.S. Bureau of Labor Statistics found that remote work increased productivity in 61 business sectors. A big reason is that those employees no longer spent time and money commuting to the office.

“I’ve enjoyed working remotely,” Clarke says. “From 5 a.m. to 7 a.m., it’s just me and my coffee.”

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.

Related content

• The Best US Cities for Remote Work
• What 89% of Workers Are Willing To Give Up Their Job For
• Nearly 50% of Workers Are Thinking of Quitting Their Jobs, Study Shows. Are You?

If you’re work-weary and dreaming of retirement, the open road might be calling your name and inviting you to chase new horizons in an RV. With the kids grown and out of the house, the freedom of RV life can feel irresistible. So, now might be a great time to sell or downsize the family home and hit the road on your own terms.

You’re far from alone in feeling the pull of the open highway. Recent data from the RV Industry Association’s Go RVing 2025 RV Owner Demographic Profile shows that approximately 8.1 million American households currently own an RV, representing about 6.7% of U.S. vehicle-owning households.

And it’s not just retirees who want to hit the road. The North American RV market remains robust, recently valued at roughly $20–22 billion, with forecasts projecting continued growth to the $29–35 billion range by around 2029–2035, driven by strong demand for flexible travel and outdoor experiences. Plus, the same survey revealed that the average age of RV owners was 49, with 46% of owners between 35 and 54.

But is retiring in an RV right for you? We spoke with retirees who spend much of their time in recreational vehicles for guidance on the cons of RV living in retirement. Key downsides?

“Emptying the sewer tanks. Cost of fuel. Rising costs of campgrounds. Having to manage mail forwarding, unreliable internet access for email and online banking. Managing deliveries from Amazon and prescription refills,” said Geoff Baker, a retired commander with the British Royal Navy who has been RVing across America since 2011 with his wife, Laura (their home base is Polk City, Fla.).

Here’s what the Bakers and others had to say about the downsides of life on the road in an RV.

1. RVs are really expensive

Much of the core appeal of the RV-retirement lifestyle is the perception that an RV costs less than a house, or a “sticks and bricks” home, to use the lingo. But there’s a ton of “it depends” in that equation, and an RV that suits your needs can be a big investment. Before you can set a budget, you need to understand the various options available on the market. A quick primer:

Class A motorhome: These are based on commercial truck chassis, with all bodywork provided by the RV manufacturer. You won’t see a Ford or Ram front end here. While not all Class A motorhomes are large, the biggest, most expensive motorhomes are all Class A. On average, a Class A motorhome costs between $100,000 and $600,000 or more, but prices can hit $2,000,000 for top-tier luxury models, according to RVUniverse.

Class B motorhome: That’s the technical term, but it’s rarely used. Owners will refer to their van, or maybe their “Sprinter” (technically a Mercedes model that gets applied generically). While these might be heavily modified, they’re no wider or longer than a factory van that provides their chassis and body shell (though they might be taller), and this makes them popular among travelers who emphasize traveling, whether in urban centers or even off-road. On average, Class B motorhomes cost between $95,000 and $200,000 for the most premium models, according to RV Owner HQ, and $100,000 to $140,000 for standard models.

Class C motorhome: This style is generally the most affordable option, although some can rival Class A in their fitments. Like Class A, these motorhomes are built on commercial chassis, but unlike Class A, they retain the factory cab. So, the driving experience — in particular, your actual view out — is more like piloting a pickup truck. Class C motorhomes can cost anywhere from $30,000 to $100,000, per Bullyan RV Sales.

Trailers: The cheapest way to begin RV life is to buy a trailer. A folding trailer, sometimes called a pop-up trailer, can cost as little as $6,000 and go as high as $30,000, according to pricing estimates from both the RV Industry Association and Consumer Reports. Conventional travel trailers (a hard shell all around) can range from $25,000 to $55,000, depending on size and amenities.

Of course, as trailer size goes up, so does the need for a capable vehicle to tow it. The largest of these, fifth-wheel trailers, require a heavy-duty truck with a modified bed designed specifically for towing. These trucks can run anywhere from $60,000 for a basic 3/4-ton truck to $90,000 or more for a one-ton model.

2. You’ll spend even more money updating your RV's décor

RV decor can differ greatly from one designer to the next, so you may end up spending more money upgrading the interior living space. This can be especially true if you buy used, but even new RVs can demand immediate upgrades to suit your taste.

RVer Charley Hannagan, whose home base is Pittsburgh, described the interior of her family’s used 32-foot Jayco Precept Class A motorhome as looking like “a 1970s old-age home.”

“It was awful,” she says. “We spent about $2,000 to buy fabric to re-cover the furniture in fabric I liked, to buy melamine dishes that won’t break on the road, organizational stuff and sheepskin covers for the front seats.”

The Bakers redecorated, too. They replaced the mattress on the bed with a better quality one for $900. Also inside, they changed out televisions, curtains, and blinds ($8,000), added a home-grade refrigerator ($350), and bought new recliners and table chairs ($2,000).

Then there’s the outside. What RVs are made of varies, but with the exceptions of the Class B vans and aluminum Airstream trailers (and their imitators), it’s generally not formed and welded metal like a car. Siding, whether aluminum, fiberglass, or another composite, is more common. That was the case for the Bakers, who paid north of $20,000 to have their entire unit re-sided and repainted.

3. Your RV will depreciate in value

You might call it your home, but don’t expect your RV to increase in value over time like most traditional “sticks and bricks” houses do.

“With RVs ranging in price from $30,000 to over $2,000,000, it’s hard to compare them to a home that’s paid off or near being paid off and find financial benefit,” says Margo Armstrong, who previously RVed for over two decades and wrote (but has since retired) the RV blog Moving On With Margo. “RVs also depreciate rapidly; when you add in costs for gas, insurance, upkeep, food and the many other expenses of being on the road, traditional vacationing will likely seem to be a better value for your money.”

There are exceptions: As with cars, there is a market for high-end, collectible RVs and trailers (again, think Airstream). But the cost of admission to this club is high, and as with most collectibles, the wear and tear of everyday use can severely limit price appreciation. Do you want to break into a sweat every time a branch brushes against your roof?

4. RVs guzzle fuel

Even with gas prices seemingly getting lower, you'll still want to think long and hard about what it’s going to take to fill your RV for rolling down the highway. Are you prepared for triple-figure fill-ups? Gas mileage in the single digits? Pushing a house through the air at 60 mph takes a lot of power, and power takes fuel. Plus, the biggest and fanciest of RVs often run on diesel fuel, and while a diesel rig can be more efficient, the gap between gasoline and pricier diesel has been growing.

“The price of fuel has certainly impacted our adventures,” said Nancy Fasoldt, who lives in upstate New York when not RVing. “We’ll winter in mid-Florida instead of South Padre Island, Texas, because it is closer. And we are planning summer excursions nearer than farther from home. And we flew to Seattle to see the kids instead of driving. Sad to say, it was cheaper to fly first class than to drive the truck camper.”

According to AAA, the current national average gas price is $3.84 for regular, $4.73 for premium, and $4.83 for diesel. Ouch! If you're looking to cut costs next time you hit the road, check out these gas-saving tips that actually work.

Of course, fuel range is also an important consideration. A typical Class A motorhome gets 6–10 miles per gallon. Smaller Class C motorhomes generally get around 400–900 miles per tank, while more efficient Class B camper vans can stretch a tank to 375–600 miles or more. You do the math.

5. You'll need extra insurance for your RV

Your car insurance policy will likely extend its liability coverage for a trailer you haul behind your vehicle (you should check), but that’s a bare minimum and does nothing to protect the trailer’s value from loss.

Your insurance needs can quickly escalate, especially if you travel extensively or buy something beyond a trailer. Keep in mind, too, that an RV is bigger than a car and more challenging to drive (we’ll get to the gory details), making accidents, both big and small, more likely and potentially more costly.

A standard RV insurance policy will cover many of the same things as a standard auto policy:

• Liability insurance (if you hurt someone else or damage their property)
• Comprehensive auto insurance (theft, vandalism, acts of nature, deer strikes, etc.)
• Collision insurance (damage to your RV if you’re in an auto accident)
• Uninsured/under-insured coverage (damage to your RV or your injuries if the other driver doesn’t have any or enough insurance)
• Medical coverage (medical bills for you or your passengers resulting from an accident)

In addition, insurers have add-on insurance for RVs. Costs will vary widely based on where you live, your driving record, what kind of RV you own, and how much time you spend in it. The Hannagans, for example, say they paid about $1,700 a year at one point to insure their motorhome and the Mini Cooper they towed behind it.

The average RV insurance policy in 2026 costs approximately $1,500 per year, or about $125 per month, though this varies based on RV type, usage, location and coverage. Full-time RVers may pay up to $3,000 yearly, per LA Insurance.

Many RV owners, according to Progressive, seek coverage that includes:

• Total loss replacement. This will replace your new RV with a comparable new RV (no depreciation applied) if you experience a total loss within a specified time frame, typically five years.
• Replacement cost of personal effects. This covers your personal belongings inside your RV (and sometimes outside) if damaged, destroyed, or stolen.
• Vacation/campsite liability. This covers injuries and property damage when you’re traveling and living in your parked RV for extended periods.
• Emergency expenses. This pays for lodging and transportation if your RV is out of commission due to a covered accident. Particularly important if you’ve ditched “sticks and bricks” to live in your RV.

Depending on your age, you might receive special discounts that can help reduce your premiums. Check out these nine ways seniors can save on car insurance in 2026.

6. Health care can be a hassle when traveling in an RV

Being on the road in an RV can mean being far away from your regular doctors and your insurer’s network of medical providers and facilities.

“Health insurance is the problem, not health care,” says retiree Nancy Fasoldt. “There are doctors everywhere, but the cost can kill you because of the insurance. HMOs, PPOs, in-network, out-of-network. Geesh. If you are in Bayfield, Wis., and need stitches, you can go to urgent care for treatment, but where to go for follow-up care that is in-network?”

Baker notes, “If you are pre-Medicare, health insurance is a nightmare as most plans are state-specific. Luckily, Laura and I are on Medicare, and we get coverage in any state, and we can choose any doctor who offers Medicare. However, for supplemental plans (Parts F and G), we pay an additional $250–$400 on top of our Social Security-Medicare Part B payment of about $203 per month."

Turning 65 and going on Medicare doesn’t eliminate these challenges, points out insurer, The Hartford: “Retirees who are already on Medicare Parts A and B will be able to receive hospital and medical care in case of a major illness. If you are on a Medicare Part C (Medicare Advantage) plan, however, it may not cover you for anything other than emergency or urgent care, since your plan may specify that you are not allowed to see providers outside of your network."

As for prescription medication, Fasoldt recommends making sure that Walmart pharmacies are in-network in your plan, “because Walmarts are everywhere.” She also recommends asking your insurer for a vacation override if you’re ever on the road and need a refill fast from the nearest pharmacy.

7. You'll have to deal with your own waste from your RV

Unless there’s a plumbing emergency, you probably think little about where the water comes from and where the waste goes when you turn on the faucet or flush the toilet in your sticks-and-bricks home. With an RV, it’s always something you need to keep in mind.

Your RV is equipped with a black tank for sewage, a gray tank for shower and sink water, and a freshwater tank. You must monitor the levels in all of these. You also have to schedule regular, er, dumps of the waste tanks.

To that end, many locales that once offered dumping stations for RVs, such as highway rest stops and campgrounds, are doing away with the service (or charging more money). Need help finding a dump station? There’s an app for that.

8. Quarters are cramped in an RV

Even in the largest of motorhomes, your traveling companion is never more than a few feet away. If you require plenty of space, privacy and solitude, the RV life might not be for you. Some traveling partners sort it out by doing certain tasks — laundry, grocery shopping — solo.

Says Nancy Fasoldt: “Honestly, we never found the closeness to be problematic. Others have told us they have. But we keep busy reading, writing, painting, bike riding, and walking the dogs. And, if necessary, we can pull a curtain to hide behind. We seriously like each other most of the time, so it’s not hard to be that close.”

9. RVs are a bear to drive

Even the most nimble of RVs — the Class B vans — require some adjustment for most drivers. The blind spots are massive, and rearward vision is generally a function of mirrors and cameras. You’ll need a trucker’s appreciation for clearance limits (GPS navigation can help here). Rest stops, left turns, and (maybe don’t do these) U-turns need to be carefully planned.

With size comes greater difficulty, but attempting to dodge that bullet by sticking to a trailer is not without its problems, chiefly backing up. Crosswinds are also no fun, especially with a hard-shell trailer. Either way, be prepared for a steep learning curve before you’re comfortable sitting behind the wheel of a 40-foot motorhome or hauling around a full-size fifth-wheel trailer.

The dealer will give you a basic introduction to your RV when they hand over the keys, but you’ll want some practical experience under your belt before you hit the road. Search online for RV driving schools in your area, or ask for referrals for instructors from the dealership or RV parks and campgrounds staff. Or, ask experienced RVers where they learned to drive.

Even if only one of you plans on taking the wheel, your traveling partner should also learn how to drive the RV in a pinch in case you become tired or ill. We saw private RV lessons that were $695 for 2 days and $375 for one backing lesson.

10. Overnight parking can be problematic with an RV

If just stopping to stretch your legs requires forethought, you’d better believe you’ll need to figure out where you’ll park your RV every night along the way. The #vanlife people with their Class B vans seem to thrive on finding public land places where they can park for free (yes, there are apps for that, too), but if you’re driving something bigger, want hookups or a bathroom with porcelain fixtures, don’t expect to live too spontaneously.

Aside from RV parks and campgrounds where you can reserve a spot in advance, Walmart, Cracker Barrel, Lowe's, and Home Depot parking lots have been popular for overnighting in your RV. However, Nancy Fasoldt recommends calling ahead to ask the store manager for permission and specific instructions on where to park in the lot. Fasoldt says they’ve also had luck overnighting at Cabela’s megastores. Some truck stops, rest stops, and state visitor centers allow RVs, as do some museums, casinos, and other tourist attractions.

An example of rest stops: You can park your RV at select rest areas on the Ohio Turnpike for one night only (bad news for all of you longing to vacation at an Ohio Turnpike rest stop). It will set you back $20, but includes electrical outlets, a wastewater dump station, and portable water filling stations. They’re available on a first-come, first-served basis.

“Our favorite overnight stops are at Elks Lodges,” says Geoff Baker. “I am a member in Gillette, Wyoming, and we can stay at Elks Lodges around the country that offer RV parking — often free, and up to $25 per night donation for water and electric service.”

The Bakers are down on the Walmart option, though. “Too noisy, and not as secure as it used to be,” said Baker.

Technology helps the Fasoldts find places to park overnight. Free websites they use include Casino Camper, FreeCampsites.net, and Harvest Hosts, the latter of which matches RVers with willing wineries, breweries, and farms. “The catch is they want our business,” says Nancy Fasoldt. They also use the Allstays Camp and RV app. Campendium and RV Parky are also options.

11. RV repairs can be costly

As with a car, an RV requires routine maintenance and, on occasion, even breaks down. But remember, it’s also a house, with the added burdens of water and waste tanks to watch, propane levels to monitor, and appliances to go on the fritz.

“Much like your house, where you’ll have somebody take a look at the furnace every season, you still have those kinds of issues with an RV,” says Phil Ingrassia, president of the RV Dealers Association.

"People need to consider the maintenance that needs to be done to keep their RV ready to go when they want to go on vacation," he said. "There’s nothing worse than you’re all ready to go with your family camping, and then something’s wrong. So you need to do that maintenance, much like you have to do with a home.”

Getting repairs done can be complicated, said Hannagan. While their RV dealer will fix things in the living area, it will not work on the engine and chassis. For that, they need to find a Ford dealer that repairs truck engines and has the room in its garage to fit a 32-foot motorhome. “It’s difficult to get your rig into a dealer,” she says.

Hannagan suggests having a dedicated savings account for RV upkeep and repair. Several years ago, she said, "We expect to spend about $5,000 to replace tires, install new brakes, and make other repairs. RVing is not for the faint of heart.

”For roadside assistance, the Fasoldts rely on CoachNet. “It is like AAA on amphetamines,” says Nancy Fasoldt. A one-year membership costs $179 to $199 for trailers and fifth wheels and $249 to $279 for motorhomes.

12. You’ll need to get rid of a lot of your stuff

Meemaw’s hutch and your trusty table saw won’t be able to come along on this ride. That can bother people who have attachments, sentimental and otherwise, to certain belongings. Unless you can find a kindly relative, you'll have to pay to store these items.

Seasoned RVers, especially full-timers, know you’ll need to cull clothes and cut down hard on clutter — and not acquire more, even if you’re traveling through a world full of yard sales.

But before you donate all your belongings to your local thrift store, make sure you're not holding on to one of these in-demand old home items.

13. The freedom of the open road isn’t free — and it’s crowded

Common complaints from RVers center on climbing rental rates at campgrounds, crowds at campgrounds, and the growing likelihood they’ll be shut out or time-restricted at RV parks. Let’s look at the national parks alone. In 2025, the National Park Service reported a record 323 million recreation visits.

“Seriously, getting into a state or national park campground has become darn near impossible unless you are willing to play a game of chance, counting back the days AND HOURS before the spots are opened for reservations, then going online at a certain time of day and hitting refresh until the site opens for reservations,” said Fasoldt. “Then it becomes a game of chance to see whose computer logs in faster.”

And if you do succeed in winning the site lottery, you’ll need to stick by your reservation, which includes showing up on the first day of your slot and not counting on extending your stay. The next camper is right behind you.

14. It can get lonely on the road in an RV

Spending much or all of your time in an RV means pulling up roots and moving from place to place. The lifestyle doesn’t work for those who desire proximity to friends, family and familiar surroundings.

“I like escaping,” says Allen Fasoldt. “But it’s often nice to spend time with relatives. Trouble is, if you go RVing to get away, you are trying to get away.”

Adds Nancy Fasoldt: “Because we travel so much, our friends have gotten used to us not being there, so we’ve been slowly written off invite lists, no longer on speed dial. I look at myself as a part-time person. Part-time here, part-time there. While fellow travelers make fast friends, it is only temporary, while we are in each other’s sphere. I do miss what I used to have in my home community.”

And loneliness can negatively impact your overall well-being. Loneliness is linked to a slew of health issues, ranging from heart disease, stroke, depression, dementia, and even premature death, according to the Centers for Disease Control and Prevention (CDC). Learn more about the cost of loneliness in retirement and how you can combat it.

15. An airbnb for RVs? You might want to try before you buy

You wouldn’t buy a home and move to a city sight unseen, yes? It’s probably not a good idea to sell your home and buy an RV before a practice run or two in whatever size motorhome (or towable) you’re eyeing. That experience — renting an RV for a vacation — soured a friend of mine on the whole retiring-in-a-recreational-vehicle jam.

Many RV dealers have rental vehicles, too. If there’s not one near you, you can find rentals across the country on several websites, including Outdoorsy and RVshare. Another, RVezy, calls itself “the Airbnb of RVs,” and it features RVs from private owners from around the country. Those rigs include towables, motorhomes, pet-friendly RVs, deliverable RVs, and stationary RVs.

It’ll cost you some, though; modest per-night rates don't usually reflect a bevy of fees. We looked at top RVezy rentals near Sacramento, Calif., a popular rental city for RVezy. This Fleetwood Bounder Class A (sleeps 5), for four nights in August, will cost you about $880. That doesn't include taxes and other fees. Renting a 2020 Keystone Raptor Toy Hauler costs around $189 per night, and doesn't include taxes and fees. And this is before gas, food, propane, and the fees for wherever you’re going to park.

Related content

• Gas Prices Are Rising Fastest in These States
• The 10 Most Valuable Vacation Destinations for Retirees in 2026 — That Won't Bust the Budget
• 9 Financially Savvy Tips for a Guilt-Free Vacation, From a Wealth Adviser
• Top Travel Rewards Credit Cards: Maximize Miles, Points, and Benefits
• Why the IRS Can Reject Smartwatch Mileage Logs

President-elect Donald Trump proposed a number of personal finance initiatives during the presidential campaign, many of which could have a direct effect on your savings and investments. Here’s a look at what you can expect from the new administration.

Trump's effect on income taxes

Trump has pledged to extend the individual income and estate tax provisions of the 2017 Tax Cuts and Jobs Act (TCJA), and with the House of Representatives and Senate in Republican control, that effort is expected to succeed. Those provisions, which are set to expire at the end of 2025, doubled the standard deduction, lowered income tax rates and increased the estate tax exemption to a level that makes federal estate taxes a nonissue for the vast majority of taxpayers. In 2025, estates of up to $13.99 million will be excluded from federal estate taxes, or up to $27.98 million for a married couple.

The TCJA also doubled the child tax credit from $1,000 to $2,000 per child, and Trump has said he wants to make the increase permanent. The credit phases out for single parents with $200,000 or more in income and married couples who file jointly and have $400,000 or more in income. Vice President-elect J.D. Vance has said he would like to increase the child tax credit to as much as $5,000 per child and extend it to all families regardless of income. However, such a tax break would be enormously expensive and face opposition from Republican lawmakers.

During the presidential campaign, Trump said he supported eliminating the $10,000 cap on the deduction for state and local taxes (SALT), a move supported by lawmakers from high-tax states. However, scrapping the SALT cap would increase the cost of extending the TCJA tax cuts, which would already add $3.9 trillion to the federal deficit through 2035, or $4.5 trillion with interest, according to the Committee for a Responsible Federal Budget, a nonpartisan nonprofit organization.

Trump's second term may impact EV tax credits

Under the 2022 Inflation Reduction Act, eligible buyers can claim a tax credit of up to $7,500 for a new electric vehicle, or $4,000 for a used one, at the point of sale, either as a rebate or as a reduction in the cost of the vehicle. Members of Trump’s transition team reportedly want to scrap the EV tax credit as part of broader tax reform legislation. Elon Musk, founder of EV manufacturer Tesla (TSLA) and a close adviser to Trump, opposes the tax credit, which he says primarily benefits Tesla competitors.

The EV tax credit probably won’t disappear overnight. Congress would need to amend the Inflation Reduction Act or enact a new law to eliminate it. And any effort to get rid of the tax credit faces opposition from U.S. automakers. Still, given the uncertainty surrounding the credit, it’s probably wise to buy soon if you’ve had your eye on an eligible EV. You can research makes and models that are eligible for the credit at www.fueleconomy.gov.

Trump's take on health insurance

During his first term, President Trump tried unsuccessfully to torpedo the Affordable Care Act, aka Obamacare. During the 2024 campaign, Trump said he would preserve the ACA but make changes to the law that could affect the cost of ACA insurance.

One of the most likely scenarios doesn’t require any action by the White House or Congress. ACA subsidies enacted in 2021 in response to the COVID pandemic and extended by the Inflation Reduction Act are scheduled to expire at the end of 2025. If Congress doesn’t extend the subsidies, premiums for individuals who currently receive the subsidies will rise significantly, more than doubling in some states, according to an analysis by health policy research organization KFF (formerly the Kaiser Family Foundation). KFF provides a calculator you can use to estimate eligibility for subsidies in 2025.

Trump's effect on student loans

Trump has made no secret of his opposition to student loan forgiveness, and lawsuits filed by Republican governors blocked some of the Biden administration’s debt-relief initiatives.

While the Trump administration’s position raises questions about the future of loan-relief programs, it won’t affect loans that have already been forgiven, says Mark Kantrowitz, a financial aid expert and author of How to Appeal for More College Financial Aid. Once the federal government discharges a borrower’s debt and the borrower has received notification, “the forgiveness is permanent and final,” Kantrowitz said in an analysis on The College Investor, a website that helps families manage college savings and debt.

For updated information on student loan forgiveness and repayment programs, go to the federal student aid website studentaid.gov.

Trump's effect on credit card late fees

The Trump administration is likely to roll back many of the regulations proposed by the Consumer Financial Protection Bureau, including one that would cap credit card late fees at $8. That proposal has been on hold following a court challenge by the banking industry, and the hold will likely become permanent under the new administration.

However, during the presidential campaign, Trump said he supported capping credit card interest rates at 10%. Such a cap would almost certainly be challenged by the banking industry and is unlikely to pass muster in Congress.

Given that major changes to current credit card late fees and interest rates are unlikely, your best bet is to try to pay off your balance every month and make payments on time. Experian provides a calculator you can use to estimate how long it will take to pay off your credit card 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.

Related Content

• Three Possible Tax Impacts for Retirees Under Trump
• Tax Changes are on Trump's 2025 To-Do List
• Is the EV Tax Credit Going Away? What You Need to Know

Why would a bank take $15,000 out of a client’s account with no explanation or any chance for the client to stop the action?

That’s the question my friend asked herself after receiving a distressed call from her son, an accomplished entrepreneur. What happened next highlights the danger of relying too heavily on credit.

A cautionary tale

My friend’s son has started several successful businesses and worked in various fields, but as an entrepreneur, his income can be cyclical, sporadic and, at times, volatile. He’d called in a rare panic, blurting out information he usually wouldn’t share so freely and confessing that $15,000 had been stolen from one of his accounts.

My friend is nothing else if not a very protective mother bear; she doesn’t necessarily become involved in her son’s escapades, but because he seldom shared this type of information with her, she became concerned. She wanted to know what was going on, and eventually, he shared the story in painstaking detail.

As it turned out, even though he had maxed out all his credit cards while in between business ventures, he’d put together a plan to go to Europe and said he kept an account with $15,000 that was now gone.

When my friend asked how this money had been stolen, he told her it had been taken directly from his account without any warning or explanation.

She asked if the bank was applying it to his credit card debt.

He said that wasn’t possible because the credit card debt had been through a different bank.

She wondered if there was a paper trail proving the bank took the money without his authorization. If so, he could request it be returned to his account.

She kept asking questions until he specified which account and bank the money had disappeared from. The answer took her by surprise because she didn’t even know he had accounts with that bank.

She dug deeper and soon discovered that no, in fact, he did not have a checking or savings account with that bank.

But he did have a credit card. And that card had $15,000 of available credit — the money he’d been “saving” for his trip.

What had happened was not that the bank had stolen his money. When all his other cards were maxed out, his credit score had gone down, so the bank lowered his credit limit. That wasn’t his money, and it hadn’t been stolen; it had never been his to begin with.

No, he insisted. That was his money. He was saving that credit as his only source of income.

But what is income?

Credit doesn't provide an opportunity to save

Income is generally defined by its function: providing consumption and saving opportunities.

I’ve always maintained that credit cards are not an alternative source of income.

While having credit available on a credit card does offer a way to provide ourselves with consumption, it does not offer us a saving opportunity. Much the opposite, in fact, most of the time.

Under certain conditions, credit can offer us a way to leverage our money. If we use our credit cards to make purchases, we will have a clean and easy paper trail of what we’ve purchased and when. Credit cards also offer many perks as incentives compared to other payment methods.

How to use credit cards to your advantage

That said, there are only two ways to use credit cards to your advantage:

• If you pay your card off in full before the end of the billing cycle each month, you will receive your rewards and incentives. It can be easier to pay one monthly bill than to account for each expense.
• Often, credit cards provide promotional offers of no interest or fees on purchases within a specific time if you pay the monthly minimum payments.

Both options are available, but you must understand the specific terms and conditions precisely. Once you exceed these parameters, the interest, fees and penalties are costly because interest is calculated continuously and compounded. Paying the total amount doesn’t eliminate the average daily balance calculations, so it can take several months, with no additional charges, to clear your account.

Credit is not income

Thinking that having credit available means you have another source of income, as my friend’s son had done, is misguided. Income is earned a) in exchange for labor or services, b) from selling goods or property or c) as profit from investing.

Credit is not income.

Just because you have the credit available doesn’t mean you have the income to pay the debt, and the bank lowering your limit doesn’t mean they are stealing from you.

Credit cards are not an alternative source of income.

Related Content

• How Do Credit Cards Work? Interest and Fees Explained
• How to Maximize Your Credit Card Rewards
• Best Cash Back Credit Cards October 2024
• How To Choose a Credit Card for You

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

Editor’s note: This is the final article in a six-part series focused on paying for education using smart financial and estate planning. See below for links to the other articles, about direct tuition payments, 529 plans, Coverdell education savings accounts, UTMAs and irrevocable trusts.

Student loans are a common way to fund education, but many may not realize family members can be the source of these loans, not just the federal government or a financial institution. While it is less common, structuring an intrafamily loan may be the best way to help pay for education. This is especially true in periods when the intrafamily interest rates are low.

For it to be considered an intrafamily loan and not a gift, the interest charged must be at least the minimum Applicable Federal Rate (AFR) set by the IRS each month. If the AFR rate is lower than the federal student loan rate, this may be a nice alternative if you want to help a family member while not paying for their education with a gift.

The lending family member can set the terms of the loan, structuring in as much or as little flexibility as desired into the repayment plan. If at any time the lender forgives part or all of the loan, any amount of loan forgiveness converts the loan into a gift, making it subject to federal gift tax laws. The interest earned from the loan is taxable to the lender and is not considered deductible for the borrower.

Unlike formal loan agreements with a financial institution, intrafamily loans can avoid the hassle of a credit check and extensive paperwork, making them more accessible for those with limited credit history or income. Additionally, the loan can be refinanced at any time. The downside, however, is that they may lack legal protections or recourse mechanisms in case of default or disputes. Any breach of trust could strain or, at worst, destroy family relationships.

Benefits of intrafamily loans:

• Intrafamily loans are often issued at lower rates than federal student loans (but must meet IRS-set AFR rate)
• Payment plan can be flexible depending on the terms set by the lending family member
• Avoids the hassle of bank bureaucracy and extensive loan paperwork

Considerations to keep in mind:

• Loan forgiveness converts the loan into a gift, making it subject to federal gift tax laws
• May lead to family disharmony if the loan is not repaid

Exploring intrafamily loans for education funding offers a flexible and possibly lower-cost alternative to traditional student loans. By meeting IRS-set interest rates and customizing repayment terms, you can provide financial support while avoiding the hassle of a bank or federal student loan program. However, keep in mind the risk of tax implications and possible strain on family relationships if the loan is not repaid. Weighing these factors can help you decide if an intrafamily loan is the right choice for your situation.

Conclusion to the series

There are myriad ways to fund a child’s education, and there is no one-size-fits-all solution ― each family should consider their financial situation, tax situation, estate plan, investment plan and/or family/personal dynamics to determine what is best.

Here’s a snapshot of the six options we’ve discussed in this series:

Many families use a combination of methods and vehicles for funding education, especially when multiple generations are involved. For instance, parents may set up a 529 plan to pay for their children’s college education, while the grandparents pay for private secondary education by making tuition payments directly to the school.

As an investment office serving multigenerational families, all with different circumstances, we are happy to help you explore your options for paying to educate future generations.

Other Articles in This Series

• Part one: Direct Tuition Payments: A Tax-Efficient Way to Pay for School
• Part two: 529 Plans: A Powerful Way to Tackle Rising Education Costs
• Part three: Coverdell Education Savings Accounts: A Deep Dive
• Part four: UTMA: A Flexible Alternative for Education Expenses and More
• Part five: How an Irrevocable Trust Could Pay for Education

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 you’ve ever set up a credit card, you’ve likely heard the term “credit score.” This number helps creditors determine how likely you are to pay bills or pay back loans should you borrow money. This number can affect many aspects of your life, including your ability to rent an apartment, purchase the house you want, take out a loan or even buy a car. Having a low credit score can hold you back from reaching your full financial potential and accomplishing your goals. And while raising your score may seem like a huge hill to climb, there are a number of simple strategies you can use to help yourself get to the top faster.

As financial leaders, the members of Kiplinger Advisor Collective know how frustrating it can be to have a number dictate your future. Here, they share easy tips anyone can use to improve their credit score, build better financial habits and take back control of their money.

Keep your credit utilization ratio low
“An effective way to improve your credit score is to keep your credit utilization ratio low, which accounts for about 30% of your FICO score. There are a few ways to accomplish this. Use no more than 30% of your available credit and request credit limit increases on existing accounts, which can lower your utilization ratio if your spending remains constant.” — Hari Prasad Josyula, DowJones

Pay your bills (and your balance)
“A lot of your credit score is determined by ‘payment history.’ That just means, ‘Do you pay your bills on time?’ It represents 35% of your score. The second-biggest factor is how much you owe. If you carry hefty credit card balances, your score drops. That’s another 30%. Add them up, and it’s nearly two-thirds of your score. Focus on those two things, and you’ll be just fine.” — Howard Dvorkin, Debt.com

Take the 'piggyback' approach
“The single best way to boost your credit score quickly and easily is to ‘piggyback’ off someone else with great credit. Piggybacking is a strategy where you get added as an authorized user on another person's credit card. By doing so, you ‘inherit’ the other party's payment history. So, if you have a poor credit score, a so-so score or no score at all, piggybacking can help tremendously.” — Lynnette Khalfani-Cox, TheMoneyCoach.net LLC

Create a budget to stay on track
“Avoid overleveraging yourself by doing a monthly budget. Everyone knows this, yet no one does it. Do not buy things you cannot afford.” — Justin Brock, Bobby Brock Insurance

Find lucrative ways to pay off your debts
“Paying down debt will improve your debt-to-credit ratio — an important factor used to determine your credit score. Take steps to make bigger payments to your credit card by cutting discretionary purchases, lowering monthly bills or finding a side hustle. Virtual tutoring or even pet sitting can be lucrative and easy through sites like Rover.com, which says you can make up to $1,000 a month.” — Andrea Woroch, Woroch Media Inc. / Andrea Woroch

Leverage the notes on your credit report
“Your credit score is calculated based on several factors that are not equally weighted. When you run a credit report through any major reporting agency, there are notes that usually indicate which areas you need to improve to raise your score. Read the notes and follow up. That is one way to raise your credit score quickly. But, remember: Credit is not an alternative source of income.” — Deborah W. Ellis, Ellis Wealth Planning

Avoid making purchases you cannot afford to make
“My advice is the old-fashioned ‘do not spend beyond your means’ advice. The convenience of credit cards can be tempting for people to just buy things left and right, even those things they do not really need just because they can put them on layaway. If you do not need it and cannot afford to buy it with cash, do not buy it. Your credit score will fix itself.” — Zain Jaffer, Zain Ventures

Related Content

• What Is a Good Credit Score?
• Credit Score vs. Credit Report: What's the Difference?
• Raising Your Credit Score Could Lower Your Mortgage Rate
• How Retirement Could Hurt Your Credit Score

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

If you like to oversee your own retirement planning, you have to do some homework. Most of you have gotten used to that and spend time on researching, sorting opinions and putting together the best approach for you and your family. Complicating the process is your need to address three key retirement objectives — lifetime income, liquidity for unplanned expenses and legacy for kids and grandkids. And, of course, you want to lower your taxes and have less market risk.

The product-by-product approach

Choosing among financial product options is sometimes fairly easy and is sometimes more challenging. When you’re comparing, for example, investments against guaranteed lifetime annuities, it’s not that difficult to measure market risk, tax effects and liquidity. It’s rarely an either/or decision, but rather a “how much.”

An advantage of this DIY approach is that you are in control of the decisions. The way to have confidence in your decisions, however, is to look at a plan with the options built in and then exclude those that don’t feel comfortable.

A traditional plan is a start for most retirees

Here’s an example for Sally, the sample investor we often refer to, who at 70 years old looks at her financial situation in two distinct buckets:

• Retirement savings that total $1.5 million, with half in her rollover IRA and half in her personal (after-tax) accounts
• Her home, worth $1 million with no mortgage

She may have another bucket for short-term cash needs or higher-risk investments. These are excluded for this exercise when planning for the three key objectives.

As she developed her traditional plan below, Sally has followed conventional wisdom in at least two other respects:

• She invests her retirement savings 30% (100 less her age) in equities and 70% in fixed income
• She plans to own her home without any mortgage in retirement

That’s about as simple as you can get. However, Sally realized it produces too little starting income ($68,000) vs. her 6% income goal — or $90,000 per year from her savings. (This doesn’t consider Social Security payments or any pension.) Drawing down another $22,000 to start, and increasing that annually to account for inflation, creates the risk of her running out of savings. And the $90,000 income goal doesn’t even consider the costs of long-term care and other unplanned expenses. (For more on this, see my article How ‘Home-Based Planning’ Can Address Long-Term Care Costs.)

Sally’s DIY starter plan is easy to understand, but if spending down your savings is not the answer, then how do you find the right plan design for you?

Start with a plan with the three L’s, then find the products

Begin with your goals, which for most retirees include lifetime income, liquidity for unplanned expenses and a legacy for heirs. To achieve those three L’s, your savings — including equity in your home — can be put to work in ways that Sally ignored in her plan above. Another part of the plan involves deciding which of your savings accounts you want to buy products from: tax-qualified or personal (after-tax) savings. Then, select single-purpose financial products that can be put together or eliminated to best serve your purposes.

For people who want to live in their own home as long as possible during retirement, access to home equity through a home equity conversion mortgage (HECM) is a consideration. And for lifetime income, which eases the fear of running out of money, converting some savings into lifetime income annuities provides a solution.

Those two (HECM and lifetime annuities) are not on every adviser or planner’s radar, but they should be on yours. Here’s a revised picture that shows how lifetime annuities and the value of the home add to a retirement plan. We call this an All-Asset Retirement Income Plan since it includes assets representing 90% of all asset classes.

Initial refinements to the All-Asset Retirement Income Plan

Now let’s apply these elements to Sally’s plan, which needs to be personalized for Sally’s age, gender and percentage of rollover IRA in her savings. Three important allocations are made in the refinement of this plan:

• Equity portfolios are allocated between high-dividend and growth portfolios
• The lifetime annuities are allocated between a SPIA (single premium immediate annuity) for current income and a QLAC (qualifying longevity annuity contract) for future income
• The value of the home is allocated between the HECM line of credit (with the amount determined by LOC percentages set by HUD) and the remaining equity

Sally’s All-Asset Retirement Income Plan delivers starting income of $92,000 that exceeds her objective of $90,000. She can add that extra $2,000 to her budget or reinvest it for future budgets.

Other deliverables under Sally’s All-Asset Retirement Income Plan

As you can see above, 68% of Sally’s income is “safe,” which means the income is not dependent on the liquidation or sale of investments. Even at a low market return, the plan will generate income from dividends, interest, annuity payments and drawdowns from HECM. (As part of the refinement process, planning software, such as that used by Go2Income, can test different investment returns and resulting plan outcomes.)

Her other objectives are also important, and the plan will help her achieve them:

• Liquidity. By adding the line of credit from HECM to her plan, more than 50% of her savings are liquid at the start, even with the addition of lifetime annuity payments.
• Legacy. Sally plans to live a long life, so the legacy, while delivered far in the future, equals or exceeds the original total value of savings.
• Lower taxes. Only 50% of her income is taxable through age 85. In turn, that will have a favorable impact on all of her taxable income, including Social Security and pension.
• Long-term care costs. Her liquidity is able to absorb, for example, substantial long-term care costs, with the impact felt on her legacy, not on income.
• Inflation protection. Under the starter plan with conservative return assumptions, her income grows by 1.4% per year until age 85. If inflation protection is a key objective, she can address it during the refinement process.

Of course, in order to achieve the best outcomes for Sally, she will need to speak with a financial adviser well-versed in all the elements of a diverse retirement plan. During that process, the plan can be attuned to Sally’s personal needs and desires.

You can order a Go2Income plan today based on the answers to three or four questions about your goals. Get started here with no obligation. Consult with your own qualified adviser, find an analytical tool to provide some guidance, or talk to a Go2Specialist.

Related Content

• A Different Way to Approach Your Mortgage in Retirement
• Transform Your Retirement Plan With This Powerful Combo
• Is Your Retirement Solution Hiding in Plain Sight?
• How Your Home Can Fill Gaps in Your Retirement Plan
• Annuities and Tax Planning Boost Retirement Income and More

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 our journey through life, making mistakes is often an invaluable learning experience. We stumble, we fall, and through these missteps, we gain wisdom and resilience. However, when it comes to credit and personal finance, the stakes are significantly higher, and the consequences of mistakes can be more severe and long-lasting.  

Experian research shows three in five adults attribute financial mistakes to their limited understanding of credit and personal finance, with these mistakes costing $1,000 or more for 60% of this group. This trend is particularly apparent among younger groups with over two-thirds of Gen Zers and Millennials claiming their inadequate knowledge of credit and personal finance has come at a price. In fact, 29% of Gen Zers and 38% of Millennials report these financial mistakes have cost $5,000 or more.  

Unlike everyday mishaps, errors in managing your credit can impact your financial stability, limit your opportunities and even affect your future goals. Avoiding financial pitfalls is crucial because, while we can learn from our mistakes, there’s no need to experiment with our financial health, or funds, when there are tools and educational resources available to help prevent costly errors.  

Here are five common credit mistakes people make and practical advice on how to steer clear of them: 

They don’t check their credit report

It’s a common misconception that checking your own credit report can negatively impact your credit score. This is not true. You can and should check your credit report regularly. Doing so is one of the best ways to see where you stand from a credit perspective, detect potentially fraudulent activity and identify ways to strengthen your credit history. You can also get a free weekly credit report from each of the three credit reporting agencies at AnnualCreditReport.com.  

They miss payments

Nothing will sink your credit scores quicker or more significantly than missing payments. In fact, a single missed payment will stay on your credit report for seven years and will impact your credit scores the entire time it’s there.

Setting up autopay can be a helpful tool to ensure bills are paid on time. If you think you may miss a payment, contact your lender before it happens. They may be willing to work with you or set up payment accommodations to help prevent the negative impact on your credit score.  

They carry a balance on their credit card

Many people think they need to carry a balance from month to month to build credit, but this is not true. Credit can be a financial tool; it’s debt that can be a financial problem. While it’s important to show regular activity on your credit cards in order for them to be factored into your credit scores, this does not mean you need to carry a balance. All carrying a balance will do is cost you money in the form of interest you’ll have to pay on the balance.

It’s best to pay off the balances on credit cards in full right away if you can. This is because your utilization rate, or your balance-to-limit ratio, is one of the most important factors in determining your credit score. People with the highest credit scores tend to have utilization rates of less than 10% and more often pay their balances in full each month than those with lower scores.

You never want your balances to exceed 30% of your available credit limit. Keep in mind 30% is not a goal or a target. The closer you are to 30%, the more rapidly your scores will decrease. 

They think their credit history only impacts their ability to secure credit

The truth is, credit is a financial tool that can unlock many of the things we want in life — not just access to credit cards, auto loans or things of that nature. Your credit history can impact your ability to get the latest cellphone, qualify for an apartment, lower your insurance rates, utility deposits and more. It’s important to take care of your credit history, so it’s there to work for you when you need it.  

They don’t use the financial tools available to them

Today, you can get credit for the bills you already pay with tools that allow you to self-report your payments for qualifying rent or other alternative data, such as cellphone, utility, etc., for the opportunity to increase your credit score. 

Mistakes are an often inevitable fact of life, but knowledge truly is power when it comes to financial wellness. By staying informed and proactive, you can avoid these pitfalls and build a strong credit foundation.  

Related Content

• How to Increase Credit Scores — Fast
• 5 Ways a Bad Credit Report Can Hurt You
• Why You Should Keep Your Credit Cards Active

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

As recently as 1974, banks were legally allowed to deny women credit or charge them higher interest if they failed to get a male cosigner. But that year, on Oct. 28, President Gerald Ford signed into law the Fair Credit Opportunity Act, giving women the right to open a credit card in their own name.

The act came after women complained they were denied credit for reasons other than income or credit history, according to The New York Times account of the Senate passage. Married women were denied credit regardless of their income and single women were denied loans or were given smaller amounts than single men with identical financial backgrounds, the newspaper reported.

According to Smithsonian Magazine, until then, “many banks required single, divorced or widowed women to bring a man along with them to cosign for a credit card, and some discounted the wages of women by as much as 50% when calculating their credit card limits.”

Getting equal access to credit

Seeking to end these troubling practices, the law barred financial institutions from discriminating against borrowers based on sex or marital status. 

The act was hugely consequential, enabling women to establish their own financial security and helping free them from circumstances of domestic violence, says Megan McCoy, assistant professor of personal financial planning at Kansas State University.  “Financial abuse is rampant and this act helped curb some of the power that men once held over all women.”

The law was amended two years later to cover discrimination against borrowers based on religion, race, national origin, age and receipt of public assistance benefits. This meant lenders could consider only credit worthiness in loan decisions. 

Lindsey Lewis, executive director and chair of the American College Center for Women in Financial Services, notes that women couldn’t open bank accounts on their own until the 1960s. 

The Fair Credit Opportunity Act “truly gave us the freedom to be in control of our lives and not be controlled by others,” McCoy says. “I can't imagine being a woman today and not being able to buy my own home unless my dad or my brother or my husband said it was OK.”

McCoy says the law empowered women by “allowing us to start our own businesses, buy our own home, and even get student loans to further our education.”

She says the law also required creditors to report credit histories in both spouses' names on shared accounts, safeguarding women’s credit rights in cases of divorce or widowhood.

The passage of the law, she adds, “enabled greater participation of women in the economy, contributing to social and economic progress and fostering a more inclusive and equitable society.”

Waiting until 1988 for business protections

Yet, the act related only to personal lines of credit. Until the Women’s Business Ownership Act was signed by President Ronald Reagan in 1988, women in some states were still required to have male relative cosigners when they opened business lines of credit. 

Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.

Read More

• Estate Planning for Women: Married, Single or Divorced
• Pink Tax: What Does Price Discrimination Cost Women?
• The Average Social Security Check by Age and Gender

Editor’s note: This is the third article in a six-part series focused on paying for education using smart financial and estate planning. Other articles focus on direct tuition payments, 529 plans, Uniform Transfer to Minor Accounts (UTMAs), education trusts and family loans. See below for links to the other articles.

It’s never too soon to start planning for the education expenses of a child, grandchild or someone you wish to support. With the cost of schooling on the rise — affecting everything from independent day schools to higher education — the need for strategic financial planning is more crucial than ever.

Fortunately, smart financial planning and estate planning can help manage these costs effectively.

If you are planning ahead and weighing your options, you may want to consider opening a Coverdell education savings account. This tax-advantaged savings account, often compared to a 529 plan, offers greater flexibility in setup. Unlike a 529 plan, which is managed by the state where it’s based, a Coverdell can be established through banks, brokerage firms or mutual fund companies. Depending on the financial institution, you may find a greater variety of investment options than with a state-sponsored 529 plan.

Similar to a 529 plan, you contribute after-tax dollars to a Coverdell and invest inside the account, allowing the earnings on your investments to grow tax-free. Assets in a Coverdell are not included in the estate of the person who set it up. Withdrawals for qualified educational expenses (QEEs) are also tax-free. A significant advantage of a Coverdell over a 529 plan is that it can be used for unlimited expenses related to preschool, K-12 education or higher education, including fees, books, technology, certain room and board expenses and even academic tutoring. As is the case with a 529, any amount withdrawn for a non-QEE will be subject to income tax and a 10% penalty tax.

Contributing to a Coverdell

Compared to a 529 plan, there are significant limitations related to Coverdell contributions. The annual contribution per beneficiary is capped at $2,000 a year, regardless of who makes the contribution. Because each student is allowed to be the named beneficiary of multiple accounts, recordkeeping and communication become especially important. For example, if parents and grandparents both contribute $2,000 to different accounts for the same beneficiary in the same year, a penalty may be imposed on the beneficiary.

Additionally, there is an income limitation on those who can contribute to a Coverdell account. To qualify for the maximum contribution of $2,000, your annual modified adjusted gross income cannot exceed $95,000 for single filers or $190,000 for joint filers. This places a natural cap on who is eligible to open a Coverdell, whereas there is no income limit for a 529 plan.

Generally, the treatment of a Coverdell for financial aid is the same as it is for a 529 plan, meaning that if it is owned by the student or parent, it typically would be included as an asset on a student’s FAFSA (Free Application for Federal Student Aid) and thus may reduce the amount of aid given. However, a plan not owned by the parent or student may be treated differently.

Finally, you can contribute to a Coverdell account only for beneficiaries who are under the age of 18. When the beneficiary reaches the age of majority, typically 18 or 21, depending on the state, the beneficiary gains control over the account, and the Coverdell owner no longer has control over how the funds are used.

A Coverdell must be fully withdrawn by the time the beneficiary turns 30, providing a somewhat limited runway for use of the account. This could prove tricky for a student who defers graduate school or wishes to continue their education well into adulthood.

Rolling over a Coverdell account

To mitigate the limitations of a Coverdell, you can consider completing a rollover. One option is to roll over an existing Coverdell account into a different Coverdell account for another qualifying member of the family. For instance, if one child is turning 30, you can roll over the older child’s account into a Coverdell for a younger sibling who is still completing their education.

Alternatively, you may consider rolling a Coverdell into a 529 plan. Distributions from a Coverdell into a 529 plan are considered a qualified expense as long as both accounts have the same beneficiary. This may make sense if the beneficiary is approaching age 30 and is likely to use the funds at a later point in life. This option may also make sense if you are moving into a higher income tax bracket that will preclude you from making further Coverdell contributions, or if you (in conjunction with other family members) wish to contribute more than $2,000 to the beneficiary each year.

Once you have completed the rollover to a 529 plan, you have more flexibility to change the beneficiary to another family member without age limitations.

Benefits of a Coverdell:

• Tax-free asset growth within the account
• Greater flexibility related to qualified education expenses, especially for pre-college education
• May be rolled over into a 529 plan or to another qualifying family member
• Potentially more investment options through the sponsoring bank’s platform

Considerations to keep in mind:

• $2,000 annual contribution limits
• Income limitation for donors ($95,000 for single filers or $190,000 for joint filers)
• The beneficiary gains control of the Coverdell at the age of majority (18 or 21)
• Contributions are subject to federal gift tax laws and limitations
• Contributions will be treated as gifts for federal gift tax purposes (but should not trigger the payment of gift taxes by the donor unless the total that the beneficiary received from the donor including gifts outside of the Coverdell account exceeds $18,000 in the year of contribution)
• May reduce financial aid (student- or parent-owned Coverdells are included in FAFSA calculation)
  

Planning for education expenses requires thoughtful consideration and early action. Evaluating the benefits of a Coverdell alongside your other options can help you discover the most effective savings strategy for your family. With its flexibility to cover a wide range of educational costs and tax-free growth, a Coverdell offers notable advantages despite its contribution limits and income restrictions. Its suitability for pre-college expenses and the possibility of rolling over funds into a 529 plan enhance its appeal. By assessing these factors, you can craft a savings plan that aligns with your goals and secures a strong financial future for your child's education.

My next article will explore the educational savings benefits of Uniform Transfer to Minor Accounts (UTMAs).

Other Articles in This Series

• Part one: Direct Tuition Payments: A Tax-Efficient Way to Pay for School
• Part two: 529 Plans: A Powerful Way to Tackle Rising Education Costs
• Part four: UTMA: A Flexible Alternative for Education Expenses and More
• Part five: How an Irrevocable Trust Could Pay for Education
• Part six: How Intrafamily Loans Can Bridge the Education Funding Gap

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.

Deciding whether to refinance your mortgage can be a lot like playing golf. When the conditions are right and you’ve studied the course, you have a better chance at hitting a hole in one. With the Federal Reserve cutting rates for the third time at its December meeting, homeowners with higher-rate loans may finally have an opening to score some savings.

Refinancing can help you lower your monthly payment and reshape your loan to fit your current goals, whether that means switching from an adjustable-rate to a fixed-rate mortgage for more stability or shortening your term to pay off your home faster.

Before you rush to refinance, take a closer look at the full picture. Even if today’s lower rates make refinancing sound appealing, it isn’t free. Closing costs, fees and the time it takes to break even all play a role in determining whether a refinance saves you money. Understanding these expenses, and how they fit into your long-term plans, is key to deciding if refinancing is the right move for you.

The cost of refinancing your mortgage

When you refinance your mortgage, you’re getting a brand-new mortgage with a lower interest rate, possibly a different loan term and potentially from a different lender. This new mortgage pays off your original loan.

Refinance closing costs are fees and expenses related to replacing your existing mortgage balance with a new one. They typically include many of the same fees you paid when you first closed on your home loan.

National average closing costs for a single-family home refinance were $6,800 without taxes or recording fees, according to ClosingCorp (now part of Core Logic.) The fees typically add up to between 2% and 5% of the loan amount.

Here are eight types of closing costs you can expect when you refinance your mortgage:

• Application fee: $75 – $300
• Origination and/or underwriting: 1% – 1.5% of loan principal
• Attorney/settlement fee: $400 – $1,000
• Recording fee: $25 – $250 depending on location
• Appraisal fee: $300 – $500 depending on location
• Credit check fee: $35 – $75
• Title services: $300 – $2,500
• Survey fee: $150 – $400

You might be able to reduce your refinance closing costs by increasing your credit score, reducing your overall debt load and shopping around for the best lender. If you work with the same title insurance company you can ask for a discounted reissue rate.

Use the tool below to compare some of today's top mortgage refinance offers, powered by Bankrate:

Impact of refinancing for a lower rate

Whether or not it makes sense to refinance your mortgage is primarily based on whether the upfront costs of refinancing and the time period you intend to occupy the home work together to lower your monthly costs and make refinancing cost-effective. It’s usually worth it to refinance if you could lower your current rate by one percent.

This is calculated by adding up all refinancing closing costs and figuring out how many years it will take you to make up those costs with the savings from your new mortgage payment compared to your previous one. Refinancing makes more sense if you plan to stay in your home longer than the break-even point. Otherwise, you could potentially lose money.

You can calculate your own potential savings by using Kiplinger's Mortgage Refinance Calculator and determine which rate will help you get to your break-even number.

Let's take a look at two examples of the impact of lower rates on monthly payments. Our scenarios include a loan balance of $400,000, a mortgage rate of 6.5% and refinancing costs of 2%.

As the table below demonstrates, a mortgage rate decrease of 1% versus 0.5% results in widely different break-even times, thanks to number crunching assistance from The Mortgage Report.

Refinancing for a 0.25% lower rate is not generally recommended but could be worth it if you can refinance to consolidate high-interest debts, have a jumbo loan with significantly higher interest rates or are switching from an adjustable-rate mortgage to a fixed-rate mortgage.

Refinancing options before the break-even point

Remember that “breaking even” with your closing costs isn’t the only way to determine if a refinance is worth it. A homeowner who plans to move or refinance again before the break-even point might opt for either a no-closing-cost refinance or rolling closing costs into the refinance loan.

No-closing-cost refinancing typically means the mortgage lender covers part or all of your closing costs, and you pay a slightly higher interest rate in exchange. If you’re still saving enough when compared to your existing mortgage loan, this strategy can still pay off. This can be a beneficial situation for borrowers who plan to keep their new loan for only a few years.

You can also roll the closing costs into the refinance loan. If you're cash poor and going to keep the loan for more than a few years, rolling closing costs into the loan amount may be more affordable than a no-closing-cost loan with a higher interest rate.

Making the decision to refinance

When deciding to refinance, look closely at all of the numbers and how they impact your monthly costs. You also need to consider costs over the life of the loan or the time period you intend to live in the home if you plan on selling in the near term. Because if your new interest rate isn’t low enough, you might actually pay more interest in the long run because you pay it for a longer time.

Evaluating the impact of your credit score on how much your new loan will cost can also help you determine the right time to refinance. When you can’t qualify for an interest rate that’s lower than your current loan’s rate, consider improving your credit score before applying.

Relayed Content

• Mortgage Calculator: Find Your Monthly Payment
• What Home Equity Is and Why It's a Valuable Long-Term Investment
• How Does the 10-Year Treasury Yield Affect Mortgage Rates?
• How the Federal Reserve Affects Mortgage Rates and What It Means for Homebuyers in 2025

As the 2024 presidential election nears, the fate of student loan forgiveness is at the forefront of many borrowers' minds, particularly as Vice President Harris and former President Trump have such wildly differing viewpoints. In the first half of this year, federal student loan debt increased by $17.9 billion, bringing total student loan debt in the United States to over $1.75 trillion.

Approximately 43 million Americans have student loan debt as of 2023, with borrowers owing $37,853 on average in federal student loans, according to the Education Data Initiative. And college is only getting more expensive. Between 2000 and 2021, average tuition and fees jumped by 65%, to $14,307 per year from $8,661, according to BestColleges.com. Not to mention the impact of rising interest rates on student loans — 6.53% for the 2024–2025 academic year, the highest rate since 2007–2008.

Student loan forgiveness has become an increasingly hot topic over the last several years as legal battles over debt relief initiatives leave millions of borrowers in limbo. 

In 2023, Biden’s plan for widespread student loan forgiveness, which would forgive up to $10,000 of student loan debt for eligible borrowers, was struck down by the Supreme Court. In August 2024, the court temporarily blocked the administration’s Saving on a Valuable Education (SAVE) repayment plan.

In September, U.S. District Judge James Randal Hall issued an order blocking the Biden administration’s latest student loan forgiveness plan, which would have provided debt relief to over 30 million Americans. And just one day after Hall decided to let the restraining order expire, Biden's forgiveness plan was temporarily blocked again by a Missouri judge. 

One study from Bankrate found that nearly 1 in 5 Americans say student loan debt will have a major influence on their vote in the 2024 presidential election. Considering each candidate has very different ideas on how student loans should be handled, many borrowers are anxious to learn how the election will impact them.

Here’s a closer look at each candidate’s plans regarding student loan debt.

Harris on student loans

The Biden-Harris Administration has implemented several aid programs that have contributed to total debt relief, despite strong opposition. And if Kamala Harris becomes president, she will build on these policies, working to provide widespread student debt relief for millions of borrowers by expanding programs like income-driven repayment plans and Public Service Loan Forgiveness.

“We see a future where every student has the support and the resources they need to thrive,” Harris stated in a speech made in July. “And a future where no teacher has to struggle with the burden of student loan debt.” She noted that the Biden-Harris administration has forgiven student loan debt for nearly five million Americans. Nearly $160 billion in federal student loan debt has been forgiven since Biden took office, according to the U.S. Department of Education.

The administration's efforts have been focused on targeting areas for forgiveness for borrowers who are most in need, Stacey MacPhetres, senior director of education finance for EdAssist by Bright Horizons told Kiplinger. Borrowers most in need have included those facing financial hardship, holding balances greater than the initial amount borrowed due to accrued interest, those who are eligible for forgiveness but have not yet applied, those who have been in repayment for 20 years and borrowers who attended institutions that show low financial value. 

Here’s a closer look at various loan forgiveness programs Harris will likely continue expanding if she takes office.

• Borrower Defense loan discharge: If your college misrepresented details that led you to enroll there, you may have grounds to apply for borrower defense loan discharge. The administration says this has led to the discharge of over $28 billion in debt for 1.6 million borrowers.  
• Income-Driven Repayment plans: These plans base your monthly student loan payment amount on your income and family size. There are four plans:
  • Pay As You Earn (PAYE) 
  • Income-Based Repayment (IBR) 
  • Income-Contingent Repayment (ICR) 
  • Saving on a Valuable Education (SAVE) 
• Public Service Loan Forgiveness (PSLF): This program forgives federal student loans of borrowers employed by the government or certain non-profit organizations after ten years of on-time payments or 120 qualifying monthly payments. These efforts have reportedly led to the forgiveness of over $62 billion in student loan debt.
• Total and Permanent Disability (TPD) discharge: More than half a million borrowers with disabilities have received over $14 billion in relief through the Total and Permanent Disability Discharge program, according to the White House. 

"The Harris campaign would be trying to extend the same types of programs and maybe repackage those in a way that they can get those through either Congress or get them through the court system without being struck down," said Shane Cummings, wealth advisor & director of technology/cybersecurity at Halbert Hargrove.

Trump on student loans

Trump stands firmly in opposition to student loan forgiveness. If he becomes president, his efforts will likely be focused towards getting student loan forgiveness programs enacted by the Biden administration repealed or restricted.

During Trump's presidency, he proposed significant cuts to student aid programs and called for eliminating Public Service Loan Forgiveness (PSLF), Federal Supplemental Educational Opportunity Grant (FSEOG) programs and subsidized federal student loans.

And while Trump has made no statements regarding his specific plans to revoke student loan forgiveness initiatives if elected president, he is very vocal about how he views these initiatives. He has referred to Biden’s plans to cancel student loan debt as "not legal" and “vile.”

"He got rebuked, and then he did it again,” Trump stated at one of his rallies back in June, referring to the Biden administration's 2023 attempt at widespread student loan forgiveness that the Supreme Court shut down. “It’s going to get rebuked again even more so.”

In the September 10th presidential debate with Kamala Harris, Trump stated, as per Politico: "They didn't even come close to getting student loans. They taunted young people and a lot of other people that had loans, they can never get this approved.”

Kimberly Weihbrecht, CSLP®, Senior Associate at Fearless Finance tells Kiplinger that although the Trump administration would likely try to repeal programs like SAVE, PSLF and income-driven repayment, "big rollbacks like this would be difficult to do via regulations for the same reason SAVE is struggling now. Regulation-based programs are more likely to get contested in court and potentially struck down."

Ultimately, whether or not loan relief programs are actually repealed during a Trump presidency could heavily depend on whether or not there is a Republican majority in Congress. A set of conservative policy proposals developed by The Heritage Foundation, called Project 2025, calls for significant changes to how student loans are managed, including the phasing out of existing income-driven repayment (IDR) plans. And while Trump has tried to distance himself from the project, according to Reuters, many of his closest policy advisers and those likely to take high-ranking positions in his administration are heavily involved in the project.

Bottom line

Ultimately, it's still too early to determine exactly how the election will impact student loans. And because of the uncertainty of whether or not loans will be forgiven, it's difficult for many borrowers to make long-term plans concerning their debt, according to Cummings. This is why he advises borrowers to focus on repayment and plan conservatively.

For borrowers who are struggling to meet loan obligations, MacPhetres urges them to communicate with their loan services to review any repayment options or hardship opportunities available.

Related Content

• A Look at Kamala Harris's Tax Plans Ahead of the Election
• Kamala Harris Calls for 28% Capital Gains Tax, Diverging from Biden's Higher Rate
• Should Paying Off Student Loans Be a Priority? What to Consider