Here's the latest personal finance news, how it may impact your financial plan and what you can do to maintain your financial well-being.
New SAVE Income-Driven Repayment Plan Set to Expand
Last year, the Biden administration introduced the Saving on a Valuable Education (SAVE) income-driven repayment (IDR) plan. Among other things, the new plan offers significantly lower monthly payments compared to other IDR plans and also prevents unpaid interest from increasing loan balances.
In July, the U.S. Department of Education will expand key points of the plan to provide more relief to eligible student loan borrowers:
- Reduced payments: Payments on undergraduate loans will be reduced from 10% of discretionary income to 5%. For borrowers with a mix of undergraduate and graduate debt, their payment will be a weighted average between 5% and 10% based on original loan balances.
- Accelerated forgiveness: Borrowers with $12,000 or less in original debt can qualify for forgiveness in as little as 10 years, compared to 20 or 25 years on other IDR plans.
- Consolidation won't reset the clock: Borrowers who consolidate student loans before September 2024 will maintain their progress toward forgiveness.
- Forgiveness credits from forbearance and deferment: Borrowers who deferred student loan payments prior to July 1, 2024, will receive payment credits toward forgiveness. The same is true for borrowers who enter forbearance on or after July 1, 2024.
Why It Matters
The new SAVE plan is expected to reduce monthly payments for millions of student loan borrowers. As of February 2024, 7.5 million borrowers were enrolled in the SAVE plan, 4.3 million of whom qualify for a $0 payment.
If you're experiencing financial difficulties as a result of your federal student loan payments, the SAVE plan could help you maximize your savings.
What You Can Do
- Learn more about how the SAVE plan works.
- Compare the SAVE plan to other IDR plans.
- Read up on how to determine the best student loan repayment plan for you.
- Get details on other student loan forgiveness programs.
Home Prices Have Reached a New Record High
The median home price in the U.S. increased to $419,300 in May, according to the National Association of Realtors (NAR). It's the highest median price ever recorded and marks an annual increase of 5.8%. It's also the 11th consecutive month of annual price increases, according to the association.
Home prices are increasing in spite of persistently high mortgage interest rates, which remain in 7% territory, according to Mortgage News Daily. Experts blame low inventory, which is improving but still well below pre-pandemic levels.
Why It Matters
Between record-high prices and stubborn interest rates, many first-time homebuyers are being priced out of the market. According to NAR's chief economist, the mortgage payment for a typical home purchased today is more than double that of homes purchased just four years ago.
High prices and interest rates are also forcing many prospective sellers to stay put rather than put their homes on the market, primarily out of fear that they won't be able to find a suitable replacement.
What You Can Do
- Determine how much money you need to buy a home.
- Evaluate ways to deal with high mortgage rates.
- Take steps to avoid becoming house-poor.
- Consider waiting to buy a house.
Federal Reserve Pulling Back on Its 2024 Rate Cut Forecast
Through March, the Federal Reserve anticipated cutting interest rates three times in 2024. However, a year after the Federal Open Market Committee (FOMC) raised its federal funds rate to its highest level in more than two decades, its members have penciled in just one rate cut for the year.
According to the CME FedWatch Tool, which tracks interest rate futures, the odds of an interest rate cut coming in September are 61.1%, compared to 10.3% in July.
Why It Matters
The FOMC's federal funds rate has a direct impact on interest rates for several consumer loans, including personal loans, auto loans and credit cards.
Both inflation and high interest rates have put significant pressure on household budgets over the past few years, and with the inflation rate resisting downward pressure so far in 2024, it's tough to predict when Americans will get some relief.
What You Can Do
- Learn more about the federal funds rate.
- Look for the next inflation report on July 11.
- Read up on ways you can fight inflation.
- Look for ways to reduce your risks when borrowing money.
The Unemployment Rate Hits 4% for the First Time in 2 Years
After hitting a 54-year low of 3.4% last year, the unemployment rate has breached the 4% mark in May for the first time since January 2022, according to the Bureau of Labor Statistics. During the same month, the federal agency also clocked 272,000 new jobs for the month, the second-highest monthly total for 2024.
Why It Matters
The unemployment rate is one indicator of a potential recession, but experts say there's nothing to be worried about. Not only is a 4% unemployment rate still historically low, but it's coupled with growing job numbers.
Also, while layoffs plagued employees at major companies earlier this year, the trend hasn't caught on in the broader job market.
That said, if you've lost your job recently, you may still face significant financial challenges, including difficulty finding a new job.
What You Can Do
- Read up on what to do if you've lost your job.
- Learn more about managing payments while unemployed.
- Take steps to protect your credit during unemployment.
- Find out how to file for unemployment.
Good Credit Can Contribute to a Healthy Financial Plan
While there are aspects of your financial situation that are outside of your control, building and maintaining a good credit score can help you weather challenges and save money in the long run.
With Experian's free credit monitoring service, you'll get access to your FICO® Score☉ and your Experian credit report. With this information in hand, you can gauge your credit health and target areas of your credit profile that you can improve over time. And with real-time alerts whenever your report is updated, you can spot potential issues and fraud and address them quickly.