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The Federal Reserve raised interest rates for the seventh time this year to cool inflation.
The rates you get for a mortgage, credit card, car loan, student debt and savings could be affected.
Here are your best money moves heading into 2023.

The Federal Reserve raised its target federal funds rate by 0.5 percentage points at the end of its two-day meeting Wednesday in a continued effort to cool inflation.
Although this marks a more typical hike compared to the super-size 0.75 percentage point moves at each of the last four meetings, the central bank is far from finished, according to Greg McBride, chief financial analyst at Bankrate.com.

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“The months ahead will see the Fed raising interest rates at a more customary pace,” McBride said.
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The latest move is only one part of a rate-hiking cycle, which aims to bring down inflation without tipping the economy into a recession, as some feared would have happened already.
“I thought we would be in the midst of a recession at this point, and we’re not,” said Laura Veldkamp, a professor of finance and economics at Columbia University Business School.
“Every single time since World War II the Federal Reserve has acted to reduce inflation, unemployment has shot up, and we are not seeing that this time, and that’s what stands out,” she said. “I couldn’t really imagine a better scenario.”

Still, the combination of higher rates and inflation has hit household budgets particularly hard.

What the federal funds rate means for you

The federal funds rate, which is set by the central bank, is the interest rate at which banks borrow and lend to one another overnight. Whether directly or indirectly, higher Fed rates influence borrowing costs for consumers and, to a lesser extent, the rates they earn on savings accounts.
For now, this leaves many Americans in a bind as inflation and higher prices cause more people to lean on credit just when interest rates rise at the fastest pace in decades.
With more economic uncertainty ahead, consumers should be taking specific steps to stabilize their finances — including paying down debt, especially costly credit card and other variable rate debt, and increasing savings, McBride advised.

Pay down high-rate debt

Since most credit cards have a variable interest rate, there’s a direct connection to the Fed’s benchmark, so short-term borrowing rates are already heading higher.
Credit card annual percentage rates are now over 19%, on average, up from 16.3% at the beginning of the year, according to Bankrate.

The cost of existing credit card debt has already increased by at least $22.9 billion due to the Fed’s rate hikes, and it will rise by an additional $3.2 billion with this latest increase, according to a recent analysis by WalletHub.

If you’re carrying a balance, “grab one of the zero-percent or low-rate balance transfer offers,” McBride advised. Cards offering 15, 18 and even 21 months with no interest on transferred balances are still widely available, he said.
“This gives you a tailwind to get the debt paid off and shields you from the effect of additional rate hikes still to come.”
Otherwise, try consolidating and paying off high-interest credit cards with a lower interest home equity loan or personal loan.
Consumers with an adjustable-rate mortgage or home equity lines of credit may also want to switch to a fixed rate. 

Because longer-term 15-year and 30-year mortgage rates are fixed and tied to Treasury yields and the broader economy, those homeowners won’t be immediately impacted by a rate hike.
However, the average interest rate for a 30-year fixed-rate mortgage is around 6.33% this week — up more than 3 full percentage points from 3.11% a year ago.
“These relatively high rates, combined with persistently high home prices, mean that buying a home is still a challenge for many,” said Jacob Channel, senior economic analyst at LendingTree.

The increase in mortgage rates since the start of 2022 has the same impact on affordability as a 32% increase in home prices, according to McBride’s analysis. “If you had been approved for a $300,000 mortgage in the beginning of the year, that’s the equivalent of less than $204,500 today.”

Anyone planning to finance a new car will also shell out more in the months ahead. Even though auto loans are fixed, payments are similarly getting bigger because interest rates are rising.
The average monthly payment jumped above $700 in November compared to $657 earlier in the year, despite the average amount financed and average loan term lengths staying more or less the same, according to data from Edmunds.
“Just as the industry is starting to see inventory levels get to a better place so that shoppers can actually find the vehicles they’re looking for, interest rates have risen to the point where more consumers are facing monthly payments that they likely cannot afford,” said Ivan Drury, Edmunds’ director of insights. 
Federal student loan rates are also fixed, so most borrowers won’t be impacted immediately by a rate hike. However, if you have a private loan, those loans may be fixed or have a variable rate tied to the Libor, prime or T-bill rates — which means that as the Fed raises rates, borrowers will likely pay more in interest, although how much more will vary by the benchmark.
That makes this a particularly good time to identify the loans you have outstanding and see if refinancing makes sense.

Shop for higher savings rates

While the Fed has no direct influence on deposit rates, they tend to be correlated to changes in the target federal funds rate, and the savings account rates at some of the largest retail banks, which were near rock bottom during most of the Covid pandemic, are currently up to 0.24%, on average.
Thanks, in part, to lower overhead expenses, the average online savings account rate is closer to 4%, much higher than the average rate from a traditional, brick-and-mortar bank.
“The good news is savers are seeing the best returns in 14 years, if they are shopping around,” McBride said.
Top-yielding certificates of deposit, which pay between 4% and 5%, are even better than a high-yield savings account.
And yet, because the inflation rate is now higher than all of these rates, any money in savings loses purchasing power over time. 

What’s coming next for interest rates

Consumers should prepare for even higher interest rates in the coming months.
Even though the Fed has already raised rates seven times this year, more hikes are on the horizon as the central bank slowly reins in inflation.
Recent data show that these moves are starting to take affect, including a better-than-expected consumer prices report for November. However, inflation remains well above the Fed’s 2% target.
“They will still be raising interest rates now and into 2023,” McBride said. “The ultimate stopping point is unknown, as is how long rates will stay at that eventual destination.”
Subscribe to CNBC on YouTube.
Correction: A previous version of this story misstated the extent of previous rate hikes.

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While open enrollment for marketplace coverage runs through Jan. 15, you need to sign up by Dec. 15 if you want a plan effective Jan. 1.
Otherwise, your coverage would take effect Feb. 1.
Most enrollees get federal subsidies that reduce the cost of monthly premiums.

If you don’t have health insurance lined up for next year, there’s still time to get private coverage through the public marketplace.
The deadline is Dec. 15 — Thursday — to sign up on Healthcare.gov for a health plan to take effect Jan. 1. Otherwise, you have until Jan. 15 to enroll with coverage effective Feb. 1.

“For people who need coverage Jan. 1, don’t wait until the last minute because it can take time to do the [application],” said Cynthia Cox, director for the Kaiser Family Foundation’s Affordable Care Act program. “They should start today.”
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Generally speaking, people who get insurance through the federal marketplace or their state’s exchange are self-employed or don’t have access to workplace insurance, or they don’t qualify for Medicare or Medicaid.
Most marketplace enrollees — 13 million of 14.5 million — qualify for federal subsidies (technically tax credits) to help pay premiums. Four out of five customers will be able to find plans for $10 or less per month after tax credits, according to the Centers for Medicare & Medicaid Services.
Some people may also be eligible for help with cost-sharing, such as deductibles and copays on certain plans, depending on their income.

There’s no income cap to qualify for subsidies

For now, the subsidies are more generous than they once were. Temporarily expanded subsidies that were put in place for 2021 and 2022 were extended through 2025 in the Inflation Reduction Act, which became law in August.
This means there is no income cap to qualify for subsidies, and the amount anyone pays for premiums is limited to 8.5% of their income as calculated by the exchange. Before the changes, the aid was generally only available to households with income from 100% to 400% of the federal poverty level.
The marketplace subsidies that you’re eligible for are based on factors that include income, age and the second-lowest-cost “silver” plan in your geographic area (which may or may not be the plan you enroll in).

Giving a good income estimate is important

For the income part of the determination, you’ll need to estimate it for 2023 during the sign-up process.
Giving a good estimate matters.
If you end up having annual income that’s higher than what you reported when you enrolled, it could mean you’re not entitled to as much aid as you’re receiving. And any overage would need to be accounted for at tax time in 2024 — which would reduce your refund or increase the amount of tax you owe.
“You don’t want a nasty surprise when you do your taxes the next year,” Cox said.

Likewise, if you are entitled to more than you received, the difference would either increase your refund or lower the amount of tax you owe.
Either way, at any point during the year, you can adjust your income estimate or note any pertinent life changes (birth of a child, marriage, etc.) that could affect the amount of subsidies you’re entitled to.

Falling behind on premiums can mean getting dropped

Be aware that if you don’t pay your premiums (or your share of them), you face coverage being canceled and claims going unpaid.
For enrollees who get subsidies, coverage is generally dropped after three months if premiums are not caught up. For those who pay the full premiums because they don’t qualify for subsidies, there’s only a grace period of about a month before cancellation, depending on the state. 
If you end up without insurance, you can’t re-enroll through the marketplace unless you qualify for a special enrollment period. This could include life changes such as marriage or birth of a child.

The ‘family glitch’ solution may not be right for everyone

Also, the so-called “family glitch” is generally fixed, starting in 2023.
Basically, workers who don’t get employer-sponsored health insurance that’s considered “affordable” — no more than 9.61% of income this year — are permitted to sign up for a plan through the marketplace. However, the measurement of affordability is based on the cost of employee-only coverage.
That’s been the case even if a worker wanted their dependents covered too — meaning the actual cost of family coverage could far exceed that threshold. Thus, the “family glitch.”

As of 2023, here’s how it will work: If the workplace coverage for a family would be unaffordable, the employee would need to stay on the employer plan, while the spouse and kids would be covered by the marketplace — and eligible for subsidies, Cox said.
“That means families would be split between two or more health plans, which would mean having multiple premiums and deductibles,” she said. “Not all the people in the family glitch will actually be better off moving onto subsidized coverage.”

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The latest reading of the consumer price index showed that used cars are one of the few categories with prices that have fallen from a year earlier.
However, the large runup in prices before that means consumers are still paying 33% more for used cars than they would if normal depreciation had occurred, according to car-shopping app CoPilot.
Electric vehicle prices, which jumped earlier in the year when gas prices were climbing, are now down 20% from their peak in July.

Westend61 | Westend61 | Getty Images

In the latest inflation reading, used cars are one of the few categories with prices that are lower than they were a year ago.
While the consumer price index — which measures price changes for a variety of consumer goods and services — was up 7.1% in November from a year earlier, used cars and truck prices posted an annual 3.3% decline. That compares to some categories that have kept climbing far above year-ago prices, such as eggs (49.1%) and airfare (36%). New car prices are 7.2% higher.

Despite sliding prices for used vehicles, they remain 33% higher than where they’d be if normal depreciation were occurring, said Pat Ryan, founder and CEO of CoPilot, a car-shopping app.
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“It’s important to remember that prices are still grossly inflated compared to all normal market conditions,” Ryan said.
“In the new year, we can expect more substantial and accelerated price drops across the board, as vehicle inventory continues to replenish,” said Ryan, adding that dealers also are responding to consumers’ growing resistance to paying record-high car prices.
Demand in the used car market skyrocketed during the pandemic as supply-chain issues hampered automakers’ ability to produce new vehicles. However, the situation is easing slowly with modest improvements in inventory on dealer lots as rising interest rates put pressure on affordability.

Price drops vary among car types and age

While used-car prices are easing from their highs, the decreases depend at least partly on their age and the type of vehicle.
Used electric vehicles have seen the largest drop: The average price of $54,314 in early December is down 20% from a record high of $75,324 in July, according to CoPilot data.
For used hybrids, the average price of $43,574 is a 12% drop from the peak of $49,809 in July. For both segments, whose demand rose earlier in the year when gas prices were headed higher, an easing in gas prices also coincided with a decrease in demand for EVs and hybrids.

Among body types, SUVs and minivans have seen the largest drop this year. List prices for used SUVs average $41,468, down 7% from a peak of $44,824 in March. Used minivans are averaging $24,992, down 8% from $27,257 in March.
By age, 1- to 3-year-old cars come with an average price of $38,987, down 8% from a peak of $42,375 in July.
Among those 4 to 7 years old, the average price is $27,137, a 13% drop from the peak of $31,265 in January. And in the 8-to-13-year-old bracket, the average price of $16,601 is also down 13% from a high of $19,215 in April.

While prices are expected to continue sliding next year, some buyers may not want to wait.
“If you can pay cash now and avoid skyrocketing interest rates [on loans], this month is the best time to buy in over a year,” Ryan said. “With prices finally down year-over-year … and dealers eager to hit year-end sales targets, it could be a good time to negotiate.”
For most buyers, however, “our advice is to wait for the used-car market to finally return closer to normal levels in 2023,” Ryan said.

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If you’re living together before marriage or committed long-term without plans to tie the knot, you’ll need to prepare for the future, experts say.
Michelle Petrowski, a certified financial planner at the Phoenix-based financial firm Being in Abundance, covers three unexpected pitfalls.

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SEATTLE — If you’re living together before marriage or committed long-term without plans to tie the knot, you’ll need to prepare for the future — or you may face challenges later, experts say.
There are “rising rates of cohabitation,” with many couples skipping marriage because “they don’t see the benefit,” said Michelle Petrowski, a certified financial planner at the Phoenix-based financial firm Being in Abundance.

Financially speaking, “it can be a blessing and a curse,” she said, speaking at the Financial Planning Association’s annual conference on Monday.
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Over the past two decades, American couples have increasingly moved in together before marriage, according to data from the Pew Research Center.
The percentage of married U.S. adults declined from nearly 60% in the 1990s to less than half in 2019, research shows. During the same period, the share of U.S. adults ages 18 to 44 cohabitating with a partner increased to 59%.
While some couples opt out of marriage for financial reasons, they may not understand the pitfalls, Petrowski said. “We always think an emergency will never happen.”

Here are some unexpected financial issues unmarried couples need to consider.

1. You can’t claim Social Security benefits based on your partner’s work history

If you’re married for at least 10 years, you may be entitled to collect Social Security benefits based on your spouse or ex-spouse’s work history, including spousal or death benefits. 
However, unmarried partners don’t have access to these payments together or after a breakup, even if they’ve been together for more than 10 years.
Petrowski said that Social Security benefit claiming strategy can be valuable for spouses who leave the workforce for years to care for children.

2. Inherited individual retirement accounts may trigger ‘unintended consequences’

Inheriting an individual retirement account also becomes more complicated for unmarried couples, Petrowski said. 
Thanks to the Secure Act of 2019, certain heirs, including non-spouse beneficiaries, must deplete inherited retirement accounts within 10 years, known as the “10-year-rule.” Previously, non-spouse beneficiaries could stretch distributions over their lifetimes.
“That could have unintended consequences,” Petrowski said, as higher income during the 10-year period may affect college financial aid, Social Security taxes or higher Medicare premiums.

3. Your partner may be ‘left with nothing’ if you die

Whether you keep assets separate or purchase property together, unmarried partners need guidance on proper titling and legal documents to protect both parties, Petrowski said.
For example, you’ll need to consider what happens if you pass away while your partner is living in your home, she said.
“If you die without a will and you don’t plan, that person’s whole life is blown apart,” Petrowski said,
The property typically passes via state intestacy laws to your biological or legal heirs.
You may opt for a cohabitation agreement, which is like a pre-nuptial agreement for unmarried couples, or a will to cover what happens to property if one partner dies. You’ll need to speak with a local estate planning attorney since the exact laws vary by state, Petrowski said.
“Your partner may be left with nothing,” she said, so it’s critical to plan for worst-case scenarios in advance.

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The November 2022 consumer price index was cooler than expected, a sign inflation is moderating from its highest level in decades.
Consumer prices jumped 7.1% in November from a year ago, down from October’s reading and less than the 7.3% expected.
The Federal Reserve is raising interest rates to cool demand in the U.S. economy and tame inflation.

Shoppers in Troy, Michigan, on Nov. 25, 2022.
Matthew Hatcher/Bloomberg via Getty Images

Inflation was lower than expected in November amid a broad-based slowdown in consumer prices that have been rising at their fastest rate in decades.
The consumer price index, a key inflation barometer, jumped by 7.1% in November from a year earlier, the U.S. Bureau of Labor Statistics said Tuesday. Economists expected a 7.3% annual increase.

The CPI reading for November was the smallest 12-month increase since December 2021, and down from 7.7% in October.
“Across the board, we saw a moderation of inflation,” said Mark Zandi, chief economist at Moody’s Analytics. “That’s what’s most encouraging. It’s not one or two special factors.”

Economists are closely watching one number

A decline in the annual inflation rate doesn’t mean prices fell for goods and services; it just means prices aren’t rising as quickly.
Monthly changes in inflation generally provide a more accurate gauge of near-term trends (i.e., if inflation is speeding up or slowing down) than the annual rate.
That’s especially true of “core inflation,” which strips out price trends in food and energy, like gasoline, heating oil and electricity.
While many Americans feel those price changes acutely — given food and energy are household staples — they’re volatile categories more beholden to the whims of global economic forces and which largely can’t be controlled by U.S. policymakers. Take the war in Ukraine, for example: Russia’s invasion roiled oil markets earlier this year, and gasoline prices surged. (So did margarine, oddly enough, due partly to the war’s impact on sunflower oil from Ukraine, the world’s largest producer.)
In other words: “core” inflation gives a better sense of the future inflationary trend in the U.S., economists said.

When inflation is low and stable, monthly core inflation is roughly 0.2%, on average, said Andrew Hunter, senior U.S. economist at Capital Economics.
Core CPI rose 0.2% in November, after a 0.3% reading in October — down significantly from 0.6% in September and August.
“One month doesn’t make a trend, or even two months, but the October and November readings are clearly a big step in the right direction,” Hunter said.

Notable inflation categories in November

Despite the overarching slowdown, some consumer categories still saw a jump in inflation.
Inflation for groceries, apparel and communication increased from October to November, according to the Bureau of Labor Statistics. Prices fell for energy, used cars and trucks, and airline fares over the month.
However, airfare is still up 36% over the year, among the largest annual increases among consumer categories. Other notable annual price increases include: fuel oil (66%), butter and margarine (34%), flour (25%) and public transportation (24%).

Inflation is still painfully high, but the pain is increasingly less intense.

Mark Zandi
chief economist at Moody’s Analytics

Food, energy and housing have been among the larger pain points for households in recent months.
Housing represents the biggest share of average consumer budgets, accounting for 34% of household spending in 2021, according to the most recent U.S. Department of Labor data. Transportation, which includes gasoline, and food are No. 2 and No. 3, respectively, at 16% and 12%.
“The good news is, we’re seeing energy prices and food prices come off their highs,” said Diane Swonk, chief economist at KPMG. “We welcome that with open arms.”
Housing may prove to be stubborn for some time, however, given there’s typically a lag in rent and home price trends flowing through to the consumer price index.
The “shelter” index is up 7.1% over the last year, accounting for about half of the increase in annual “core” inflation, according to the BLS. While shelter inflation moderated a bit from October to November, shelter was “by far the largest contributor” to the monthly inflation, more than offsetting decreases in energy indexes, the BLS said.
“Rent inflation is still yet to slow meaningfully, but we know from the private-sector rent data that a sharp slowdown is coming there too,” Hunter said.

How supply-demand economics fueled inflation

A healthy economy experiences a small degree of inflation each year. U.S. Federal Reserve officials aim to keep inflation around 2% annually.
But prices started rising at an unusually fast pace starting in early 2021, following years of low inflation.
As the U.S. economy reopened, a supply-demand imbalance fueled inflation that was initially limited to items such as used cars, but which has since spread and lingered longer than many officials and economists had expected.
The problem isn’t siloed in the U.S. In some cases, it’s been worse overseas.
On the global stage, inflation first showed up in the U.S., however. That’s partly due to Covid-related restrictions unwinding sooner in many states relative to the rest of the world and federal support for households kickstarting the economic recovery.
Americans had more disposable income as the economy reopened, the result of federal funds such as stimulus checks and pent-up demand from staying at home. Meanwhile, Covid-19 lockdowns snarled global supply chains — meaning ample cash ran headlong into fewer goods to buy, driving up prices.
The dynamics that had underpinned high inflation for physical goods seem to be retreating, Hunter said. Supply-chain issues have largely faded, while a strong U.S. dollar relative to foreign currencies generally makes it less costly to import goods from overseas, he said.

‘We’re in a world that’s much more prone to inflation’

But inflation for “services” has proven “a bit stickier,” Hunter said. Labor costs are a big driver of inflation in the services sector, which might include anything from haircuts to hotel stays. Demand for workers is near historic highs and the unemployment rate low, helping fuel competition for workers and therefore fast-rising wages — in turn feeding through to high labor costs to businesses, creating upward pressure on their cost of services.
Russia’s invasion of Ukraine also fueled a surge in commodity prices — for crude oil and grain, for example — which has fed into higher costs for gasoline and food. High energy costs have broad ripple effects on other goods, which become more costly to produce and transport.
Other one-off events have also weighed on inflation. For example, one of the worst cases of bird flu in U.S. history has led the price of eggs to surge more than most other food categories this year. The price of eggs is up 49% in the past year, according to Tuesday’s CPI report.
Severe drought in Western U.S. states like California and Arizona has reduced vegetable supplies, triggering big price increases.
Climate change, along with elevated geopolitical risk and aging trends, represent a “trifecta” of issues that create more inflationary pressure relative to before the Covid-19 pandemic, Swonk said.
For example, global extreme weather events can disrupt food supplies and supply chains, a wave of U.S. retirements have contributed to a smaller pool of available workers, and political tensions have led to more protectionism and self-sourcing — all of which have implications for inflation, Swonk said.
“I think we’re in a world that’s much more prone to inflation than the world we left,” Swonk said.
“What is the new equilibrium once we’ve gotten there?” she added. “That’s where the difficulty is.”
The U.S. Federal Reserve and other central banks are trying to make sense of these multi-pronged inputs and tamp down inflation by raising borrowing costs for consumers and businesses. The dynamic serves to reduce demand, ultimately filtering through to prices. That’s likely to be a lengthy process, according to some economists.
“Inflation has likely already peaked in most markets, but reducing price pressures tied to labor markets and wage growth will take longer,” Vanguard Group economists wrote in an outlook report published Monday. “As such, central banks may reasonably achieve their 2% inflation targets only in 2024 or 2025.”

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If the legal challenges to Biden’s sweeping student loan forgiveness prove successful, many borrowers will likely be in need of other relief measures.
The existing policies include options for deferring payments if you’re financially struggling and, in the most extreme cases, filing for bankruptcy.

HOUSTON, TEXAS – AUGUST 29: Students study in the Rice University Library on August 29, 2022 in Houston, Texas.
Brandon Bell | Getty Images News | Getty Images

After President Joe Biden’s historic announcement that tens of millions of Americans would get up to $20,000 in student loan forgiveness, borrowers’ celebrations were short-lived.
Conservative groups and Republicans soon brought a number of legal challenges against the president’s plan, arguing that the policy was unfair and an overreach of executive authority. Two of those lawsuits have been successful in halting the Biden administration from canceling hundreds of billions of dollars in student debt. In February, the U.S. Supreme Court will have the final say on if the plan can proceed or not.

The disappointment and financial distress that borrowers will feel if Biden’s forgiveness plan is struck down — a likely outcome, according to experts — is likely to be massive.
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A group of borrower advocacy groups, in a recent brief to the highest court, said student debt forgiveness was essential to the country’s recovery from the public health crisis, which exacerbated the financial difficulties for “borrowers who have, for decades, been at the mercy of a broken student loan system.” Without the cancellation, they warned, “working and middle-class borrowers are at substantial risk of default.”
If that is the way things go, however, here are four of the other relief options for struggling borrowers.

1. Defer payments (once they resume)

The pandemic-era policy suspending federal student loan payments and the accrual of interest is still active. The U.S. Department of Education has said borrowers won’t need to start making payments on their debt again until 60 days after the litigation around its forgiveness plan resolves.

If the lawsuits are still pending at the end of June, the bills will resume 60 days after that, at the end of August.
If you’re unemployed or dealing with another financial hardship at that time, you can put in a request for an economic hardship or unemployment deferment. Those are the ideal ways to postpone your federal student loan payments, because interest doesn’t accrue.
If you don’t qualify for either, though, you can use a forbearance to continue suspending your bills. Just keep in mind that with forbearance, interest will rack up and your balance will be larger — possibly much larger — when you resume paying.

2. Use the Public Service Loan Forgiveness program

The Biden administration has recently made a number of improvements to the Public Service Loan Forgiveness program, which allows those who work for the government and certain nonprofits to get their debt cleared after a decade of payments.
There are typically three primary requirements for public service loan forgiveness, although the recent changes provide some more wiggle room in certain cases:

Your employer must be a government organization at any level, a 501(c)(3) not-for-profit organization or some other type of not-for-profit organization that provides public service.
Your loans must be federal Direct loans.
To reach forgiveness, you need to have made 120 qualifying, on-time payments in an income-driven repayment plan or the standard repayment plan.

The best way to find out if your job qualifies as public service is to fill out the so-called employer certification form.
In 2013, the Consumer Financial Protection Bureau estimated that 1 in 4 American workers could be eligible for the program.

3. Find a more affordable repayment plan

If you find your student loan payments too high when the bills resume, you should explore the different income-driven repayment plans. These programs aim to make borrowers’ payments more affordable by capping their monthly bills at a percentage of their discretionary income and forgiving any of their remaining debt after 20 or 25 years.
To determine how much your monthly bill would be under different plans, use one of the calculators at Studentaid.gov or Freestudentloanadvice.org, said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit.

If you do decide to change your repayment plan, Mayotte recommends submitting that application to your servicer well ahead of the timeline for payments to restart. Lenders will likely be overwhelmed when they have to begin collecting loan payments from tens of millions of people again.
“I have significant concerns that there will be some big servicing delays,” Mayotte said.

4. File for bankruptcy protection

The Biden administration recently announced updated guidelines that will make it easier for those severely burdened by their student debt to discharge it in bankruptcy.
Currently, it’s difficult, if not impossible, for someone to walk away from their federal student debt in a normal bankruptcy proceeding.
“The new rules do give some hope to federal loan borrowers who may be struggling with their loans for 10 years or more,” Mayotte said.
The federal government will be less likely to object to borrowers’ attempts at discharging their debt, she said, if they have a record of making an effort to repay their student loans but don’t have a high enough income to cover the bill while also meeting their basic needs.

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To combat stubborn inflation, the Federal Reserve is expected to announce its seventh interest rate increase of the year.
Another rate hike will impact borrowing costs across the board.
Here’s what that means for you.

The Federal Reserve is expected on Wednesday to raise interest rates for the seventh time this year to combat stubborn inflation. 
The U.S. central bank will likely approve a 0.5 percentage point hike, a more typical pace compared with the super-size 75 basis point moves at each of the last four meetings.

This would push benchmark borrowing rates to a target range of 4.25% to 4.5%. Although that’s not the rate consumers pay, the Fed’s moves still affect the rates consumers see every day.

Why a smaller rate hike may be ‘pretty good news’

By raising rates, the Fed makes it costlier to take out a loan, causing people to borrow and spend less, effectively pumping the brakes on the economy and slowing down the pace of price increases. 
“For most people this is pretty good news because prices are starting to stabilize,” said Laura Veldkamp, a professor of finance and economics at Columbia University Business School. “That’s going to bring a lot of reassurance to households.”
However, “there are some households that will be hurt by this,” she added — particularly those with variable rate debt.
For example, most credit cards come with a variable rate, which means there’s a direct connection to the Fed’s benchmark rate.

But it doesn’t stop there.
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What the Fed’s rate hike means for you

Another increase in the prime rate will send financing costs even higher for many other forms of consumer debt. On the flip side, higher interest rates also mean savers will earn more money on their deposits.
“Credit card rates are at a record high and still increasing,” said Greg McBride, chief financial analyst at Bankrate.com. “Auto loan rates are at an 11-year high, home equity lines of credit are at a 15-year high, and online savings account and CD [certificate of deposit] yields haven’t been this high since 2008.”
Here’s a breakdown of how increases in the benchmark interest rate have impacted everything from mortgages and credit cards to car loans, student debt and savings:

1. Mortgages

Although 15-year and 30-year mortgage rates are fixed and tied to Treasury yields and the economy, anyone shopping for a new home has lost considerable purchasing power, partly because of inflation and the Fed’s policy moves.
“Though they are falling, mortgage rates are still at a more than 10-year high,” said Jacob Channel, senior economic analyst at LendingTree.
The average rate for a 30-year, fixed-rate mortgage currently sits at 6.33%, down from mid-November, when it peaked at 7.08%.

For would-be buyers, a 30-year, fixed-rate mortgage on a $300,000 loan would cost about $1,283 a month at last year’s 3.11% rate. If you paid today’s 6.33% instead, that would cost an extra $580 a month or $6,960 more a year and another $208,800 over the lifetime of the loan, Channel calculated.

Adjustable-rate mortgages, or ARMs, and home equity lines of credit, or HELOCs, are pegged to the prime rate. As the federal funds rate rises, the prime rate does, as well, and these rates follow suit. Most ARMs adjust once a year, but a HELOC adjusts right away. Already, the average rate for a HELOC is up to 7.3% from 4.24% earlier in the year.

2. Credit cards

Credit card annual percentage rates are now more than 19%, on average, up from 16.3% at the beginning of the year, according to Bankrate.
“Even those with the best credit card can expect to be offered APRs of 18% and higher,” said Matt Schulz, LendingTree’s chief credit analyst.
But “rates aren’t just going up on new cards,” he added. “The rate you’re paying on your current credit card is likely going up, too.”
Further, households are increasingly leaning on credit cards to afford basic necessities since incomes have not kept pace with inflation, making it even harder for those carrying a balance from month to month.

If the Fed announces a 50 basis point hike as expected, the cost of existing credit card debt will increase by an additional $3.2 billion in the next year alone, according to a new analysis by WalletHub.

3. Auto loans
Even though auto loans are fixed, payments are getting bigger because the price for all cars is rising along with the interest rates on new loans. So if you are planning to buy a car, you’ll shell out more in the months ahead.
The average interest rate on a five-year new car loan is currently 6.05%, up from 3.86% at the beginning of the year, although consumers with higher credit scores may be able to secure better loan terms.

Paying an annual percentage rate of 6.05% instead of 3.86% could cost consumers roughly $5,731 more in interest over the course of a $40,000, 72-month car loan, according to data from Edmunds.

Still, it’s not the interest rate but the sticker price of the vehicle that’s primarily causing an affordability crunch, McBride said.
4. Student loans
The interest rate on federal student loans taken out for the 2022-23 academic year already rose to 4.99%, up from 3.73% last year and 2.75% in 2020-21. It won’t budge until next summer: Congress sets the rate for federal student loans each May for the upcoming academic year based on the 10-year Treasury rate. That new rate goes into effect in July.
Private student loans tend to have a variable rate tied to the Libor, prime or Treasury bill rates — and that means that, as the Fed raises rates, those borrowers are also paying more in interest. How much more, however, will vary with the benchmark.

Currently, average private student loan fixed rates can range from 2.99% to 14.96%, and 2.99% to 14.86% for variable rates, according to Bankrate. As with auto loans, they vary widely based on your credit score.

5. Savings accounts
On the upside, the interest rates on some savings accounts are also higher after consecutive rate hikes.
While the Fed has no direct influence on deposit rates, the rates tend to be correlated to changes in the target federal funds rate. The savings account rates at some of the largest retail banks, which were near rock bottom during most of the Covid pandemic, are currently up to 0.24%, on average.
Thanks, in part, to lower overhead expenses, top-yielding online savings account rates are as high as 4%, much higher than the average rate from a traditional, brick-and-mortar bank, according to Bankrate.
“Interest rates can vary substantially, especially in today’s interest rate environment in which the Fed has raised its benchmark rate to its highest level in more than a decade,” said Ken Tumin, founder of DepositAccounts.com.
“Banks make money off of customers who don’t monitor their interest rates,” Tumin said.

With balances of $1,000 to $25,000, the difference between the lowest and highest annual percentage yield can result in an additional $51 to $965 in a year and $646 to $11,685 in 10 years, according to an analysis by DepositAccounts.

Still, any money earning less than the rate of inflation loses purchasing power over time. 
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Social Security beneficiaries will soon see bigger checks to help them cope with record high inflation.
As Social Security statements roll in, you should troubleshoot for errors that can cost you.
Also keep in mind that higher income this year may affect your income taxes and Medicare premium surcharges in the future.

Kathrin Ziegler | Digitalvision | Getty Images

As inflation has kept prices high in 2022, Social Security beneficiaries may look forward to a record high cost-of-living adjustment in 2023.
“Your Social Security benefits will increase by 8.7% in 2023 because of a rise in cost of living,” the Social Security Administration states in the annual statements it is currently sending to beneficiaries.

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The 8.7% increase will be the highest in 40 years. It is also a significant bump from the 5.9% cost-of-living increase beneficiaries saw in 2022.
The increase is “kind of a double-edged sword,” according to Jim Blair, a former Social Security administrator and co-founder and lead consultant at Premier Social Security Consulting, which educates consumer and financial advisors on the program’s benefits.
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“It’s good for people on Social Security,” Blair said. “It’s not so good for the economy with inflation.”
Social Security benefit checks will reflect the increase starting in January.

The average retiree benefit will go up by $146 per month, to $1,827 in 2023 from $1,681 in 2022, according to the Social Security Administration The average disability benefit will increase by $119 per month, to $1,483 in 2023 from $1,364 in 2022.
What’s more, standard Medicare Part B premiums will go down by about 3% next year to $164.90, a $5.20 decrease from 2022. Medicare Part B covers outpatient medical care including doctors’ visits.

Monthly Part B premium payments are often deducted directly from Social Security checks. Due to the lower 2023 premiums, beneficiaries are poised to see more of the 8.7% increase in their monthly Social Security checks.
“The good news about these letters is people are realizing 100% of the 8.7% lift,” said David Freitag, a financial planning consultant and Social Security expert at MassMutual.
“Of course, the economy is inflated at a frightful rate, but this represents the value of cost-of-living adjusted benefits from Social Security,” Freitag said.
Few other income streams in retirement offer cost-of-living adjustments, he noted.

What to look for in your Social Security statement

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If you’re wondering how much more you stand to see in your checks, the personalized letter from the Social Security Administration will give you a breakdown of what to expect.
That includes your new 2023 monthly benefit amount before deductions.
It will also tell you your 2023 monthly deduction for premiums for Medicare Part B, as well as Medicare Part D, which covers prescription drugs.
The statement will also show your deduction for voluntary tax withholding.

The good news about these letters is people are realizing 100% of the 8.7% lift.

David Freitag
financial planning consultant and Social Security expert at MassMutual

After those deductions, the statement shows how much will be deposited into your bank account in January.
Of note, you do not necessarily have to be receiving Social Security checks now to benefit from the record 2023 increase, Blair noted.
“The good news is you don’t have to apply for benefits to receive the cost-of-living adjustment,” Blair said. “You just have to be age 62 or older.”

When you may pay Medicare premium surcharges

If your income is above a certain amount, you may pay a surcharge called an income related monthly adjustment amount, or IRMAA, on Medicare Parts B and D.
This year, that will be determined by your 2021 tax returns, including your adjusted gross income and tax-exempt interest income. Those two amounts are added together to get your modified adjusted gross income, or MAGI.
In 2023, those IRMAA premium rates kick in if your modified adjusted gross income is $97,000.01 or higher and you filed your tax return as single, head of household, qualifying widow or widower or married filing separately; or $194,000.01 or higher if you are married and filed jointly.
Notably, just one dollar over could put you in a higher bracket.

“It’s important for everyone to make sure that the amount of adjusted gross income that they’re using for the IRMAA surcharges agrees with what they filed on their tax return two years ago,” Freitag said.
If the information does not match, you “absolutely need to file an appeal,” he said.
Because the IRMAA surcharges can be extremely significant, that is an area to watch for errors, Freitag said.

When to appeal your Medicare surcharges

If your income has gone down since your 2021 tax return, you can appeal your IRMAA.
That goes if you have been affected by a life changing event and your modified adjusted gross income has moved down a bracket or below the lowest amounts in the table.

Qualifying life changing events, according to the Social Security Administration, include marriage; divorce or annulment; death of a spouse; you or your spouse reduced your work hours or stopped working altogether; you or your spouse lost income on from property due to a disaster; you or your spouse experienced cessation, termination or reorganization of an employer’s pension plan; or you or your spouse received a settlement from an employer or former employer due to bankruptcy, closure or reorganization.
To report that change, beneficiaries need to fill out Form SSA-44 with appropriate documentation.

How higher benefits could cost you

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As your Social Security income goes up with the 8.7% COLA, that may also push your into a different IRMAA or tax bracket, Freitag noted.
That calls for careful monitoring of your income, he said.
Keep in mind that two years in the future you may get exposed to IRMAA issues if you’re not careful.
In addition, more of your Social Security benefits may be subject to income taxes. Up to 85% of Social Security income may be taxed based on a unique formula that also factors in other income.
It is a good idea to have taxes withheld from Social Security benefits in order to avoid a tax liability when you file your income tax returns, according to Marc Kiner, a CPA and co-founder of Premier Social Security Consulting.
“Do it as soon as you can,” Kiner said of filling out the voluntary withholding request form.
To better gauge how IRMAA or taxes on benefits may affect you going forward, it may help to consult a tax advisor or CPA who can help identify tax-efficient strategies, Freitag said.

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