What Just Happened and What to Do Next

From the first interest rate cut of the year to paused federal student loan forgiveness, here is some news that could impact your wallet this week, and how you can prepare your finances for the week ahead.

The First Fed Cut Since December Happened This Week

The Federal Reserve cut interest rates for the first time since December, which will likely mean other borrowing costs will fall.

The central bank voted on Wednesday to lower its influential federal funds rate by a quarter of a percentage point to a range of 4% to 4.25%. While central bankers’ median economic projection was that the Fed would cut rates two more times this year, Fed Chair Jerome Powell said another rate cut is not guaranteed.

What To Do Next

This week’s rate cut will likely soften interest rates on credit cards, auto loans, and other debt, making it easier to borrow and refinance.

It will also influence banks and credit unions to lower the yields on savings accounts, money market accounts, and certificates of deposit. However, you can still lock in a CD and a high-yield savings account with a historically high rate.

Updated FAFSA Opens In Less Than Two Weeks

The Free Application for Federal Student Aid for the 2026-27 academic year opens on Oct. 1, and will reflect some Congressional changes to financial aid.

The “One Big, Beautiful Bill” has mandated some changes to eligibility and calculation guidelines for federal student loans and grants. Most updates will result in lower Pell Grant award amounts for some students.

What To Do Next

Before the next school year starts, learn about the changes and how they will impact what you pay for your or your student’s education. Keep in mind, federal student loan limits have also been lowered for the 2026-27 school year.

Here is an overview of the biggest changes:

• Families with small farms, businesses, or a commercial fishery can once again exclude these assets when calculating their Student Aid Index.
• Students who receive a non-federal, full-ride scholarship are no longer eligible for the Pell Grant.
• Families that earn foreign income will now have to include it as part of their adjusted gross income when applying for a Pell Grant.
• Families with an SAI that is twice or more the maximum Pell Grant, which is $14,790 for the 2026-27 academic year, are not eligible for the grant program.

Lawsuit May Result In Resumption of Student Loan Forgiveness

The American Federation of Teachers has requested a preliminary injunction, requiring the Department of Education to resume student loan forgiveness.

Earlier this year, the department stopped granting forgiveness for borrowers under the Income-Contingent Repayment and Paying for a Valuable Education plans, citing a court injunction. In July, the department said the same court injunction forced them to temporarily pause forgiveness for the Income-Based Repayment plan.

Typically, after 20 or 25 years of payments on an income-driven repayment plan, borrowers will get their remaining student loan balance forgiven. Although some borrowers reached their forgiveness deadline months ago, they still have not gotten their loans discharged.

What To Do Next

If you are waiting for forgiveness, experts say borrowers should continue paying, and they will be refunded for overpayments later. Borrowers can also request to be placed in forbearance while they await discharge.