Senate Republicans voted unanimously on Monday to block a bill which would suspend the debt ceiling until December 2022, with the federal government’s funding deadline in a few days.
Unless Democrats find a way to tackle the debt limit, the government will shut down and be unable to meet financial obligations by Oct. 18, Treasury Secretary Janet Yellen wrote in a letter delivered to Congress after the vote.
GOP lawmakers, led by Senate Minority Leader Mitch McConnell, would not support the bill as they frown on the Biden administration’s economic agenda that would raise taxes on the rich and fund new spending for child care. children, health care and infrastructure.
Under the Trump administration, the debt limit has been suspended three times, according to Treasury Secretary Janet Yellen. The most recent suspension was passed on a bipartisan basis in 2019 – it expired in June 2021. The vast majority of debt currently subject to the debt limit was accumulated before President Biden took office.
This is a shared responsibility, and I urge Congress to come together on a bipartisan basis as it has done in the past to protect the full faith and credit of the United States.
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If Congress breaks the debt limit and the government defaults for the first time in history, it would cause catastrophic damage to the country’s credit rating, Yellen wrote in a recent editorial for The Wall Street. Newspaper. This could send the financial markets into a spin which could lead to an economic recession if the problem is not addressed.
Failure to raise or suspend the debt ceiling could also lead to delays in Social Security and Child Tax Credit checks in October. Yellen said about 50 million seniors would be affected, alongside millions of American families who depend on the child tax credit to make ends meet. Federal employees can also experience payroll delays.
If you’re one of the millions of Americans who rely on timely Social Security checks, now is the time to prepare your finances for a government shutdown. Keep reading to find out more about what you can do with your debt, like forbearance and refinancing. You can compare student loan refinance offers and mortgage rates in Credible’s online marketplace without affecting your credit score.
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How to manage your debts if Social Security is delayed
Millions of Americans depend on federally funded income programs like Social Security, but those much-needed checks can be delayed until October if the government is unable to meet its debts.
While there is still a chance that Congress will work together to develop a solution to this problem, it is a good idea to take a look at your finances just in case Social Security checks are delayed. Here are some things you can do now to prepare.
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Your mortgage is probably your biggest debt, and most of the time, missing a payment isn’t an option. If you don’t pay off your home loan, you risk losing the roof over your head and ruining your credit score in the process.
Fortunately, there are a number of ways to help you out if you can’t make a mortgage payment. First, you might want to consider signing up for mortgage forbearance. This essentially puts your mortgage payment on hold for a period of time, usually a few months. Interest can accrue during the forbearance period, so keep in mind that deferring your mortgage can increase interest costs over time.
You can also consider mortgage refinancing. With mortgage rates stable at unprecedented levels, now might be a good time to refinance your home loan. Mortgage refinancing can help you lower your monthly payments or even pay off your debt faster.
Use a mortgage calculator to estimate your new monthly payment and compare mortgage refinance rates without affecting your credit score on Credible.
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Student loan debt
Federal student loans are currently subject to administrative forbearance, which means payments are suspended and interest does not accrue. The Biden administration has issued a “final extension” of the student loan payment break that expires in February 2022, so it won’t be a problem if you have to miss your federal student loan payment in October due to a delay. federal income.
Private student loans are not covered by the COVID-19 forbearance period, however, so you could be penalized for missing a payment. If you have private student loan debt, consider contacting your student loan manager to sign up for economic hardship forbearance to temporarily suspend your monthly student loan payments.
You can also refinance your private student loans when interest rates are near their historic lows, according to data from Credible.
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Refinancing your student loans for a longer repayment term can lower your monthly payment. A recent analysis by Credible found that borrowers who refinanced for a longer term loan could reduce their monthly payments by more than $ 250, all without increasing the cost of borrowing on the loan.
Use Credible’s student loan calculator to see if you can lower your monthly payments by refinancing.
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Credit card debt
Making the minimum payment on your credit cards can lead to exorbitant interest charges over time. But missing a minimum payment can result in late fees and penalty APRs that can increase the cost of borrowing even more.
If you can’t make your credit card payment without your Social Security check, you might consider consolidating your debt with a personal loan to lower your monthly payments.
Personal loans offer quick lump sum financing that is paid off in fixed monthly installments over a set period of months or years. They come with low fixed interest rates compared to variable and high credit card interest rates. The current average interest rate on a two-year personal loan is 9.58%, according to the Federal Reserve, compared to 16.30% for credit card accounts rated at interest.
Thanks in part to lower interest rates, it may be possible to save money on your monthly debt payment while placing your debt on a structured repayment plan. Credit card holders who can get a lower interest rate on a personal loan have the potential to save $ 66 or more on their monthly payments by refinancing, according to credible estimates.
Learn more about personal loans for debt consolidation on Credible. You can compare the offers of several personal lenders to make sure that you are getting a good deal.
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