As we enter a second Trump Administration, predictions about the economy are as divided as were opinions of the candidates during the election. We keep hearing speculation about trade tariffs, tax cuts, the federal deficit, immigration and the future of Social Security and healthcare.
Will the United States see economic growth, or will new policies create more financial challenges for struggling Americans?
In truth, no one knows which proposed policies will come to fruition nor how consumers and the financial markets will respond. We can, however, anticipate certain outcomes and offer sound financial advice to the consumers we serve – the millions of Americans struggling with mounting debt.
The Financial Counseling Association of America (FCAA) represents the nation’s leading non-profit credit counseling agencies. Professional debt counselors at these agencies help consumers who are in trouble with debt – whether from credit cards, student loans, medical bills or housing costs.
Average Americans are not concerned with stock market performance or the national deficit. They want to know how new government policies will help or hurt them.
As financial educators, we don’t make economic predictions. However, we can offer an overview of economic factors, explain what they mean, and suggest how they might play out in the coming year and in the long term.
Click on the topics below or scroll down for an explanation from FCAA President Martin Lynch about key economic drivers and how they could affect you and your family. Then, read on for practical tips from our debt counselors on navigating the changing economy in the coming months and years.
Tariffs on Imports
Inflation & Interest Rates
Social Security
Healthcare
Student Loans
Housing Costs
Prepare for all potential economic outcomes
Many Americans are in debt and feeling anxious about the economy. Having unmanageable debt is scary, and an uncertain economy can make it even more frightening. We understand this fear and work with consumers every day to help them regain control of their finances.
Non-profit credit counselors offer this advice to help you prepare for potential outcomes:
- First, take a deep breath and don’t panic – Don’t get too hung up on news headlines about the unemployment rate or interest rates. And definitely don’t turn to social media for your “news.” Instead, stay calm and focus on your personal financial situation.
- Revisit and revise your budget – Be proactive in assessing your monthly income and expenses. Look for ways to cut back on unnecessary expenses. Even if the Trump economy works in your favor, spending less and saving more is always a good idea. The FCAA’s free budget planning tool is a great place to start.
- Check your emergency fund – If you don’t already have an emergency fund, start one now. Do you have a plan to cover the cost of a major car repair, an unexpected medical expense or a job loss? Perhaps just the loss of working overtime hours? These are life events that can happen to anyone, so having a cushion fund is essential.
- Get serious about paying off your debts – This is an area that most people would rather avoid. Talking with lenders and negotiating payment plans can be intimidating. This is where a professional debt counselor can really help. They are your voice and represent you in dealing with creditors.
Credit counseling agencies work with consumers on a confidential basis. Your counselor will get into the nitty-gritty of your financial situation and give you an honest assessment of how best to tackle your debt. Oftentimes, the solution is a debt management plan that enables you to pay off your debt, making manageable payments over time.
Many of our members are also HUD-approved housing counselors. They can give you free advice about home equity lines, first-time homebuying, reverse mortgages, homeowners insurance for emergencies and more.
Visit the FCAA website to connect with a credit counselor.
- Reach out to your legislators and tell them what’s important to you – Affordable housing, affordable college tuition, interest rate reform. Are these issues that affect you? Your representatives are elected by you, and they need to know what policies would improve your life.
Impact of Tariffs
Tariffs are duties charged on imported goods aimed at raising revenue and preserving jobs for American workers, particularly those in manufacturing. While these goals may be achieved, they often have unwanted side effects, such as higher prices on consumer goods.
For example, if you purchase a TV from Costco, it is very likely made in China. When tariffs are in place, the foreign manufacturer will charge more for products, so the consumer ultimately pays the tariff. Even goods produced in the United States may cost more because many American-made products have parts sourced from other countries.
“Many manufacturers are currently in a buying frenzy, trying to maintain parts inventories in anticipation of tariffs,” said Lynch. “If tariffs go into effect, consumers can expect prices to go up for just about everything – the bigger and more complicated a device is, the more likely there are parts made in other countries.”
Inflation and Interest Rates
Inflation is the general increase in the price of goods and services over time. We saw this happen from 2021 through 2023 with the rising cost of groceries, housing, energy and consumer goods and services. When inflation rises, the Federal Reserve will increase interest rates to cool the economy and slow consumer spending.
The Fed increased interest rates 11 times during 2022 and 2023, making it harder and more expensive for consumers to borrow money. Once inflation began to taper off by mid-2024, the Fed slowly and steadily started lowering interest rates.
It’s important to understand that U.S. presidents do not control the Federal Reserve or interest rates. The president can replace the Federal Reserve chair at the end of his term, can nominate key officials for Senate approval, and can discuss policies; however, the Fed operates independently of political influence.
So, what does all this mean for the future of inflation and interest rates?
“Inflation is what the Federal Reserve will be watching in the first half of this year; they will take a wait-and-see attitude for further rate cuts,” says Lynch. “And like all of us, they’re waiting to see what policies the new administration puts in place.”
Future of Social Security
In their 2024 platform, President Donald Trump and the Republican Party publicly committed to “fight for and protect Social Security and Medicare with no cuts, including no changes to the retirement age.” Yet, Project 2025 and other GOP-endorsed proposals threaten to scale back or even privatize these programs.
One big issue surrounding Social Security is that the program faces a funding shortfall expected to hit around 2035. As the U.S. population ages, baby boomers are utilizing their benefits while fewer young people are entering the workforce to pay into the system.
President Trump has pledged to protect Social Security but has offered few details on how he intends to do that. He has also suggested eliminating income tax on retirement benefits, which would worsen the financial shortfall. Furthermore, deporting illegal immigrants would also impact the health of the Social Security program. Immigrants pay an estimated $90 billion dollars annually into Social Security even though they never get to use those funds. Deporting them could blow a hole in Social Security funding.
“What is most concerning for our clients is the concept of privatizing Social Security,” says Lynch. “If this happens, retirement funds would be invested in the stock market, and the risk is too high. The stock market does not always go up. When it comes to retirement, people need a sure thing.”
Despite heated political debates about Social Security, it’s unlikely to change much during Trump’s time in office. “The program is too popular among Americans, and it would be political suicide for Congress to change it substantially,” said Lynch.
Medicare, ACA and Healthcare Overall
For many of the same reasons, we’ll not likely see major changes to Medicare, most experts say. As of January 2025, 68 million Americans were enrolled in the program that provides healthcare benefits for seniors ages 65 and older and for people on disability.
The Affordable Care Act (ACA) is another federal program that has been a lifeline to millions of Americans. 24 million Americans were enrolled in health insurance plans under the ACA as of January 2025. Furthermore, over 50 percent of individuals enrolled in ACA plans are in Republican districts.
According to Lynch, the FCAA’s credit counseling agencies hear a lot people say their insurance costs went up when they switched to Affordable Care Act (ACA) plans, but the insurance benefits are better.
“Now, they may have more expensive plans, but it’s better coverage,” he said. “It helps a lot of people and their dependents. Doing away with the ACA would be disastrous for millions of people.”
Given the widespread use and popularity of Medicare and the ACA – and the fact that Congress would have to pass legislation to make substantive changes – these programs will likely remain intact. However, we could see proposed changes to both Medicare and the ACA.
Aside from these two programs, problems with the U.S. health care system abound. There is much opportunity for policy change that could help average Americans, according to Lynch.
“As debt counselors, we talk with thousands of people who are struggling to pay their bills, including medical bills,” Lynch said. “Legislators have an opportunity to make some real gains on behalf of patients.” He cites the following areas:
- Develop an income-based plan for patients to repay medical debt and for medical facilities to forgive debt. (Nearly 60 percent of U.S. hospitals have non-profit status and are required to work with patients in this way; for-profit hospitals do not have this requirement.)
- Set rules for health insurance companies around denials of coverage, in- and out-of-network coverages, and coverage for everything from ambulance to contracted services.
- Continue to push for lower prescription drug prices by directly negotiating with pharmaceutical companies and reigning in the pharmacy benefit manager scheme.
- Make Medicare Advantage (Medicare C) more transparent. For most consumers, it is too costly and not comprehensive.
- Continue to support the Veteran’s Affairs system of health.
- Protect and strengthen the Affordable Care Act.
If any of these policies could benefit you or your loved ones, contact your congressional representatives to let them know, Lynch advises.
Student Loan Debt
According to the Education Data Initiative, paying off student loans takes the average borrower 20 years. For some professional graduates, it can take up to 45 years.
President Joe Biden prioritized student debt relief, with 5 million Americans receiving loan forgiveness during his term. Millions of others saw lower monthly payments thanks to Biden’s income-driven repayment programs.
President Trump has not historically supported student debt relief, although he did not define his position during his campaign. Given his proposal to abolish the Department of Education, combined with legal challenges to student debt forgiveness in some states, the future of such programs looks grim.
Public Service Loan Forgiveness has the greatest potential to remain viable. This program allows borrowers to work in the public sector (federal, state, municipal or nonprofit) for at least 10 years and have their student loans forgiven.
“Considering the staggering cost of higher education, we often advise young people to look for public sector jobs to benefit from this loan forgiveness,” said Lynch.
Lynch says greater loan flexibility in federal government-backed student loan plans is necessary. This includes flexible payment amounts and loan terms, as well as the ability to defer the loan if the borrower encounters financial hardship.
Lynch would also like to see more flexibility with the Parent PLUS loan, a bridge loan between what the student can borrow and what the school charges. “Currently, parents take out these loans and can have that loan forgiven if the parent works in the public sector,” says Lynch. “But parents have all the bills and the least flexibility on loan terms. A reduction in the interest rate and more flexible payment options would make this loan viable for more Americans.”
Housing Costs
Home prices, mortgage interest rates and rental costs have become a major issue for many families. President Trump campaigned on improving the cost of living, but he didn’t get into specifics about his plans to improve housing affordability. What happens next depends on the policies he pursues.
If the new administration follows through with imposing tariffs, construction materials will cost more, driving up the cost of new homes and renovations. Furthermore, immigrant workers make up 25 percent of the construction workforce, according to a National Association of Home Builders report, so a shortage of labor could be an issue if mass deportation is pushed through.
On the other hand, a Trump economy may bring tax incentives for home builders and less regulation in homebuilding and lending. This could increase the supply of new construction and help lower home prices.
Housing rentals are driven by supply and demand, location and amenities – but landlords also look at local home valuations when pricing rentals. Therefore, we can expect housing rentals to remain high as long as home prices are high.
Lynch would like to see a federal program for first-time homebuyers as well as limitations on investor home purchases. Reducing the number of investment properties and second homes would make housing more affordable for everyday people. This type of legislation is becoming more common at the municipal level – especially in resort and high-cost areas where local citizens are being priced out of the housing market.