Part 1 of 5: What Does It Cost? — The Price of Borrowing in Today’s Economy

Welcome to Part 1 of our five-part series, “What Does It Cost?” — a deep dive into the hidden, not-so-hidden, and often misunderstood costs behind major financial areas of life. Over the coming weeks, we’ll explore the cost of borrowing, inheriting, saving, earning income, and investing — all through the lens of financial life planning and how these forces shape your ability to live the life you envision.

We’re starting with one of the most universal financial experiences: borrowing money. Whether it’s a mortgage, student loan, car loan, credit card balance, or even unexpected medical debt, borrowing plays a role in nearly every financial journey. And like any tool, it can help or hinder depending on how it’s used — and how much it costs.

The Fed’s January 2026 “Strategic Pause”: Why It Matters

On January 28, 2026, the Federal Reserve decided to keep its benchmark interest rate steady at a target range of 3.50%–3.75%. Markets were hoping for a rate cut, but the Fed is taking a cautious, wait-and-see approach while inflation hovers around 2.7%. For now, we’re in a holding pattern.

That may sound like abstract economic policy — but it has very real consequences for your wallet.

The Fed funds rate acts as the “base cost” of money across the financial system. When the Fed pauses, it signals that borrowing costs across the economy are likely to stay elevated. And when borrowing costs stay high, the ripple effects touch everything: buying a home, financing higher education, managing credit card debt, and even recovering from a medical emergency.

Understanding the Core Idea: The “Cost” of Money

Every financial decision has a cost — not just in dollars, but in trade-offs. Borrowing is the clearest example of that. When you borrow money, you’re essentially renting someone else’s dollars for a price. That price can be manageable... or it can quietly shape your financial life for decades depending on interest rates, repayment terms, and timing.

Let’s look at how today’s rate environment influences different areas of borrowing.

The Cost to Homebuyers: Higher Rates, Lower Buying Power

Mortgage rates don’t follow the Fed rate exactly, but they are influenced by the broader interest rate environment — especially the yield on the 10-year Treasury. When the Fed stays the course, long-term rates tend to settle into a pattern as well.

As of late January 2026, the average 30-year fixed mortgage rate sits around 6.1%. That’s down from 2023’s peaks, but still dramatically higher than the 3% era many people remember. And those numbers matter. For every 1% increase in mortgage rates, buying power drops by roughly 10%.

What does that look like in practice?

• Your monthly payment is higher — sometimes hundreds of dollars more.
• Your total interest paid over 30 years can be tens of thousands more.
• Your home-shopping budget shrinks unless you're able to increase your down payment.

For many families, the cost of borrowing directly impacts lifestyle choices: which neighborhood you can afford, whether you move now or wait, and how much financial cushion you maintain after closing.

The Cost to Students: Borrowing for the Future

College remains one of the biggest investments people make, and student loans are often the tool used to finance that investment. For the 2025–2026 school year, federal loan rates are historically high:

• 6.39% for undergraduate loans
• Up to 8.94% for Parent PLUS and Grad PLUS loans

Borrowing at these rates affects a graduate’s financial trajectory long after the tassel is turned. Higher interest costs mean higher monthly payments, which compete with other goals: buying a home, saving for retirement, raising children, or even choosing a career path with more purpose than paycheck.

At Heintz Wealth Management, we help families plan ahead for education costs through college planning strategies that balance parent and student needs with long-term lifestyle goals. The key takeaway: the earlier you plan, the more control you have over the “cost” of borrowing for education.

The Cost of Credit Cards & Medical Debt: When Borrowing Gets Dangerous

Unlike fixed-rate loans, most credit cards come with variable APRs — meaning they rise and fall with the prime rate, which closely tracks the Fed funds rate. With the Fed holding steady, card APRs are staying at near-record highs, often over 20%.

At 20% interest, carrying a balance — even a modest one — gets expensive quickly. Credit card debt often becomes a silent lifestyle tax, siphoning away future dollars from more meaningful uses like travel, family experiences, or savings milestones.

A Complicating Layer: Medical Debt

Medical emergencies are unpredictable, emotionally taxing, and increasingly expensive. And in July 2025, when a federal judge vacated the CFPB’s attempt to remove medical debt from credit reports, the stakes grew higher.

Now, unresolved medical debt can still hurt your credit score — which in turn makes every other form of borrowing (homes, cars, credit cards) more expensive. This creates a dangerous cycle for people already under financial and emotional stress.

Borrowing for medical expenses has two costs:

• The interest you pay if you finance the bill
• The potential long-term damage to your credit score if payments fall behind

This is an area where thoughtful guidance, emergency planning, and financial wellness strategies can make a big difference.

The Bottom Line: Borrowing Costs Are More Than the Interest Rate

The Fed’s latest decision helps prevent inflation from re-accelerating — an important goal for the stability of the overall economy. But for everyday borrowers, a “pause” doesn’t mean relief. It simply means today’s higher borrowing costs are sticking around a bit longer.

In financial life planning, we think beyond the numbers. Borrowing affects your stress levels, your opportunities, your freedom, and your ability to live the life you want. Understanding the true cost of borrowing helps you make informed decisions — when to take on debt, when to avoid it, and when a creative strategy might soften the impact.

What’s Coming in This Series

This is just the beginning. Over the next four posts, we’ll explore the other “costs” that shape your financial world:

• Part 2 — The Cost of Inheriting: What heirs often overlook about taxes, timing, and complexity.
• Part 3 — The Cost of Saving: Why saving isn’t free — and how inflation, taxes, and opportunity costs come into play.
• Part 4 — The Cost of Earning Income: From taxes to burnout, we’ll examine the hidden costs of making money.
• Part 5 — The Cost of Investing: How fees, risk, and behavior shape long-term outcomes.

At Heintz Wealth Management, our mission is to help you understand these costs and make choices that reflect your values, your goals, and your vision for your life. Borrowing is just one piece of the puzzle — but understanding it can help you move more confidently toward a life filled with purpose, intention, and financial clarity.

Stay tuned for Part 2 as we explore the cost of inheriting — a topic filled with assumptions, surprises, and important planning opportunities.