ALEX CHADWICK, host:
Each Tuesday around this time, DAY TO DAY brings you financial advice from Michelle Singletary. Michelle writes the syndicated column The Color of Money for The Washington Post, and she's helped us answer some of your money questions. She's here with my colleague, Madeleine Brand.
MADELEINE BRAND reporting:
Welcome back, Michelle.
MICHELLE SINGLETARY (Personal Finance Contributor): Thank you. Good to be here.
BRAND: Now our first question is this: `I have a student loan which I had consolidated when I was just out of school in order to get the payments into what I could afford. Unfortunately, the interest rate was fairly high, 9 percent. I'm now in a better financial situation and own a home with an equity line of credit with an adjustable rate. Would you recommend using the equity line of credit to pay off the student loan?'
SINGLETARY: That's such a good question and lots of folks are in this similar position and want to know what to do about this. Keep in mind that an equity line of credit is adjustable and interest rates are going up. So in a couple of years, this person's interest rate could be as high as what they're already paying, which is 9 percent. And also consider how far along are you in the loan. If you're five years away from paying it, you don't want to reset that loan by getting an equity line of credit that's going to take you 10 or 15 years to pay off. And additionally, lastly, some student loans come with great benefits. If you lose your job, for example, you can get a break and repay that loan. In other words, you can temporarily postpone paying on that federal loan; it's called forbearance. And there are other such repayment options if you have a federal loan, so you want to keep that in mind.
But overall, if all that is not an issue, if you've got the money and you're fairly new into the loan, an equity line of credit can be a good way to bring that interest rate down.
BRAND: All right. Now another question about debt and student loans. Joe, a listener from KPBS in San Diego, asks: `I'm curious because if the worst should happen to me, will my wife be liable for paying off my student loans? Will the credit cards in my name, car loans, student loans, all that fall to her? These are debts in my name only. She has no affiliation as a co-signer.'
SINGLETARY: The student loans will not be liable by your wife. However, those other debts may be if you live in a community property state. According to the American Institute of Certified Public Accountants, the general rule is that spouses are not responsible for each other's debt. But there's a huge `but' there; there's an exception. As I said, if you live in a community property state, you may be held liable for those debts because they consider that you also have access to your spouse's income. But as all of us know, that if you sign for those debts with your spouse, you're responsible. So it depends on what your situation is. And this person, I think, came from California, so they need to check with their creditors because for those other debts, not the student loans, his wife may be liable.
BRAND: OK. And finally, we have a credit card question. This person writes: `I have heard that the government is requiring credit cards to increase the required minimum monthly payment to reduce personal debt. Is this correct? And if it is, when will the changes start?'
SINGLETARY: It is definitely correct. And, in fact, some cardholders have already seen their minimum payments go up. Listen, several agencies that regulate banks and thrifts looked at what was going on and found that lots of people were just making the minimum payment and not making a significant dent on their debt. So now they're asking the banks to impose a new policy that people have to pay at least 1 percent of their credit card principal plus any interest or fee. And so far cardholders, that means that their minimum payment has gone up to 4 percent; others, they just need to pay that 1 percent plus fees and any other charges that they have on the card.
BRAND: Michelle Singletary write The Color of Money column for The Washington Post, and she's DAY TO DAY's regular contributor on matters of personal finance.
SINGLETARY: Thank you.
BRAND: And if you want Michelle to answer any questions you may have about personal finance, please go to the `Contact' page at npr.org, and be sure to include `Michelle' in the subject line.
CHADWICK: And that was DAY TO DAY's Madeleine Brand.
DAY TO DAY's a production of NPR News with contributions from slate.com. I'm Alex Chadwick.