Wednesday, July 29, 2015
When will the Federal Reserve raise interest rates?
Short-term interest rates have been hovering around zero for nearly 7 years. Many believe they will raise rates toward the end of the summer. How does this rate impact the average college student? Could mean slight higher rates on student loans but also on checking/saving accounts.
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It seems that the hesitation from the Federal Reserve raise the interest rates stems from at least two things: lower-than-anticipated net exports due to the strong US dollar, and lower-than-anticipated consumer confidence that was realized in unimpressive consumer spending.
ReplyDeleteIn my opinion, the increase in saving could partially be due to the slashing of government supported college funding, namely the Pell Grant, in favor of paying student loan fees to the banks who are realizing a nearly 23% default/delinquency rate. (http://www.huffingtonpost.com/2014/12/10/pell-cuts-cromnibus_n_6299092.html). If the only way to actually be competitive in the job market is to have a post-secondary education, and the avenues to pay for that education are becoming more limited, saving in those households planning to send students to college must increase their own resources to accomplish that without incurring even more loan debt at an even higher interest rate than over the past decade.
While the federal reserve seems to have confidence in the future of the economy it does not seem as Americans have the same confidence. While the price of gas has fallen, there has also been an increase in savings.
ReplyDeleteThe Fed has been patient with the economy, not wanting it to spiral again. But with talk of raising interest rates it has raised a question of what will happen next. How will that effect the number of people able to go to college because of high loan rates and will it deter people from an education? How will that later effect the success of our generation if they are paying off larger school loans that are already at all time highs? On the other hand higher interest rates would lead to higher rates of savings, so if the trend of higher savings rates were to continue would the increased rates for loans make that much of a difference?
My question is that if the interest rate does rise how drastically will that effect the number of people not going to college? will this rise in interest rates be enough to change the layout of americans and make us as a whole be a "less" educated country. i say less as a referance to being less than before. also since there is so much demand for highly skilled workers in todays market will that change in interest rates effect the number of people that are unemployed or employed with minimum wage jobs, could this rise in an interest rate start a domino effect of things happening in the US?
ReplyDeleteI think if interest rates are raised on college loans more people will not be able to afford school, but I think that the government might add some incentive plans to get more people going to college. It seems like for everything that happens with increasing rates the government tries to balance it out with a benefit. Maybe there will be more grant money offered? Or interest rates on checking and savings accounts will be so much better that everything is counter acted.
ReplyDeleteThis probably is exactly what will happen. The thing is, the benefits will likely either only affect a small group of students (grand merit scholarships and need-based aid) or it will affect a larger group of students, but not enough to ultimately offset the damage done by the higher rates. Despite the rhetoric being thrown around in Washington of "every student having an opportunity to go to college", it is really JUST that. An opportunity. What the government (I believe) is really trying to do is establish a meritocracy free from the barriers of privilege and glass ceilings/floors. It wants to try to see past the "nurture" part of the nature-nurture problem to get the students that either have ability due to their own genetics or their own willpower, and in the long run these students will supposedly give the most bang for their buck.
DeleteI think that raising short-term interest rates will have a negative net impact on college students. Yes, interest rates on checking and savings accounts will go up, but how many students actually have enough money stashed away in banks to offset the impact that higher interest on student loans will cause? I don't believe the answer is too high. Students make up one of the more economically vulnerable groups in our nation, and raising interest rates will have no positive effect on us. Still, it's true that the "trust fund babies" out there have a great deal of money in their own savings accounts, so it's likely that this change will impact them for the better. So I suppose the ultimate result here is just that economic inequality will increase drastically between college students who had to take out loans and those who did not. So while this move might be good for the rest of the economy, it's not good for college students and by extension is not good for the future of an educated America.
ReplyDeleteI think a raising of interest rates will drive the inequality gap to even larger proportions. Students who can afford to go to college will still have that opportunity while those that are on the bubble or barely able to afford it will have to drop out or go directly into the workforce after high school. Although interest rates in savings accounts will rise, usually people who are having to take out huge loans do not have enough in their savings accounts to make a difference so they will be paying way more than they will be receiving. On the other hand, those that do have a decent amount in their account probably aren't worried about paying for college and won't have the burden of high interest rate on a loan.
ReplyDeleteI don’t think there is going to be raise, but this is something that is impossible to say for certain, so that’s why we need to be very careful with it. I won’t really trade unless I am 100% sure and I believe that’s how one should work. I get a lot of support from my broker OctaFX since they provide me daily market updates for free, so having that I am very much comfortable and I fully aware of all the situations that is going on.
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