While there is no direct correlation between interest rates and student loans that we know about, any additional spending by the federal government during these uncertain economic times are bound to push the question about stabilizing the economy through interest rate hikes. This is not a simple question as there are multiple factors to consider in our experience. What or how will the federal government pay for any loan forgiveness? So far, there seems to be a muddled message on how the government will cover the cost of yesterday’s announcement from the President to forgive 43 million Americans of at least some student loan debt.
Part of the problem is that there is no exact number known for the cost of the anticipated forgiveness in the first place. Secondly, there are any number of tools available to the President and currently Democratic controlled congress to address the cost. The problem for now is two-fold. First, that the decision or announcement has ignited ire from most of the US population. Some claiming the forgiveness is too little and some saying the opposite. Secondly, spending money in large scale during what could have been the beginning of a stabilization of inflation will certainly tilt the scale for even higher inflation (absent of a sensible plan to pay for it-not yet announced). So the Federal Reserve Board may be feeling like their hands are being tied and possibly feeling forced to hike interest rates again soon, when some were touting recent cooling of the inflation rise before said announcement.
There is no question that people need relief, but was this the way to do it? In our mind, no. However, we are pleased that something is being done to ignite the debate to resolve the out of control price of education. In the end, every action has an equal and opposite reaction, if we recall correctly from school. With that immutable fact in mind, more spending means more inflation is likely and with more inflation, more interest rate increases are on the table as a very likely possibility to tamper inflation increases. Our question is what else is on the table and when will we stop spending without regard for the consequences? Your thoughts?
Our news is meant to be informative and thought provoking, but we can not and do NOT provide accounting ,tax, legal, financial, nor investment advice.