Smart Borrower Blog

What S&P’s Downgrade of America’s Credit Means for College Students


Aug 8th, 2011 @ 5:09 PM by Debbie Dragon


The news these days are mired with stories about the debt ceiling and politics, but these events may mean very little to the average college student. But the consequences of the political and economic atmosphere will have very dire effects, and it will hit college students close to campus.

 

It starts with Standard and Poor’s reassessment of America’s credit rating, dropping it from a AAA rating to a AA+. S&P justified their decision to downgrade with a statement they released, stating:

 

The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to, fall short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.

 

This downgrade will affect just about everyone, but will hurt college students in particular. With the downgrade comes threats of higher interest rates on college loans, both federally and privately funded, it will mean increased costs to pursue higher education, and a longer time table to pay back loans. It will also make it more difficult to secure a student loan, because a higher standard will be set forth to apply for a loan.

 

Only time will tell how much this downgrade will effect the interest rates on college loans. Most financial advisers will point out, since this has never happened before, that they have nothing to base projections off of. However it can be expected to raise up to a point and maybe more.

About Debbie Dragon
Debbie Dragon is a full time freelance writer and the co-owner of ReliableWriters.com.

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