According to the U.S. Labor Department data published on Sept. 13, the annual inflation rate for the United States is 8.3% for the 12 months ending August 2022, after rising 8.5% previously.
Inflation increases the price of goods and services in the economy. It can also lower people’s self-esteem and make everyday living feel like a challenge as you now need to live below par to avoid succumbing to the economy’s uncertainties.
Inflation is continuing a record-setting run and further decreasing most people’s buying power, and college students are no different. Inflation impacts student loans in two overlapping groups; firstly, for those seeking to take out a student loan to cover their current or future educational expenses, and secondly, for those who have completed their studies and must pay off their student loan debts.
High inflation raises the cost of students’ necessities, such as housing, food and transportation, and will push up tuition costs, making it more important for students to spend less and earn more where possible. With a higher overall cost of attending college, students will likely need to take out more loans. These loans will come at higher interest rates than in the past years due to inflation.
On a positive note, for students who have graduated from college and are repaying their loans, inflation makes repaying past fixed rate loans less expensive in real terms. Between rising tuition, greater personal expenses and the possibility of needing more loans to pay for the same degree, students are particularly vulnerable to the effects of inflation. This is especially true of those who live off campus or whose college accommodation prices have increased.
The main way inflation reduces the value of a student dollar is by raising the price of everyday essentials, such as food, accommodation, gas and transportation
Students can reduce the impact of inflation in the following ways:
• Focus on saving money or earning extra cash
• Share housing with roommates, or simply move in with parents, if necessary
• Reduce spending on entertainment and eating out
• Buy food in reasonable bulk, and focus on groceries that are likely to last you for a month
• Take a means of public transportation, if possible, rather than using a personal vehicle
• Make a budget to gain greater control over personal finances
Students can also reduce inflation’s impact on student loans.
Federal student loans tend to provide more safeguards than private loans. However, if a student is eligible for a federal loan, then they may opt to take a private loan on a fixed rate term, ensuring they can more accurately predict future payments.
Dealing with financial pressures as a college student can be stressful but there are ways to alleviate the impact of inflation. Also, on the bright side, the pressures and hindrances college students and graduates face can teach essential financial skills, which will be beneficial to them during and after college.