Inflation and Its Affect on College Students

Between rising tuition, greater personal expenses and the possibility of needing more loans to pay for the same degree, students are vulnerable to the effects of inflation. This is especially true for those who live and eat primarily off campus, or students whose college room and board has risen as far as prices are concerned. Unfortunately, it’s hard to predict how long this spiraling situation of inflation will last since it depends so much on many factors, from the Fed’s monetary policy decisions to the current war in Ukraine. For that reason, it would be wise for students to make preparations now for the long term.

The main way inflation reduces the value of a student’s dollar is by raising the price of everyday essentials, such as food, shelter, and transportation. For students who often rely on their college calculation of overall cost of attendance, how hard inflation hits depending on timing. Those starting or continuing school this fall will likely see their tuition rise. It is known that many schools will not increase their grant budgets even as they increase their costs of attendance. Instead, the new, higher costs of attendance will make students eligible to take out more loans to cover rising costs. With so many young Americans buried in debt, a prolonged inflationary spiral threatens to burden future generations.

There is also another thing that comes to mind: the effects that inflation have on student loans. It will impact student borrowing by two overlapping groups: those seeking to take out a loan to cover current or future expenses, and those who have completed their education and have to pay down student loan debt. For the first group’ the news isn’t all that good. The knock-on effect of Fed rate hikes is that interest rates for all kinds of loans also rise. Student loan rates are no different. Since federal-fixed interest loans are set in May of each year, loans were taken out before July 1st, 2022. The current interest rate on an undergraduate student loan is 4.99%, up from 3.73% last year. But on the bright side, for graduates repaying their loans, inflation would (in theory) make their existing student loans cheaper.

Finally, for many students, the only way to finance a college education these days is through some kind of borrowing. If a student needs to borrow money to attend college, he or she may want to apply for a grant-based scholarship through the school that they are attending, regardless of what state they reside in. They should also take out whatever fixed loans that is needed for the basics, like tuition and room and board. dealing with financial pressures of college can be stressful, but on the bright side, the next batch of graduates could learn essential financial skills, which will be a benefit to them during and after college.

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