How the Nation's Debt Crisis Could Affect You
By Lauren Bayne Anderson
It’s hard to miss the debates over the federal budget crisis.
If the government doesn’t raise the debt ceiling by fast approaching August 2, 2011 the country will default on its loans. But what does that mean for you, the average fresh-out-of-college, American worker?
It could mean everything from a freeze on student loans to higher credit card payments.
If the crisis isn’t worked out, the nation’s credit rating will be downgraded from its AAA rating, and that could mean higher interest for you on everything from credit card payments to home and car loans.
Some experts are predicting an immediate increase of at least 1.5 percentage points on consumer interest, which could add thousands to your debt over the course of the years.
And if you’re still in school or considering going back, and are relying on federal loans to make your tuition payments, the crisis could cause trouble.
If the budget crisis isn’t solved by the deadline, federal student loans would be frozen and an estimated $8.8 billion in Pell Grants would not be paid to students and colleges this August and September.
Additionally, the rates for student loans could rise and there could be further cuts to education.
Even scarier, colleges across the country could be forced to temporarily close and some to lay off faculty.
Mark Kantrowitz, Publisher of Fastweb, said “It would be nothing short of a national disaster,” in a recent CBS MoneyWatch article.
The good news…if any? Interest rates on credit cards and other consumer borrowing can only be raised on new balances—not on anything you’ve already spent. Lenders are also required to give borrowers 45 days notice.
And, experts are still unsure of the fine points, since this looming crisis is a first for the country. Some say credit cards will be affected, others say they won’t.
However, experts agree that if the crisis isn’t solved pre-deadline, there will be consequences for the country—and those consequences will be felt in one way or another by the average everyday American like you.
What can you do?
Contact your representatives and urge them to act immediately to solve this budget crisis. To find contact information for your U.S. Representative visit https://writerep.house.gov/writerep/welcome.shtml and for your Senator www.senate.gov/general/contact_information/senators .
Information compiled from the St. Petersburg Times, CBS Moneywatch and UPI.