with S and P downgrade, how will this impact student loan rates?

I think it's fixed to the fed rate. It'll be low and stay low unless inflation forces the fed to raise the rate.

With college costs increasing it's critical to give students a decent rate.

burritos;540528 said:

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I think it's fixed to the fed rate. It'll be low and stay low unless inflation forces the fed to raise the rate.

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Exactly....inflation would be a bigger worry then the downgrade which was only done by S&P....Moody's and Fitch still have us at AAA... at worst, I think Bill Gross of PIMCO said we could see 25 basis points of 1/4 % or so....

I wouldn't worry about inflation (I'm more worried about deflation) and I wouldn't worry about the S&P downgrade. US Treasury rates still on the way down.

dajo9;540540 said:

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I wouldn't worry about inflation (I'm more worried about deflation) and I wouldn't worry about the S&P downgrade. US Treasury rates still on the way down.

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I never understood the logic behind the thought process that both inflation is bad and deflation is bad. And if we had neither that would be just right. Yet a loaf of bread is probably 1000% higher in cost than it was 50 years ago, so are we better off now? or were we better off then?

dajo9;540540 said:

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I wouldn't worry about inflation (I'm more worried about deflation) and I wouldn't worry about the S&P downgrade. US Treasury rates still on the way down.

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yeah...to clarify, I am not worried about inflation at all....just that inflation would be a bigger headache then this downgrade....

Actually, inflation right now would be a good thing. The biggest problem in our economy is that households have too much debt. Inflation would lower the value of that debt improving household balance sheets. With lower debt burdens they could afford to spend again.

You also have to keep in mind that sustained inflation comes with higher nominal wages. Higher nominal wages are nowhere near in sight which is part of the reason why I'm completely confident that inflation is not going to be an issue.

burritos;540542 said:

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I never understood the logic behind the thought process that both inflation is bad and deflation is bad. And if we had neither that would be just right. Yet a loaf of bread is probably 1000% higher in cost than it was 50 years ago, so are we better off now? or were we better off then?

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I don't give much thought to these things, but it would seem that asset allocation and demographics would be the largest preasures upon the US Fed to attempt and control inflation.

Of course inflation is necessary for growth which helps us all feel better about unblindingly channeling more energy and work product into the future so that we can all be happy. Unfortunately we have all gone global, and the math and economic models needed to sustain these global systems just hasn't caught up to speed and may not for years to come.

The US securities market is a crap-shoot based not upon traditional fundamentals, but on insider moves by increasingly larger players that can (under the right circumstances) move the market and pricing at will so that a few players make a killing. (For more info see Sports bettor Billy Walter's winning streak, and how he moves the odds. The circumstantial evidence is there. Most people just choose to ignore it.

burritos;540542 said:

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I never understood the logic behind the thought process that both inflation is bad and deflation is bad. And if we had neither that would be just right. Yet a loaf of bread is probably 1000% higher in cost than it was 50 years ago, so are we better off now? or were we better off then?

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Keep in mind that when economists and policy makers use the term "inflation" they are referring to a general increase of prices for ALL goods. Including labor. Moreover most of the time the discussion presumes that the rate of price increase for all goods is relatively even (so the price of labor goes up about as much as the price of other goods). With those parameters, you get the result that inflation doesn't really affect someone who only sells labor and uses the proceeds to buy what are now, more expensive goods.

With those parameters, what inflation does affect are transactions that were based on historical (past) prices. The primary example being lending money at fixed interest rates. For those transactions inflation is both bad and good. Deflation is both bad and good. It's just good/bad for different people. Inflation is good for people who are net debtors (owe more money than their gross wealth). Inflation is bad for people who have net positive wealth.

Over the last two decades more and more people in the US have flipped into being net debtors. That is why there is less and less resistance to the implementation of economic policies (i.e. QE) that cause inflation. However as a whole the country still has net positive wealth, so inflation is still viewed as "bad". It's just that for certain individuals and institutions (such as the central government) a bout of inflation would really help them out.

93gobears;540552 said:

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The US securities market is a crap-shoot based not upon traditional fundamentals, but on insider moves by increasingly larger players that can (under the right circumstances) move the market and pricing at will so that a few players make a killing.

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Well if that's your attitude, just don't invest in financial securities. We've had this topic discussed on this board multiple times and ultimately no one is forcing you to play a game that you feel is tilted against you.

As long as the feds are willing to continue subsidizing the market there ought to be no change in rates paid by students. Correspondingly since the subsidy paid by the central government does not show up in its expenditures in the normal budgetary process, it will be some time before these subsidies end, despite the precarious nature of the central government's finances. I'd estimate at least another 10 years before the government gets its house in order and realizes it is losing vast sums of money (even more than it presently assumes) guaranteeing student loans. So the gravy train should be unaffected for anyone who is presently a student.

Cal84;540563 said:

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As long as the feds are willing to continue subsidizing the market there ought to be no change in rates paid by students. Correspondingly since the subsidy paid by the central government does not show up in its expenditures in the normal budgetary process, it will be some time before these subsidies end, despite the precarious nature of the central government's finances. I'd estimate at least another 10 years before the government gets its house in order and realizes it is losing vast sums of money (even more than it presently assumes) guaranteeing student loans. So the gravy train should be unaffected for anyone who is presently a student.

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If you are in the financialservices industry, the zero interest rate given by your main provider is the only reason that you have to live.

No one in their right mind says that ZERO percent interest year after year is healthy for an economy. And if you state that prolonged ZERO percent interest rates for privileged banks is cool, then you are just feeding fifth avenue.

Federal reserve presidents would prefer inflation to deflation simply because there is much more data on how to combat that issue. We have very little data on how to get out of a credit deflationary situation. It would be like the blind leading the blind.

You are preaching to the choir here. As an owner rather than a borrower of capital, the artificially low interest rates present in this economy represent nothing less than a forced appropriation of resources. My resources to be precise. That said however, the US is just one small country in a very large world. There are still other countries left that value and respect your capital. Most Americans aren't used to thinking about these sorts of concepts but if you are familiar with Latin American economic history, you know what you need to do. The fortunate thing is that today, you can move your capital halfway across the world with a couple of mouse clicks. Back in the 70's, Latin Americans had to jump through hoops in order to rescue their money from their feckless domestic economies.