Higher interest rates increase costs for college students

“Charge it.”

This phrase is not uncommon to the average college student. Yet, due to a recent increase in the nation’s prime interest rate, students may no longer be so hasty to whip out their charge cards.

The prime rate is a main interest rate set by the government that affects everything in the country that works off of an interest rate. This includes credit cards, student loans and petroleum products.

The current prime rate is 4 percent, which is a .25 percent increase from the former 3.75 percent interest rate of the last few months, according to http://www.wjla.com

A shortage of applicants for student loans has not occurred, but some students are using different avenues to pay for college.

“I’ll keep some of my loans, but now I’ll be working to help supplement the costs,” Robert Robinson, 21, said.

Deanda Ewers agreed.

“The increase will not affect me taking out student loans, but from now on I’ll only take out federal loans instead of private loans,” said, Ewers, 21, a senior elementary education student from Ramstein, Germany.

The rate increase also affects credit cards.

While some students have lowered their amount of credit card usage, others are continuing their regular usage.

Ewers said, “The increase hasn’t affected my credit card usage because I only have one credit card, and I don’t make purchases on it often.”

Some students have noticed the increase in the prime rate when they open up their monthly credit card bill.

“I definitely noticed the increase. I noticed it as soon as I opened up my bill,” said Robinson, a junior computer and information sciences student from Atlanta.

The main reason for an increase is to combat inflation on the U.S. economy. Inflation causes a lot of uncertainty and crises within an economy; therefore the main goal of the Federal Reserve Board is to do whatever it takes to eliminate the prospect of inflation, according to comments posted on the Board’s website at http://www.federalreserve.gov

The Federal Reserve Board is the body of individuals who make all the decisions regarding the money and interest rate in this country. Although the government appoints members to the Federal Reserve Board, they do not control it.

The board members have the sole decision-making power on every aspect regarding money and interest rates in the United States, according to its website.

The Federal Open Market Committee is the group within the Federal Reserve Board that specifically makes decisions regarding the interest rates. When there is an increase in inflation, interest rates rise, but when there is a decrease in inflation, interest rates decrease.

There is no way to fully predict the future of the prime rate, but many economists have come up with their own speculations. According to www.wjla.com, under the current chairman Alan Greenspan, the board raised the prime rate more than 12 times this year.

Rising costs of products within the economy, particularly costs associated with petroleum- based products, can cause a shift in U.S interest rates because the U.S. is what Victor Oguledo, chair of Florida A&M University’s economics department, describes as an “energy intensive economy.”

Oguledo said he believes that rates will never return to being low again.

“The days of low interest rates will be coming to an end.”

A survey of economists by “The Wall Street Journal” found they were evenly split on whether the newly appointed Federal Reserve Chairman Ben Bernanke “will lead the Fed to further rate hikes in his first months in office or leave rates at the level reached under outgoing chairman Alan Greenspan.”

Bernanke said he sees no danger of inflation getting out of hand, according to the Associated Press.

Contact Gheni Platenburg at famuannews@hotmail.com