This article is for informational purposes only and not intended as financial advice. Always consult a professional for personalized guidance regarding your financial situation.
The Federal Reserve (Fed) is the U.S. central bank, and they just cut their benchmark interest by a half-point. This might not have caught students’ eye immediately but the information could be useful.
What does this cut mean?
Interest rate cuts are needed to stimulate the economy. When the Fed cuts interest rates, it lowers the cost of borrowing for businesses and consumers, which can lead to a boost in borrowing since it is inherently cheaper to do so. Essentially, this makes borrowing more attractive, helps reduce the risk of an economic slowdown, and promotes economic growth.
The Federal Open Markets Committee stated it has gained greater confidence that inflation is moving well toward 2% and judges that the risks to achieving its employment and inflation goals are roughly in balance, according to a press release.
Although this is positive, many students continue to face an unforgiving job market.
An article by CNBC stated, âLightcastâs data shows that job postings for bachelorâs degree holders with two years or less of experience from Jan. to May ’23 to Jan. to May â24 saw little difference in top occupations, industries, and skills demanded. However, there were 148,500 fewer job postings in that period for â24 than in ’23. For jobs that donât require a degree, openings are up slightly from last year, from 65.75% of postings in 2023 to 65.98% so far in 2024. However, according to Lightcastâs data, eight of the top ten job postings in March were ones that did not require a college degree.â
This illustrates how data proves the difficulties these students face by there being a skewed ratio of what jobs are looking for and what candidates need.
How does this help college students?
For those who take out student loans, this could lower those rates and, more specifically, lower rates on private loans. This means that students will pay less interest over time, potentially leading to more manageable debt. For those planning to graduate soon, this could mean achieving financial independence more rapidly since borrowing will be easier. This will be evident when financing major purchases such as cars, homes, or a business. Since this cut is meant to promote economic growth, it can lead to more job opportunities since companies may find it more effective to afford new projects and not adhere to layoffs to stay financially afloat. With a strong economy, graduates can face higher starting salaries and better job prospects.
What are some ways to navigate?
College students have the opportunity to benefit from this new rate by re-evaluating their financial approaches.
According to an article by Anna Helhoski at Nerd Wallet, you could track your spending by starting âwith a list of expenses you are certain of during the semester, such as a trip home at Thanksgiving or filling your car with gas every two weeks. Subtract those expenses from the amount of money you have for the semester. Whatâs left is your discretionary spending money.â
Furthermore, an article by Lisa Smith at Investopedia suggests, âFor a broad overview of all things finance, consider reading How to Money: Your Ultimate Visual Guide to the Basics of Finance. Written by best-selling author and frequent TV guest Jean Chatzky, the 256-page book does a great job covering the basics, such as budgeting, credit, investing, and taxes, in an engaging and refreshing tone.â
Students could even look to see if there are any financial literacy organizations at their schools.
Setting the Seal
Levels of financial literacy differ for each person, and it is well known that the traditional K-12 grade levels in the United States donât always offer education on the topic. Understanding the choices made for our economy can be overwhelming and hard to understand, but with enough curiosity and determination, one can develop one’s own meaning of financial literacy.