All posts tagged “Fed

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Homeownership Declines As US Student Loan Debts Soar

A story in the New York Times on Friday shed light on the relationship between student debt and homeownership in the US. The amount of people under the age of thirty owning a home is hovering near a three decade low, according to statistics from the FED: only 35 percent of people younger than 35 own a home. According to census data, this is down from 41 percent in 1982. At the same time, the nation’s student loan bill has exploded to $1.4 trillion, surpassing credit cards to become the largest source of personal debt outside mortgages. The Federal Reserve Bank of New York researched this development and its conclusion suggests that student debt was responsible for up to 35 percent (again) of the decline in homeownership among people between the ages of 28 and 30 from 2007 to 2015. Moreover, the study says that, if the amount of student debt would’ve stayed at the level of 2001, more than 360,000 people in that age group would have owned a home in 2015. (source)

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US Interest Spending and Debt Could Increase Drastically With New Interest Rate

On the sixteenth of March, the Federal Reserve Bank lifted its key interest rate from 1.50%, to 1.75%. This is the highest it’s been since 2008. It was the first major decision under the new Chairman Jerome Powell, and was made because of the continued growth and strengthening of the US economy. However, there’s one major concern regarding this decision: the interest spending and the size of the debt of the US. As shown in the graph, made by the Committee for a Responsible Federal Budget (CRFB), they estimate that interest costs will total $6.8 trillion over a decade and $965 billion in 2028. With just 1 percentage point annual increase in interest rates above CBO’s projection, this number would increase interest costs by $2 trillion (to $8.8 trillion) over a decade and by $325 billion (to $1.3 trillion) in 2028. Scenarios with an even higher percentage point increase are also shown. Moreover, the CRFB estimates that with the new key interest rate, the debt (to GDP) will grow to 101%, and would be at 107% with an increase of the key interest rate of 1%. (source)