What happens to my student loans when/if the dollar is devalued?
Posted Nov 22, 2014, 6:03 AM UTC
Posted Nov 22, 2014, 6:03 AM UTC
No idea who this blog is, but hey do a good job explaining how inflation helps borrowers:
http://www.economicshelp.org/blog/2830/economics/impact-of-inflation-on-savers-and-borrowers/
This is part of the reason hyperinflation is so damaging, all of the contracts written in nominal (non-inflation adjusted) dollars are essentially worthless which destroys tons of value. Hyperinflation bouts tend to be self-reinforcing so they start off slowly then exponentially ramp until something gives.
You shouldn't really expect this though, US debt is all priced in US dollars and congress could raise significant revenue fairly easily with taxation which obviates the need for massive money printing. All of the examples in modern history were countries that were in the midst of wars or had massive liabilities in foreign currency (e.g. Germany owing Francs and Pounds after WWI) which they tried to print their way out of.
your student loans are probably at a fixed rate, so the notional amount you'd pay wouldn't change. If your salary increases because of inflation this would be a good thing.
Either a 1920's Weimar Germany scenario, or even an Argentina, or Japan, type scenario is what I'm referring to.
Uh, Japan has had deflation, which is the opposite of the other two. And if you really think Weimar-style inflation is coming to the U.S. any time soon, then you should have bigger things to worry about than your student debt.
you'll be in good shape assuming your interest rate stays constant and the economy hasnt collapsed. it will be easier for you to earn back the money you owe.
but dont count on it happening in the us. the dollar is actually strengthening relative to other countries.