If you are a student in college or have a family member in college right now... you may end up being affected by the nation's current credit crunch. If you live in Michigan, you may be affected next semester.
As reported on Mlive.com, Michigan's MI-LOAN program, which was often used to close the gap between loans made by the federal government and the actual cost of education, has been suspended for the time being, because the program was unable to borrow enough money needed to in turn, lend the money to it's borrowers. The cost of credit is going up... and it's quite likely that in the future, more than just student loans will be affected.
Thinking about buying a new car? On credit? While for years many people have just been able to walk to the dealership and walk away with a brand-new car for no money down, in a credit crunch, like the one that's just beginning, that might be a thing of the past... even if you have stellar credit. It will be harder to get a credit card, harder for businesses to get loans... and it's already harder for home buyers to get loans.
A tightening credit market is not entirely a bad thing. While it is a bad thing that some students might not be able to go to college without the MI-LOAN program, our country as a whole relies too much on debt. I'm a big fan of Dave Ramsey. He lives in a world where "debt is dumb, cash is king, and the paid off home mortgage replaces the BMW as the status symbol of choice". I like that. If only my husband could get a job so we could pay off our student, car, and home loans, LOL.
Living in the world of credit sacrifices tomorrow in order to live it up today. We see that in both personal finance and government finance (think national debt/trade deficit). There's absolutely no reason to finance a vacation. While it might be important to finance a trip to great-grandma Smith while she lies on her deathbed, nobody needs to borrow money to go to Disneyland. Or to buy a Hummer. But people do it every day. There are people out there paying more in car payments than we do for our home mortgage. Hope you like that car, because you may end up living in it if things go south.
The days of credit cards loaning wads of cash to everyone and their dog (and dead grandma) are probably drying up. Perhaps this means that people will start learning to live within their means? One could only hope. It's not easy to adjust to a lower income level, or an effective lower income level because there is no credit to go out and borrow, but it can be done. We took a 66% pay cut when I left the Navy and my husband went to work. I had to learn to use coupons effectively and hunt out bargains. Now it's like a game to me... see how much food you can haul home from the grocery store for the least amount of money. Today I came home with 20 pounds of ground beef, 9 Tombstone pizzas, and 1 box of Velveeta Shells and Cheese for $36. I was in bargain lover's heaven.
America as a nation tends to be a resilient nation (or at least it used to be). We will live through this credit crunch and any residual effects, and hopefully come out of it as a people much wiser and a little more thrifty.
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