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Pound jumps after hint of interest rate hike

By WTOP Staff

DANICA KIRKA
Associated Press

LONDON (AP) — The pound jumped on Friday to reach its highest level against the dollar in nearly five years after the Bank of England’s governor predicted an interest rate hike might come sooner than expected.

The British currency rose to $1.6960 from $1.6830 the day before after Mark Carney said an interest rate rise from its current record low of 0.5 percent, “could happen sooner than markets currently expect.” The last time the pound traded above $1.70 was in August 2009.

Carney hedged the hint by telling an annual banquet of bankers that the Bank of England is not pre-committed and would make its decisions according to incoming economic data.

But the warning nevertheless surprised economists and traders, many of which had been forecasting the first rate hike to come in the spring next year. With the economy strengthening and the unemployment rate dropping to 6.6 percent in the three months ending in April, the pressure to raise rates sooner has increased.

Economists quickly updated their forecasts, with some predicting a rate hike by early 2015, or even sooner.

“We acknowledge that this forecast change is being made against the metaphorical cacophony of stable doors being slammed shut,” said Ross Walker of RBS U.K. economics. “Perhaps we ought to have seen it coming.”

Carney’s first year in office has been defined by a “forward guidance policy,” which kept rates low and closely tied an interest rate rise to a drop in unemployment.

But as economy the strengthened and unemployment fell below the level where a rate rise would have been considered, that “forward guidance” passed into history.

Further underscoring the recovery in the British economy, credit rating agency Standard & Poor’s on Friday lifted its outlook for the country’s debt to stable from negative. That means there is less chance of a downgrade in the coming years, something the agency credited to improvements in public finances and the pickup in growth.

Should the Bank of England lift interest rates this year, Britain would be way ahead of the ECB, which is still cutting rates — and maybe even ahead of the U.S. Federal Reserve, said Stephen Lewis, chief economist of Monument Securities.

“The markets have, for a while, suspected the BoE might be the first of these central banks to tighten,” Lewis said. “Mr. Carney’s comment has served to strengthen their conviction.”

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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