Why investors aren’t the only ones who will feel the pinch

The Federal Reserve’s funneling of trillions of dollars into the economy over the past five years has provided a shot in America’s arm. The stimulus has affected consumers more than they realize, experts say, as will the tapering.

On Wednesday, the Fed announced it would begin to wind down the quantitative easing program known as QE3. Analysts say consumers should start to prepare now — especially those who are planning to buy a car or home within the next three to six months. “The stimulus program was supposed to boost spending going in, so it’s going to reduce spending going out,” says Peter Morici, economist and professor at the University of Maryland’s R.H. Smith School of Business.

Tapering may increase the cost of financing big-ticket items and rates on student loans. “If your furnace goes out and you only have $700 in the bank, you will either have to freeze or buy it in installments,” Morici says. “The same goes for any emergency repairs on your home.” Similarly, college students struggling under the weight of rising tuition fees may face a new challenge in 2014: rising interest rates on loans. “Colleges are already seeing concerns about this reflected in their applications,” Morici says. Law schools are facing a fall in admissions due to rising costs: 54% have reported cutting their entry law school classes for the 2013-14 academic year, according to the 2013 Kaplan Test Prep law school survey.

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