Saving Money on Your School District Debt

By Charles K. Trainor

This past summer was one that many people would like to forget. The economy was battered. Hurricane Irene destroyed thousands of homes along the East Coast. Tropical Storm Lee soaked states along the Gulf Coast and the already waterlogged Eastern Seaboard. Unfortunately, it missed drought-stricken Texas, where wild fires scorched over 100,000 acres, destroying hundreds of homes. In addition to enormous human suffering, these disasters caused a severe economic impact on homeowners and businesses.

Other events at home and abroad also affected our economy. Turmoil in global financial markets increased stress levels for governments and investors alike. Rumors about the possibility of several European nations defaulting on their debts were partly to blame. Here at home, we experienced our own brush with default until Congress and the President finally reached a less-than-elegant compromise to raise our national debt limit.

Throughout the tense negotiations, many were concerned that the U.S. government would lose its AAA credit rating, the highest and most valued designation used by independent rating agencies. These ratings rank the ability of borrowers to repay their debts. In most cases, the higher the credit rating, the lower the interest costs for the borrower. For municipal borrowers such as school districts, that can mean significant savings over time.

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