Fixing our Loan Problem

According to American Student Assistance, nearly 20 million Americans attend college annually and 60% of them borrow in order to cover costs. Though the level of need varies greatly, estimates indicate that there is somewhere between $902 billion and $1 trillion in total outstanding student loan debt in the United States today. Such statistics, as well as the many others out there, point to a very troubling and precarious situation for our nation. And what’s more, the figures continue to worsen each year with one of the most troubling statistics being that the number of college drop-outs is on the rise. In fact, nearly 30 percent of college students who took out loans dropped out of school, up from fewer than a quarter of students a decade ago (Source: Education Sector).

eligibilityIn order to stem this mounting problem before it creates a financial mess, there needs to be a significant policy change at the federal level. Specifically, I believe that there needs to be a complete overhaul of the system by which we determine which individuals receive aid. Currently, the criteria that are used to evaluate students is very minimal and does not take into account many factors that would help decipher if a student is likely of repaying the loan. For example, the U.S Department of Education’s office of Federal Student Aid (FAFSA) only requires that a candidate to: have a high school degree, be accepted to a college, have a social security number, and sign FAFSA certification statements. To me, this represents a system that inadequately evaluates students and must become more stringent. I think that a student’s performance in high school, the quality of the university they will be attending, and the student’s planned major should all be considered. Though a radical move, I feel that each of these factors should be considered because each of them is a likely determinant of the student’s future earnings. For example, if a student plans to attend a lower quality university versus an Ivy League school, I think that they should not receive the same level of aid. Though this may seem a little shallow, students from Ivy League schools tend to earn more in their careers than most students so this should not be ignored.

 In the end, this change represents a dramatic shift that would greatly limit the number of students that would be able to attend college. I am a believer that everyone should have access to education, but we also cannot afford to continue dishing out federal funds to students that don’t even finish school or pursue careers that will not enable them to pay loans off. As a whole, the United States is in a pretty precarious financial situation given the amount of debt we hold and our level of spending so I think that student loans is one area that can and should be addressed.




4 comments on “Fixing our Loan Problem

  1. I could not disagree more.

    First, as to American economic power. In general, a better educated population will outperform other countries. So, having fewer college graduates looks like a step backwards.

    Second, you seem to be blaming students for dropping out on them. They are often dropping out because they are taking extra jobs while in school and can’t balance it all.

    Third, if we only gave loans to those who would earn more, we get lots of bankers and no teachers, nurses, policemen, and other underpaid but essential professionals. Do you think we need more great bankers or teachers in this country?

    Fourth, the problem is the cost of higher education, not the students taking loans. We need to find ways to lower that. (I must admit, I am not sure what drivers are, but as most costs of higher education, saving must come from there). Also, I know in Pennsylvania, the legislature keeps cutting the amount they provide, so there is just less government support overall which pushes up tuition at public schools.

  2. I think we should do more of what the Obama administration has started- shifting towards income-based repayment. As an educator, I think the best outcome for students and schools is for students to pursue an interest. If they pay a “tax” on that choice by having to factor in loan repayment, we undermine their freedom to study what they are inspired to.

    So, a solution is to make repayment based on a proportion of your future income. Maybe you become a small business owner who employs five people for thirty years. But you are happy, you provide a service, you a pillar of your community. And you didn’t have to to cannibalize your savings to start the business to pay off student loan. Maybe you become a poet whose poems make people happier. You don’t make a ton of money, but you didn’t opt out of it because you had to work for some mega corporation to earn enough by age 35 to repay loans….

    …and so on.

  3. What if we even took a step back further and looked at our college education system. The costs are staggering, especially for private universities. I am fascinated with Australia’s college system actually. There are only about 10 large state colleges in which students can attend for FREE and pay it off using income from their post grad job. Keep in mind, Australia is one tenth the population as us, so this plan may not work on a greater scale. But, I think that the true answer lies in recreating the college structure.

  4. Pingback: Surfing Blogs (Trial Blog) | Stakeholder Organizations 11

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