Student Loan Debt

Thesis

Student loan is a type of loan offered by the government and other financial institutions to the students in higher learning institutions. It is payable and the time for repaying loan is after the student has graduated. This system of the loan to students is based upon the assumption that students are guaranteed jobs after the studies and thus will repay back the loan. This scheme was introduced by the government in 1957 with the aim of increasing the number of students in college.

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The student loans have been denounced as risky and at the same time celebrated as helping advance the lives of college students. The student loans attract more benefits to the students and camouflage the few disadvantages. The impacts of the student loan debt on the graduates’ lifes have been found to be devastating due to the stress of repaying back the loan. The final paper will discuss the relationship of benefits of the student loans to a student and negativity of it to a graduate repaying back and deduce whether to encourage students continue taking the student loan or not.

Introduction

The paper will start with an introduction which will cover a brief overview of student loan development history. This overview will explain changes that have taken place on the loan and how it was perceived by students. The historical development will cover the following stages.

  • 1957 during the commissioning of the first satellite in space.
  • 1972 Sallie Mae creation by the government.
  • 1993 Congress intervention for both federal student loans and private lending agents.
  • 2008 US financial crisis.
  • 2010 Uncle Sam takeover.

Benefits of Student Loans

This will be the main part of the paper and it will explain why student loan is important to the students in argumentative nature. The areas to base arguments will be:

  • Fixed and low interest rates (Hua 23).
  • Different repayment plans (Baum 23).
  • Federal consolidated loan (Baum 25).
  • Deferment of the payment options (Hossler 7).

Impacts of student loan debt on today’s society

This is the second section of the main body of the paper. This part explains the impacts of the student debt on the former beneficiaries of the scheme.

Conclusion

This section will discuss a summary of the relationship between benefits of the student loans and impacts of its debt to the life of graduates and conclude on whether to encourage more students to take up loan or not .

Student loan has been in existence since 1957, the time of President Dwight Eisenhower who established the first student loan program through National Defense Education Act. His idea of having the student loan was to increase the number of the science students in America. Since its inception, there have been debates on its pros and cons in relation to the students’ interest in and out of college.

By observing the hard times former beneficiaries of the loan are going through in paying back the money, many people have viewed the loan as a trap to the students’ life in future. Should the student take the loan to meet college fees? Should one consider the difficulties of paying the loan later? Are the pros and cons important for consideration in making decision whether to take the loan? All these questions have been asked concerning the value of student loan to student life in and out of campus.

The structure of the student loan has been designed in favor of the student. In looking back into the historical development of the student loan, the federal government was the only lender of the loan. The student loan was fully supported in 1965 through the introduction of Great Society presidential initiative and the enactment of the Higher Education Act that further expanded the loans to the needy and bright students.

This feature of the loan ensured that all youths are given equal access to the higher education irrespective of the social class that one comes from (Gladieux 6). In view of this stand, the students from poor background who took the loan benefitted from going through the college, gained skills and graduated just like students from well off families. This therefore affirms that student loan assisted in meeting the social economic equalization policies by laying a leveled academic playfield for all social classes.

The issue of the private agencies getting into the business of lending student loan almost killed the morale of students and society in taking this loan. The interest of the loan was high for the private financial institution as they viewed this in business terms and thus were interested in making profit. This was too expensive for students. This time of student loan evolution saw decline in the number of the borrowers of the loan.

I view this as a learning experience for the government to note that student loan should be made available to students as it advances the lives of college students. Thus it is supposed to be fully funded by the government as it includes low interest that couldn’t affect the financial gains of the graduate as well as the career development. As it is noted, President Bill Clinton moved back the loans to be given directly to the students like during the initial times.

The 1993 historical development of student loans saw the congress intervening by allowing the federal loans to the students and at the same time guaranteeing bank loans (Gladieux 10). Existence of two agencies in funding the student loan was great advantage to the students as it provided options to induce decision. But, it is good to note that the two agencies being at play pose a risk to a student as this can tempt the student take up both loans and suffer in paying back. This will thus affect the future generation as they will see it as a burden to graduate.

Matt Hopster of Hope Intentional argues that student loan is worthwhile because education is a lifetime investment. By taking education as an investment, the amount invested in it will be doubled when reaping its benefits. Ed Irish on his blog post, Should I borrow for my Education, compared a loan taken for education and for buying a car. From the findings he noted that a loan for a car takes a five year repayment period as compared to a ten year repayment period for student loan whose social, intellectual and economic effects are felt in the lifetime through education. As noted from the two hypothetical scenarios, student loan is worthwhile for a student.

The loan has been made better to the students’ community by the government by borrowing more funds using credit form. Introducing more funds to the schools by the government will now increase funds to the students. The effect of increasing the funds reduces the cumulative effects of the loan.

Student loan is a good way of investing in education for a predictable and better earning in future. This is true because it takes time to buy something in cash as it takes time to accumulate the funds but easier to purchase through loan and pay the loan slowly and enjoying the services of the item. This is applicable to education; financing college education might take long for one to graduate due to breaks. If the same is applied to student loan, it will take shorter time and easier and paid later while working.

The student loans attract more benefits to the students and camouflage the few disadvantages. The student loan program as the system of giving loans by the government to the students through the federal loan system results into the consolidation of varied loans that is serviced through one payment done every month (Hua 23). The process of servicing the student loan is thus made very easy through consolidation. It thus attracts many students to take up the loan.

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