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student loans concept
English 102 - Section 12521
16 February 2018
A waitress sitting in a coffee shop in New York City looking around at all these people in suits wondering how did I get here? She remembers when she was in her young 20's and in college, then life took a turn and she had to move out and be on her own and college was not in her budget. She had dreams of becoming a big wig on Wall Street and making a lot of money, driving fancy cars, and living in a nice apartment in Manhattan. Life happened, and she had to start paying bills and supporting herself and her child and paying for school was not on the priority list. Seeing these college educated people have better paying jobs, are in the middle to upper class and they seem to be contributing a lot to society. She thought what I can do to go back to school on minimal income with no assistance from anyone else, and she had an idea. She had heard about something called student loans from some of the suits who were discussing how they are having to pay them back now that they are out of school. She had an idea, when she got home she started searching the internet and found she could qualify for these loans and at a low rate and with minimal credit. This was her ticket out of this minimum wage job and a better life for her and her daughter. "A college graduate can expect to make about $1.3 million more than high school graduates over the course of their working lives" (Fay).
In the 1950's, student loans became a solution to solve an economic problem of finding ways for funding higher education which in turn would have students earn higher wages to build up the economy. The ability to get a degree and not have to pay for it up front works for those struggling to just feed their families, this started the student loan concept. The thought of being able to get free money ahead of time then not have to pay it back right away was a clever concept, since most had no money to spare on this higher education they were just barely making ends meet. Over the years, student loans had evolved to be one of the primary funding sources for college. The government has also evolved and created more programs to offer parents and student such as subsidized loans, un-subsidized loans and parent loans, even banks have started to get in on this type of funding. These loans are being offered at lower interest rates and have easy credit qualification, so it makes sense to use this funding first before utilizing your own income. Some may argue taking on the student loan debt may be a burden to have to pay back. Re-payment of the student debt started to become an issue for borrowers and began to cause an economic concern for the government as this debt has continued to grow over the years. The benefits still outweighed the negative due to the impact to the economy and what results from having higher education are having. Tuition costs have risen to 344% in comparison to food and electricity of only 150%. Student loans make up about 40.9% of the funding used to pay for this rising tuition and it is continuing to grow. Obtaining a bachelor's degree by acquiring student loan debt pays off with students earning higher wages over their lifetime, allowing students opportunity to attend college who otherwise would not, and contribute more to society.
First, student loans give people the opportunity to pay for higher education and it has been proven students who have a higher education, have more career opportunities and in turn are making higher wages over their lifetime. These professions are very expensive to pay for but higher education results more employable and higher paying positions, such as management, professional, legal and positions with higher authority. College students tend to want to apply for and qualify for higher income positions and avoid government sector positions or lower paying skill level work. "There is evidence that bachelor's degree recipients with higher student debt are less likely than their low-debt peers to work in such sectors as government, nonprofit organizations, or education" (Velez). Professionals such as doctors, lawyers, pharmacists, veterinarians are some of the highest tuitions needed to obtain these degrees. A family of 4-6 children don't always plan for this scholarly journey when one child wishes to pursue this type of education. Costs can be over $100,000 dollars and families have not had time to save for this amount of funding. These professionals will all tell you they had to apply for student loans to get through school. Higher paying positions do typically require a college degree and can be lucrative in the long run.
Secondly, banks offer easy credit approval and financing, with lower interest rates which are regulated and capped to avoid hardship on borrowers, and various financial aid or government loan programs offered at fare rates. Parents intentions are to try to save enough for their child's education, but life happens and when it comes time to head off to college, the funds may not be there. Student loans offer parent's relief and students are not having to wait to enter college because of funding. Loans can be applied for 6 months before graduation for fall and there are websites such as salliemae, to help understand all options. Students can qualify for up to 100% of their education to be covered and re-payment options, so there is flexibility and something for everyone.
Next,"" research from the Bureau of Labor Statistics shows a high correlation between joblessness and earnings, and those with less than an associate's degree fare worse on average than workers with post-graduate credentials"" (Gobel). Therefore, companies offer tuition reimbursement for those seeking higher education, so repaying student loans after borrowing is simple. Companies realize if they are investing in their employees and help them to earn their degree, they are going to be a good candidate for higher positions and have more skills to build up the business. "A college education is an important requirement for entry into many of the highest earning professionals and jobs" (Fay). Loans having the flexibility to be borrowed then paid back later, taking advantage of this company benefit is smart. It does come with some responsibility, with the amount of student loan defaults rising and students not completing their degree, this can put someone in a financial situation that can impact their financial life. Getting ahead in the job today, requires a higher degree to be more competitive for management or higher paying positions in most corporate or small businesses.
It has been found providing loans to lower income students allows them the opportunity to attend college who otherwise would not and improve their overall lives. The cost is always of concern when these students are thinking of investing in their future, always keeping in the back of their mind, where is this money going to come from and how do I pay it back? "A car is more tangible in the short term, but an investment in education (even if it means borrowing money) gives you more bang for your buck in the long run" (Tyson 258). From the time students get to high school, they are already being encouraged to think of going to a good college or university, just not explained how to pay for it. College recruiters come to speak with students and offering them opportunities and showing them fancy dorms and college life, but not how to pay for it, only to get a degree. High schools are starting to do a better job of showing students how to apply for student funding through government student loans to have financing now and explaining option of paying it back later with no penalty.
The concept is student loans provide funding ahead of time to pay the tuition and housing or other school related items and then payment is not due for about 6 months after you've graduated or ended your schooling. This allows students to concentrate wholly on their studies and not have to worry about the stress of how to pay for school. Students who are working and paying for their education had expressed more stress and difficulty concentrating during their studies due to the worry of paying for school. Tuition costs continue to rise and a concern for students was how to combat the rising costs, especially when it is either private school or Ivy League college where tuition is already and the max in cost. Student loans are a way to subsidize that cost when scholarships or grants are not enough to cover all the costs. "Even after historic investments by the Obama Administration, the maximum Pell Grant covers only about 30 percent of the cost of a four-year public college education-the lowest proportion in history and less than half of what it covered in 1980." (College Affordability) This could be a concern for families who worry about whether or not their child will be able to attend a good school. Giving students various loan options helps defuse the stress of paying for college and lets them focus on what school should they attend and what is going to benefit them with their career choices
Equally important, if government did not offer loans to those who could not afford tuition or were low income students, they feel they could never afford to go to college and may not want to seek a higher degree. "When children born into the bottom fifth of the income distribution get a college degree, their chances of making it to the top nearly quadruple, and their chances of making it out of the bottom increase by more than 50%" (The Executive Office of the President 3). Providing student loans is a way for these low-income students to be offered an opportunity to make something of themselves. The thought of being able to have a higher education to some may feel like it is out of their reach. Loans have given lower income students and minorities a way to see it is possible to go to college. These types of students tend to take lower paying positions in government sector or lower level positions. "First, encourage more low-income children to go to college; and second, finance their education in order to narrow the opportunity gap" (Sawhill), so these students have equal opportunity for higher paying jobs. Low-income students who work hard and make the grades to get into college cannot find scholarships due to colleges cutting budgets, and" many of the students expressed a willingness to achieve their educational dreams by "any means necessary" and loans were described as one of these key means" (McKinney 329-354).
One impact on students is they will typically participate in retirement plans, health insurance, and make better decisions about their lives and improve their quality of life. "A college degree gives them access to alumni career services and mentorship from other graduates" (Gobel), to help them navigate through this even after graduation. Having this type of access to other professionals, leads to other opportunities, and jobs and companies through networking and involvement in non-profit organizations. Students need to get involved with organizations and clubs in school and not worry about paying for their schooling but how to stay connected with people who will inspire them to give back to their community.
In addition, student loans used to pay for a higher education are important to our society, because college degree earners were more involved in community programs, aware of political views, and contributed more in taxes into the economy. "Through volunteer work, leadership, and philanthropic contributions, public university graduates enrich the civic and economic life of their communities" (APLU). This is a way to grow healthy minds and good people who pay higher taxes, volunteer in community services, and have a need for more personal fulfillment. Government giving loans to students reap rewards for this lending in that they become public defenders, accounting and budgeting officers, serve in political offices and volunteer in positions which require higher education. Students with higher education are aware of politics and tend to be voters and College graduates have higher number of participation in community services. Government sees there is a need to break down any obstacles and make loans available to those who want to be better citizens." Under the President and First Lady's leadership, the Administration and the Department of Education engaged with leading experts to identify the barriers to increasing college opportunity" (The Executive Office of the President 2).
As a society, we need to try to view student loan debt as a good debt and understand there is value in this debt. Unlike a mortgage or car loan, this debt is not bad debt but an investment that increases over its lifetime. Government investing in student's education has long term benefits on society because students are willing to give back to their community. "Moreover, those with college degrees are more than twice as likely to volunteer and they contribute nearly 3.5 times more money to charity" (APLU). The impact on society for having invested in a higher degree, allows students to give back to their community and make a difference. There needs to be change on the stigma that going into debt for a higher education is somehow bad debt. Government is understanding it needs to be a part of the solution for student loan debt and it does make paying back loans easier with keeping payments at less than 10% of one's income to make it affordable.
On the other hand, there are those who have borrowed and do not complete their degree in four years or even 6 years or have not finished and de-faulted on their loans. There are also those who have taken on too much student loan debt and feel this is keeping them from graduating due to stress of the debt. There is one drawback for the middle class in that they may not get access to Pell grants due to earnings are too high and student loans are the only option but benefits still outweigh the debt. Also, taking on student loan does come with responsibility and if not paid back can impact families from receiving mortgage loans, cause bad credit, and garnishment of tax returns. Re-payment of the student debt started to become an issue for borrowers and began to cause an economic concern for the government as this debt has continued to grow over the years. This is now the norm for those wanting a higher degree since just having a 2-year degree is not enough for most higher-level management jobs.
In summary, providing a way for people to fulfill their dreams and giving them something tangible to have the power to earn more money, get them out of their current situation to a better one, and have them become a contributing member of society has its benefits. Loans are a means to an end and are not something negative in your finances but used as an investment in something that cannot be taken away and can build wealth for someone. To prevent students from giving up on going to college, this is the type of funding that students have been looking for and parents can be ok with having this debt. From a social stand, there is benefits to the economy through higher taxes being paid, non-profit organizations receiving more contributions, and professionals contribute for personal satisfaction. Finally, loans are a flexible form of financing for a better future and it gets people somewhere financially where they want to be but is also requires the responsibility of being paid back and cannot be taken for granted.
"We need to reach, inspire, and empower every student, regardless of background, to make sure that our country is a place where if you work hard, you have a chance to get ahead" (The Executive Office of the President 2).