Introduction
Everyone has a right to a decent education that will ensure the possibility to lead a comfortable, healthy life and fulfill one’s potential. However, higher education is not free, it is an investment in a person’s future, often, with an unpredictable outcome. The majority of US families cannot afford to pay the entire tuition, especially if their children want to study in top schools. Many would apply for a merit-based scholarship and grants, yet this sort of financial aid would not meet the needs of all applicants. Another option to pay for the university is to take a federal loan. Since education is an investment with an unpredictable outcome, taking loans is a risky venture that may result in a significant financial crisis of both an individual and a state.
Millions of American students graduate with a loan debt for their education every year. Overall, student debt around the country makes almost a trillion dollars, and it is constantly growing. Along with mortgages, student loans appear to be one of the major concerns for family budgets at the moment (Dynarski 12). Some students that are lucky enough to find a well-paid job straight after graduating may have adequate funds to pay back the loan in about ten years. However, with a current unemployment rate, the probability of such an outcome is small. Apart from insufficient wages, the graduates may have additional conditions that make it almost impossible to repay the loan and survive. Some of them start working not only to be able to cover the debt but also to save up money for the education of their siblings. Let alone unpredictable life situations that need huge investments, such as sudden cancer or fire accident at home.
The burden of debt is a significant obstacle for young college graduates to build their lives, launch their own business, or start a family. To deal with this issue, the federal government offers a number of opportunities for reducing the debt or even relieving the entire amount. In 2014, the Obama administration introduced a program to address the debt crisis that allows developing a repayment plan based on the income of each individual (Dynarski 14). The program also offers the option of postponing the payments and consolidating multiple loans into one. In very rare cases, the loan can be partially or entirely forgiven if an individual meets certain criteria. For example, citizens that have worked as school teachers in low-income areas worked in a non-profit organization, or did military service, might be entitled to a significant loan reductions.
Despite its good intentions, the program has flaws and has been widely criticized by the experts. The federal loan system is far from perfect and needs some substantial improvements. However, the improved loan system would only concern the new borrowers and exclude the millions of graduates that are already indebted. First, the government has to work on the existing loan relieving program. Second, the nation has to realize that releasing the educated professionals from debt is in their own interest, and supplying the market with young, competent workers is beneficial for the development and well-being of the entire society.
Conflicting Opinions on Relieving Student Loan Debt
Every year undergraduates tend to take bigger loans due to the increasing cost of university tuition. The larger loans later turn into larger debts and present a threat to the educational system and the economy of the state.
Dynarski argues, however, that she does not believe there is a debt crisis, and the amount of payback to American universities is still much higher than the amount of debt. She calls the situation a “repayment crisis” since the graduates have to pay for their loans at the beginning of their careers when their income is not sufficient (Dunarski 12). The Pay-as-you-earn program has the potential to help many distressed borrowers, but the repayment plan must be based on thorough information about an individual. Along with low-income, such factors as a family situation and health conditions may seriously affect the ability to pay the debt.
The earnings of young graduates tend to be changeable and often absent at all, forcing them to seek help from families or loan rescheduling programs. Carlo de Bassa Scheresberg et al. emphasize that one of the biggest obstacles to the financial well-being of the graduates is a lack of financial literacy. According to their research, it is common for Millennials to make hasty decisions, choose quick ways of earning money and struggling to make ends meet. The authors state that the measures should be taken to improve the Millennials’ knowledge about finance. It will help not only them “minimize the cost incurred in managing the debt” but as well to achieve a “financial stability and security” (de Bassa Scheresberg et al. 2).
Avery and Turner say that before considering taking a loan, a student has to evaluate his situation and analyze the differences in earnings “associated with the probability of degree completion and the choice of a field of study” (172). They highlight the importance of the completed degree for getting a better job offer. Once again, financial literacy is vital for a student to properly calculate the possible outcomes of college investment. It is up to a government to provide a decent financial education and ensure that students are able to finish their studies. The importance of improving students’ knowledge about loans is mentioned by the other researchers, like Perna and Ruiz, who encourage all students to complete entrance counseling to know how to manage their loans (54).
Even though the current debt relief program requires some significant amendments, it is the only available option for distressed students to get help from the government. However, not everyone considers this program a wise initiative. As it was mentioned before, the program by Obama administration did not get much support with economic scientists. According to Dorfman, since the universities already receive governmental funding, another program is an unreasonable waste of money. The state is already helping the students through grants and scholarships and it is unfair to put another burden on taxpayers, many of whom have not even been to colleges themselves. Dorfman states that it is extremely unfair that these citizens have to sponsor the individuals, who have a degree and therefore a chance for much better jobs and higher wages. He also questions the decision to give more favorable conditions to those who work in government and public sector, rather than to the workers that are in higher demand. The author argues that the very existence of student loans is unjustified. He explains in the article: “If the government wants to subsidize college education it could simply directly subsidize it rather than making loans that are designed to be forgiven”( Dorfman para. 10).
In his article for Forbes, Chris Denhart claims that the massive loan debts are destructive for both the college graduates and the state economy. He also mentions that plenty of borrowers do not use the student money to pay for school, but for entertainment. The author also suggests that forgiving one loan would give people a wrong idea that all loans can be forgiven, thus, creating a possible economic hazard (Denhart para. 12). In his article to New York Times, Kevin Carey also criticizes Obama administration policies regarding the student debt relief and emphasizes its effect on taxpayers. He also claims that the best solution to reduce the federal expenses for loan forgiveness is to “crack down on spiraling college prices, so students won’t have to borrow as much money in the first place” (Carey para. 7). As well as Carey, Denhart suggests that instead of forgiving the loans, the government should stop giving them to students that won’t be able to repay them.
In 2010, The Wall Street Journal published a provocative article “What’s Wrong with Vocational School?” by Charles Murray. The author’s point was that the reason for the educational debt crisis is overpopulation in the universities. Murray believes that too many people are enrolling in the top colleges and only a few actually deserve to be there (Murray para. 2). Only the brightest students with the highest scores should be admitted to colleges. He claims that the students with lower learning abilities would not be able to make the best of their education and will only waste their time, money of their parents and governmental funds.
Most of the arguments make a lot of sense, yet their authors miss some important facts. First of all, not everyone is qualified for scholarships and grants. Zoe Mendelson claims that the current system of financial aid for students practically excludes students from middle-class families (para. 2). Normally, such families are not poor enough to match the criteria for most types of financial aid, but not wealthy enough to afford the tuition in good schools. Thus, the middle-class students can either go to a less expensive college or take a loan to go to the preferred one and engage in self-realization. Joel and Eric Best agree that the students choose to study in a particular college voluntarily and therefore are responsible for the most of the costs. However, they are positive that the higher education is beneficial for the whole country as the number of competent workers in all institutions directly affects the quality of life of society.
Analysis of the Opinions
The system of student loan forgiveness is indeed not perfect, and yet it is the only one we have. The millions of students all over the country are facing financial difficulties at the moment, and the federal government has to take actions to help them.
Susan Dynarski is a Professor at the University of Michigan and, apart from everything else, is engaged in the National Bureau of Economic Research. Considering her academic experience, her judgments can be trusted. Dynarsky reminds us that people tend to exaggerate the scale of issues that frighten them the most. She claims that despite there is no debt crisis, there are numerous cases of financial distress affecting the indebted graduates individually. The professor considers that the income-based payment has a potential, yet it requires more detailed information about each particular borrower to develop the most effective loan plan.
Carlo de Bassa Scheresberg, Annamaria Lusardi, and Paul Yakoboski are all distinguished scholars in Economic Sciences and winners of numerous research awards. The researchers understand the flaws of the repayment program and focus mostly on the ways to improve the financial literacy of students. Indeed, not everything can and should be solved by the government. Students have to be conscious about their financial perspectives and think before taking unreasonably big loans.
A paper by Christopher Avery, a Professor of Public Policy, and Sarah Turner, a professor of Economics and Education was published in a respected Journal of Economic Perspectives. Their view of a student loan as a risky investment sums up its entire concept. Students risk their family well-being hoping to get benefits in far future. Therefore, both Avery and Turner recommend to deeply evaluate the possible outcomes before applying. Laura Perna and Roman Ruiz conducted a thorough research and in their arguments mostly support the ideas of Dynarski, Lusardi, Avery and Turner.
It is hard to disagree with Dorfman, Denhart, and Kevin Carey on their points regarding the unsustainability of the loan program and the importance of controlling the tuition rates of the universities. However, when it comes to the unfairness towards taxpayers, there is another perspective to it. Taxpayers may not get direct benefits from funding the future graduates, yet it is important to look further. Indeed, one might have sponsored a future greedy businessperson who just wanted to make use of governmental funds, but at the same time, one might have given a chance to a future cardiologist to quit the night shifts in fast food restaurant and open his or her private health care facility.
Regarding Charles Murray, his arguments might seem reasonable in the beginning. However, it is extremely snobbish to judge who is good enough to study in college. The problem is that the students from low-income families do not have much access to good knowledge and cannot compete with those who can afford better books, better teachers, and better schools. The tradition of providing higher education only to the wealthy should stay in the past.
Zoe Mendelson expresses a very important point, saying that current financial aid options often exclude middle-class citizens. Middle class constitutes the major part of the entire US population, which means that the majority of young Americans have very limited options for higher education and may never get in the school they dream about. If the economic experts want the government to stop giving away the loans, they should keep in mind that there must be another way for the middle-class students to access the educational opportunities.
Joel and Eric Best did not only include their personal stories into the book, but they also did a profound investigation of a loan history in the United States. The most important statement they made regarding the student loan debt is that there are two approaches to it. The individualist one implies that the person is responsible for his or her own education as well as for the cost of it. However, the second one is a common approach. The nation is only prosperous when its bright and talented people have freedom to develop, study, grow personally and professionally, and do their best for the sake of the country.
Conclusion
It is crucial for the nation to recognize that the number of qualified and talented professionals that work in state institutions, launch businesses and offer their services within the country, directly affects the economic and social prosperity of the country. The program of student loan forgiveness should not be regarded as a robbery of taxpayers. The program is yet to be improved, and the flaws are to be reconsidered. The government is to make sure that all the citizens have equal rights of accessing a higher education and develop their financial literacy.
Works Cited
Avery, Christopher, and Sarah Turner. “Student loans: Do college students borrow too much—or not enough?.” The Journal of Economic Perspectives, vol. 26, no. 1, 2012, pp. 165-192.
de Bassa Scheresberg, Carlo, Lusardi, Annamaria, and Paul J. Yakoboski. “College-educated millennials: An overview of their personal finances.” Joint report from the TIAA-CREF Institute and the Global Financial Literacy Excellence Center, 2014. Web.
Best, Joel, and Eric Best. The Student Loan Mess: How Good Intentions Created a Trillion-Dollar Problem. University of California Press, 2014.
Carey, Kevin. “Flip Side of Reducing Student Debt Is Increasing the Federal Deficit.” The New York Times. Web.
Denhart, Chris. “How the $1.2 trillion college debt crisis is crippling students, parents, and the economy.” Forbes Magazine, 2013. Web.
Dorfman, Jeffrey. “Here Comes The Student Loan Forgiveness.” Forbes Magazine, 2014, Web.
Dynarski, Susan M. “An Economist’s Perspective on Student Loans in the United States.” ES Working Paper Series, 2014. Web.
Mendelson, Zoe. “Paying for college.” Los Angeles Times, 2008. Web.
Murray, Charles. “What’s Wrong with Vocational School?” Practical Argument: A Text and Anthology, edited by Laurie G. Kirszner and Stephen R. Mandell, Bedford/St. Martin’s, 2010, pp. 631-635
Perna, Laura W., and Roman Ruiz. “The Use of Loans to Pay College Costs: Insights from the US.” Perspectives of Student Financial Assistance Policies: Lessons for Japanese Higher Education, 2015, pp. 37-60.