Student loans are an issue discussed by many in the US. On the one hand, they provide a possibility for people to get higher education without spending years to accumulate funds for it. Additionally, it can be strenuous to combine studying and working to pay for tuition fees and monthly expenses. The loans supposedly should make the task more accessible for those earning a degree. On the other hand, repaying those loans can be difficult. While student loans are intended to make it easier for people to get an education, the system has significant problems that make the process challenging.
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Earning a degree results in higher personal income, therefore enabling the repayment of the loan. Black, Filipek, Furman, Giuliano, and Narayan (2016) stated that the debt of students in the country totals at $1.3 trillion. Nearly half of students have an obligation they will have to repay once they begin building their careers. The authors argue that the loans are beneficial as students can have higher earnings after the graduation. Therefore, they can compensate those more easily (Black et al., 2016).
The system in which the loans are organized is confusing, therefore resulting in many of them not being repaid. Barr, Chapman, Dearden, and Dynarski (2018) argue that this is because the borrowing process is similar to mortgages. There are fixed payments throughout a certain amount of time, placing a financial burden on a person. The authors offer an income-contingent loan program that would consider monthly income when setting the amount of payment (Barr et al., 2018).
Some students choose to avoid taking a loan because of the difficulties associated with them. McKinney and Burridge (2015) have conducted a study on loan aversion, and have determined that negative attitudes towards the system can have damaging consequences for people. The issue arises because some choose not to borrow money due to the risks and problems associated with the process even in cases where it would be helpful. Therefore, the college loan system in the US should be modified to suit its purpose better.
Barr, N., Chapman, B., Dearden, L., & Dynarski, S. (2018). Reflections on the US college loans system: Lessons from Australia and England. IZA Institute of Labor and Economics. Web.
Black, S., Filipek, A., Furman, J., Giuliano, L., & Narayan, A. (2016). Student loans and college quality: Effects on borrowers and the economy. VOX. Web.
McKinney, L., & Burridge, A. B. (2015). Helping or hindering? The effects of loans on community college student persistence. Research in Higher Education, 56(4), 299–324. Web.