College Loans (Pros vs Cons)

Outline

 Introduction

• Students borrow federal and private loans to finance a college education
• Federal loans has many benefits, such as fixed interest rates.
• A college education is expensive, and most students cannot obtain without borrowing.
• Student loan debt is the main problem facing former students

 

 Thesis:  college degree pays.  It is a good investment that benefits the individual and society at large, and therefore the educations outweigh the student loan debts that students face.

 

 Pros

• College loan allow students in different areas of specialization to pursue their dreams
• A college education is expensive, and students need financial aid to achieve their goal
• Students acknowledge that a  college education is greater than   the costs
• Generally, students  deserve education despite the student  loan debt

Con

• A college loan is a burden to student
• As the debt rises, students suffer physically and mentally
• In the long run, graduates do not achieve similar opportunities
• Students with loan debt fall behind due to wealth inequality
• Generally, student loan does not bring equal return as debt-free students

 

Conclusion 

• Not all students can afford a college education.
• They should borrow loans to pursue their dream
• However, they should have the best of intentions when acquiring a loan
• Student debt is a serious issue, but policies to alleviate debt should be implemented
• Guide students in making borrowing decision to avoid adverse outcome
• Students should be well-informed before borrowing money

 

 

 

Introduction

 In the 19th century, a college education was considered as a good for all including the nation’s economy, and students received a quality training for free. The society was willing to support students by providing scholarship and allocating resources so that they may achieve their career goals and benefit society. However, in the 20th century, college education changed from a public good to a private pursuit. Initially, the goal of college education focused on promoting social welfare, but the social and cultural changes transformed the perception, and students could join college to pursue personal goals. The shift in perception introduced the idea of charging students since college education was a personal affair. Students received loans to aid them in covering education expenses. Since education is all about money, students experience a financial issue in attaining a college education.  Despite the financial burden, students believe that a college degree brings economic benefits, and more students both from high-income and lower-income backgrounds attend college. They prefer to borrow loans to help them complete education, and more importantly, achieve a better-paying job, and gain longer college experience. However, despite these benefits, the ongoing debate concerning college loan is that students find challenges in repaying loans. The purpose of this paper is to compare the pros and cons of student loan and make a conclusion if the benefits outweigh the risk. Generally, college loan help students struggling to access a college education.  Even though loan repayment remains a challenge, the rising costs of a college education is also a real problem, and the college degree is worth the student loan debt.

Arguments for student loans

Marx & Turner (1) assert that since 2000, the number of undergraduates in both two-year institutes and four-year institutions has increased. Due to the increase, the number of student-loan debt reached $1.4 trillion in 2018.   Note that American colleges offer open access education, and millions of students are attending these colleges with the help of grant aid.  However, students encounter other significant expense, such as textbooks, activity fees, tuition, and personal expenses (Marx & Turner, 1).  To meet these needs, students borrow government-sponsored loans.  The loan is associated with some benefits since it has fixed interest rates, flexible repayment terms, loan forgiveness, and no prepayment penalties, among other benefits.  The authors aim is not to focus on positive elements of the federal students' loan, but their goal is to find out how the borrowing benefits students.  In a randomized experiment, participants who were students from the community college asserted that they benefited from zero-interest loans.  Note that some colleges avoid providing nonzero loan to restrict students from having too much loan debt, and also to protect the institution from the harm of poor loan-repayment rates.  Only 16% of students borrow loans in such college compared to schools that offer nonzero loans (Marx & Turner, 1).  In the experiment, there were two groups; financial aid-eligible students and control groups.  The results showed that 30% of eligible financial students borrowed loan compared to students in the control group.  An important point to understand is that students who borrowed loan increased education performance. Since they received a nonzero loan or a zero-interest loan, they had the opportunity to further their studies, and they did better in their courses.  In weighing costs and benefits, it is evident that students' loans enhance success for students (Marx & Turner, 1).  Besides, the loan allows community college students to enroll in colleges, succeed in school, and more importantly, loan protects the students’ future.

 Abel & Deitz (1) add that the great recession affected many areas of the economy, including the labor market and capital investment.  It also increased the rate of unemployment since finding good jobs is challenging.  Another problem is that college tuition has increased and students suffer from student loan debt since they borrow a loan to finance their education.  However, although there is a challenge in wages decline, and the cost of education is rising, a college education is vital, especially with the help of student aid (Abel & Deitz (2).  The important point is that college degree benefits students in that it enriches their lives and help students live a life full of happiness and stability.  Note that students who are less educated struggle with life than educated students, and this means college degree is a good investment (Abel & Deitz, 2). However, a college education is so expensive, and students find it hard to achieve their career goals.  Remarkably, the availability of student loan is enabling students from different areas of specialization such as engineering, health care, and other areas to pursue a college degree.  Note that college education demand direct costs such as tuition fee, and opportunity costs which include housing costs and books (Abel & Deitz, 3).  Students can meet these costs by borrowing loans, and as a result, the loans allow them to attain higher education, gain a successful career, and make all ends meet, among other immeasurable benefits.

Arguments against student loans

            The central problem of college loans is student- loan debt.  Perkins et al., (116) assert that in 2014, student debt amounted to $1.6 trillion, and it was considered as the highest consumer debt. In 2012, 70% of graduates had an average debt of %29, 4000.  Although students value a college education, and there are investing in their future by acquiring the best education possible, there is an increase in student loan debt which is hindering students from achieving their dreams.  In 2013, 9,523 borrowers of private loans had an average debt of $25,000 and $35,000.  40% of the borrowers earned $25, 000, and the rest earned less than $50,000 (Perkins et al., 116). Many respondents asserted that they made sacrifices to pay the loan. For example, some lived at parents' home, they limited the entertainment and vacations, and gave up important things. Apart from these physical burdens, student debt loan impacts students' mental health. Note that when students have excessive debt, they feel as if they are in a financial prison.  Students who have excessive debt experience relationships stress, marital dissatisfaction, among other life issues which leads to severe depression (Perkins et al., 118).   In most cases, graduated are underemployed, and they accept the underemployment to make ends meet.  Students also suffer from negative consequences as a result of a loan default.  The government takes legal actions such as reporting graduates to credit agencies, money is deducted from salary until the debt is fully paid, and borrowers in default are denied professional licenses. The debt burden will remain to be a significant problem since there is no measures to alleviate debt.  

 Popescu (115) adds that students borrow money to reimburse their tuition and make ends meet but what they get in return is significant student debt which affects their physical and mental health.  An important point to note that student debt loan does not only occur as a result of underemployment and lower wages, but they loan debt occur since students obtain unimportant amounts. In other words, they misuse loans in buying new clothes, vacations, and other noneducational purposes (Popescu, 115).  They make poor decisions in that rather than spending the money in tuition and fees, and living costs, they spend money in gaming systems, alcohol and drugs, eat at restaurants, among other shocking shopping habits.  As a result of spending college loan in material things, they enter in the labor market with significant levels of debt that restrict them from buying a house, saving for retirement, having children, and other major life events (Popescu, 116).  The reason as to why students borrow large amounts to engage in lucrative lifestyle is because they lack a loan training program. Students do not make decisions before borrowing a loan, and they end up obtaining large amounts for a personal expense and ultimately suffer from student loan debt.

 

Conclusion

 Opponents of college loan argue that students are struggling with student loan debt. The Federal and private grants are making students servants, and also the debt is causing the economic crisis.  Rather than creating productive pathways to students, and improve their lives, students are being restricted from marrying, starting a business, saving for retirement, achieving their dreams, and have worse credit scores.  My opinion is that students should borrow a loan and use it appropriately.  Before borrowing a loan, students need to understand the consequences, and this will enable them to make wise decisions.   Even if student debt is a significant problem, students cannot do without loan since they want to pursue a college education and it is very expensive.  In addition, college fees have increased, and students rely on borrowing to finance their education. It is also important to note that a big number of students come from lower-income families.  In rethinking about the value of college degree, students should be allowed to borrow a loan to make their dreams come true.  The only way to enable them to enjoy socioeconomic advantage is by supporting them with funds. Note that since college education is a significant investment, students require significant resources. We should acknowledge this reality and allow students to borrow money to pursue a college education.  Students can avoid debt by borrowing wisely, cut living expenses, and make extra payment while in school. In addition,  there should be students loan program and allow students to take a productive path, that is;  teach students the importance of choosing a career path while and not a hobby path. 

 

 

 

 

 

 

 

 

 

 

Work cited

 

Perkins, David, Tim Johnston, and Rick Lytle. "Addressing student debt in the

classroom." Journal of Education for Business 91.3 (2016): 117-124.

 

Abel, Jaison R., and Richard Deitz. "Do the benefits of college still outweigh the

costs?." Current Issues in Economics and Finance 20.3 (2014).

 

 Marx M. B., & Turner J. L.The benefits of Borrowing: Evidence on Student loan debt and

community college attainment. Education Next Institute, Inc 19.3 (2019).

 

Popescu, Gheorghe H. "Does student debt constitute a bubble that may bring about an

educational crisis?." (2018): 115-118.