Student loans are loans given to students to facilitate them through their higher education. Student loans have greatly increased over the last decade with approximately forty million people having loans. According to research carried out by CNCC, they discovered that college education is the second-largest expense that a person will make in their lifetime the first being the decision roto purchase a house(Dickler).This paper will examine whether student loans lead to higher tuition and reckless use of funds.
To ascertain whether student loans lead to higher tuition rates it is paramount to consider the history of student loans in The United States. After the second world war, there was a rise in the number of people who enrolled for higher education and subsequently the rise of tuition fees. The amount students pay for a four-year college education is three times more than it was in the late 19th Century(Maloy,1).Higher education colleges were initially meant for teaching religious studies, but after the revolution age, the institutions slowly began teaching other courses.
The most significant development in higher education was with the G.I Bill( The Serviceman's Readjustment Act) which was in 1944. The Act provided for veterans four billion to be used in college education. Due to this, the enrolments were monumental and the number of students enrolling doubled. After President Truman created a task force to come up with suggestions on higher education in America ,the commission made the following findings. That there was a need to increase the number of colleges and that the government should be involved in supporting higher education. The late 19th century saw the declaration of separation of people in terms of race unconstitutional and the advent of feminism. These two developments led to increased enrolments in higher education.
The history reveals that the policies that were made in the past and decisions made by the government were for the welfare of the student. However ,the past ten years the feeling has been different in that the decisions that are being made are no longer student-centered. The burden is not in relation to the development of the student but the pressure of students to take loans with the increase in tuition fees. The amount of tuition fees kept increasing and is still increasing at an alarming rate to the point of overtaking consumer goods (Maloy,7).Funds are divided into two, state funding and federal funding. Federal funding mainly supports individual students and research; on the other hand, state funding mainly supports institutions in terms of operations.
One may ask themselves ,what the incentive is for incurring such huge amounts of student loans. Some of the reasons are that the pay of a graduate in comparison to a non-graduate is significantly higher. A graduate is able to have higher income and satisfied with their job. It is also very rare to find a graduate who is not in employment.
Reasons that are attributed to increased tuition aside from the availability of loans is the amount colleges use to sustain their staff. Lobbyists also argue that another reason is the cuts made by the state legislature which helps institutions. But the major reason is the availability of loans. This is according to the National Bureau of Economic Research. The colleges increased the amount because they are aware that the difference will be catered for It can be therefore be argued that federal initiatives allow students to enroll in universities. With the increased number of enrolments, the institutions struggle to accommodate the students ,thereby shifting the burden of costs to the students. The increment in federal aid and credit supply to students has led to an increase in the price of education.
To deal with this issue, all stakeholders need to come together and discuss how institutional sending can be minimized with the advent of technology and how tuition rates can be reduced. Technology can be leveraged by offering alternatives such as online classes which can be used to reduce the cost significantly. Online classes can also aid the students with the additional costs they incur when it comes to accommodation. Another option that a student may use is the two-step college method it involves acquiring an associate degree and later transferring credits for a bachelor's degree. The notion of being at prestigious schools should also be demystified. The final solution may be to have a proper state funding formula(Chingos,19) reforms need to be made for a proper change to be felt.
As to whether the availability of funds leads students to use money recklessly is a 50-50 answer. For students who fully understand and don't underestimate the impact of the loans do not misuse the funds. However, students who do not fully comprehend the effects of the loans tend to use money in an undesirable manner which leads to longer repayment periods and increased interest rates. Before taking the loans, students should be adequately explained to the effects of borrowing, and hidden information/charges explained to them so that the amount is not used recklessly.
Chingos, M., and Kristin Blagg. "Making Sense of State School Funding Policy." Urban Institute.
Dickler, J. "Student loan balances jump nearly 150 percent in a decade." CNBC, College Game Plan, August 29 (2017).
Maloy Jr, K. Harrison. "Higher Education Student Debt & Tuition Costs." (2018).
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