Essay Example on Public Policy: Loan Forgiveness to Ease Student Financial Stress

A public policy is a set of actions that the government takes when solving a problem that affects a group of people. It is a decision that the government makes on behalf of its citizens and to solve a problem affecting a group of them. An example of such an issue is when the leaders in a society decide that due to the significant increase in the student loans and bankruptcy of those affected, there will be a loan forgiveness program. In the program, for example, the students will only pay their loans partially, and the rest is forgiven. Several considerations need to be made before enacting the policy. The affected parties should at least benefit from the agreement, and none of the parties should suffer complete loss at the benefit of the other. In addition to that, the policy should be in line with the laws of the country. The scope of the policy should be considered by looking at the total population that will be affected. In case the policy affects a large population, then it is worth being implemented nationwide. This is a public policy advocacy plan for the issue of student loans in the United States.

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To begin with, it is essential to understand what student loans are. In the current forms of education, the government offers financial aid to students to access fees, pocket money and other maintenance costs that they have while they are learning. The aid is given in instalments depending on the learning systems that the students have. The policy of education loans was made to solve the problem of school dropouts by students who had the skills to potential to make it in life due to the problem of lack of fees. The government decided to make a system that allows the students to get funded for fees and other maintenance costs that they have while studying.

Moreover, the loans helped the students access the schools that have the best facilities and have a more assured chance of success in their examinations (Yanellis, 2019). Before the introduction of loans, the students who had qualified to be admitted to prime schools were forced to turn down the offer because they could not afford the money to pay for fees and upkeep. They, therefore, went to schools that had some lower standards because they were cheaper. The aid if adequately planned for, can also be used in other means apart from tuition fees. In case the student has already paid the fees, the money may be used in the attainment of a business idea that may be a life-changing decision for the student. The loans also help build the creditworthiness that a student has upon paying them back. When the individual pas the government, their loan limit increases which give them access to bigger loans. The individual can, therefore, take more money to start even bigger projects which reduce the poverty levels in the country.

The loans are however unlike bursaries, and the financial help is recorded as a debt to be paid as soon as the students leave school. Though the loans played a very significant role in helping many students get access to education, there are some disadvantages associated with it. They are discussed below. First, loans are expensive to pay back. The loans have an interstate of 4.45% to 7% (Lochner & Monge-Naranjo, 2016). Taking into consideration the appreciation and the increase in debt annually the payment of the loans is cumbersome to the individual. In addition to that, one takes time to establish themselves in life properly. After school, one may not be adequately established and may have difficulties in establishing their life projects because the loans tie them down. If for example one has a salary of a $100000, and the loan takes $20000 per month, the individual may not have enough capital to start other projects. The first capital after school should be used in making personal projects which are a foundation for future life.

Basing on the knowledge on the pros and cons of the student loan, it is possible to come up with a public policy that rectifies the flaws that the finances come with. The policy should be implemented nationwide because students are in all places that the nation. The policy should get rid of the high-interest rates that the loans have and offer a more affordable rate. An interest rate of 7% on a student who has just graduated would mean that they would have to spend their first income paying for their educational loans. The loans should be paid at lower interest rates compared to those of banks because the students may not have a proper source of income.

Due to the high increase in the number of students who need and enroll in student loans, the number of people who are in debt increases gradually over tie meaning that a large portion of people who graduate are under debt (Chapman, 2016). Since 2006, the number of people who are in debt has risen and the total amount of $1.26 trillion. The amount is 7% of the gross income that the country has. Subjecting the people to such a high loan limit to the people is detrimental to the economy. The amount continues rising because more people take up new loans every year. The number of students who cannot pay back the loans is also high.

This policy aims to reduce the effects that paying back the loans has both on the students and the nation at large. Having a lot of loans reduces the rate of development of a country. The citizens do not have any income to start businesses that they use as sources of income. This is detrimental for both the government and the individuals. The poverty level of the people remains high for the individuals, and the government lacks means of charging some taxes such as income tax among others. The, therefore, lack proper means to start projects such as road constructions which makes the nations remain underdeveloped.

The policy is likely to be opposed by some of the unions that benefit from the bills. The board in charge of giving loans is likely to receive a big blow once the policy is implemented. They will no longer receive the extra money that they get on the current conditions. The unions are therefore likely to offer a lot of resistance to the policy. The banks that transact the money will be stripped of the privileges of getting transaction charges. The affected parties are likely to file court cases against the policy. They may also collude with political leaders to influence the outcome of the policy. To curb the resistance that they offer, the best means to curb it is by educating them on the importance and benefits of the policy. In understanding the essence of reducing the student loan interest, they have higher chances of allowing the policy to take action. The defaulting fees charged on those who cannot afford to pay should also be reduced to a minimum depending on the circumstances that the defaulter has. If for example an unemployed individual is charged a very high levy, they may lack the means to develops which reduces the chances of paying the loans.

To ensure that the policy is successfully implemented, some help is needed. First, the leaders and members of the legislature must pass the bill as a law so that it can be implemented countrywide (Youman & Mather, 2018). They have to ensure that they woo the opposition members into accepting the policy. They have to show that the advantages of the policy outweigh the disadvantages. This can be achieved by having as many leaders as possible into seeing the motion through the legislature. The second source of essential help is student bodies. In most universities and colleges, there are special units that are assin=gned the role of looking into student affairs. The bodies should come together to show the disadvantages of high-interest rates and loans. They should find people who support the idea in the outside world and give demonstrations using people who have suffered due to educational loans. They should also avoid any incidences that point to the cancellation of student loans considering the benefits that the financial help has. The loan should still be given but at lower or no interest rates.

The policy on the reduction of the interest rates that the students pay back their loans is very beneficial. It reduces the levels of poverty and at the same time maintains the access to education as because many people still have access to the funds. The idea of reducing the rates or forgiving the students increases their chances of prosperity especially because there is a reduced financial burden on their first salaries. The money that would be used in paying the loans can be used in other projects such as capital for new businesses which benefit both the individual and the government (Fairfield & Luis, 2016). Though the policy may face some opposition from some of the organizations that benefit from the interest, passing it is more beneficial. It is a countrywide policy that will require the passing by the legislature and therefore some political leaders will have to pass it as a bill then a law if it succeeds.

References

Chapman, B. (2016). Income-contingent loans in higher education financing. IZA World of Labor.

Fairfield, T., & Jorratt De Luis, M. (2016). Top Income Shares, Business Profits, and Effective Tax Rates in Contemporary Chile. Review of Income and Wealth, 62, S120-S144.

Lochner, L., & Monge-Naranjo, A. (2016). Student loans and repayment: Theory, evidence, and policy. In Handbook of the Economics of Education (Vol. 5, pp. 397-478). Elsevier.

Youman, M., & Mather, N. (2018). Dyslexia laws in the USA: A 2018 update. Perspectives on language and literacy, 44(2), 37-41.

Yannelis, A. (2019). A crisis in student loans? How changes in the characteristics of borrowers and in the institutions they attended contributed to rising loan defaults. Retrieved from https://www.brookings.edu/bpea-articles/a-crisis-in-student-loans-how-changes-in-the-characteristics-of-borrowers-and-in-the-institutions-they-attended-contributed-to-rising-loan-defaults/