By Sarah Wright
Why Do Student Loans Exist?
Loans of any type exist to provide people without immediate means the ability to make a big purchase. In many ways, this can be seen as a democratizing measure, because it allows people without large amounts of capital to access funds that would otherwise only be available to the wealthiest of individuals. There are plenty of arguments against this type of system, but the bottom line is that this is the way the world works for most people: credit is an option that many people take advantage of.
College tuition is typically more expensive than most people can afford to pay out of pocket, and for better or for worse, the public sector doesn't have enough cash to spread around. Loans are, in many cases, the only viable solution to the problem of not being able to immediately pay for a college education. In this sense, student loans are a positive force for change. They enable more people to afford higher education. But the high number of borrowers defaulting on their student loans is cause for concern.
Should Student Loans Exist?
With credit defaults causing economy-shaking 'bubbles' in a variety of sectors over the past few years, there's been a recent push toward living within one's means, even if that requires working more than one job and rarely having time off. Conceptually, living within one's means explicitly eschews the notion of buying anything on credit, including an education.
With talk of a student loan 'bubble,' it could conceivably be argued that student loans just shouldn't be available. But that kind of argument would ignore the important issue of educational access equality, which is important to ensure that people of all social standing have the ability to get an education. Some people rely heavily on student loans, and earning an education is an aspiration that is worthy of the extension of credit.
A Different Argument Against Student Loans
Rather than seeing student loans as a means to allow financially irresponsible people to add instability to our economic system, one could see student loans as an unfair and unnecessary burden. Should we really have to agree to carry a heavy debt load just to get an education? Couldn't we take a lesson from our foreign (and financially stable) allies like Canada, Germany and Norway, where taxpayers heavily subsidize higher education? Wherever you stand on the political spectrum, it seems worth considering whether our current system of student loan debt is really worth the cost.
Whether you're in favor of student loans or not, there are some new changes to federal student loan payments that you should be aware of.