The last few decades have seen an unprecedented increase in student loan debt levels and in fact, student loan debt has become a financialfully-fledged crisis for many graduates.. Students have been incurring enormous debts and later defaulting or going into forbearance in these payments and because of this, education policy makers and experts have had endless debates regarding how to tackle this problem. The, but the debate has been laden with inconsistencies and lack of consensus and most of the solutions advanced have not made area real impact on the loan deficit.been effective. One of the key problems contributing to student loan crisis is the lack of adequate knowledge and awareness by student borrowers about what they are really getting into when they take loans. To get rid oferadicate this problem, students should be properly counseled, advised and educated by college institution financial advisors from high school preparatory classes and college financial advisors the department education about the seriousness of taking out loans.logistics involved in loan borrowing. Students should also be advised and helped by university financial advisors in in choosing the best- fit colleges financially so that they do not make wiseunwise college choices and then do not take on enormous loans to fund their education that they will have trouble paying back later.
Education experts and college loan helpersactivists have for long fought againstdecried the complex and unclear rules regarding college loans and have often advocated that these rules be clearly explained to college students so that they can fully understand them before deciding to borrow. The complex and unclear logistic have resulted in instances where students sometimes do not know the total amount that they are borrowing due to, the interest incurred on these loans, or even the repayment options available to them. ThereAlternatively, there are instances where the students know the actual amount they are borrowing, but do not know the interest that they will incur on these loans due to misinformation or not regularly balancing their loan.. Some schools have, in some instances, been accused of behaving arrogantly, for instance where they also enroll students without asking any questions whether the students can afford the high annual tuition fees or even give any advice related to loans (Hechinger). The approval of the loan excites the students about being able to afford school without realizing the mountain of debt they may have in the future.It is such arrogance that sometimes leads students to make unwise decisions that are based on inadequate knowledge and information when it comes to the borrowing loans. In fact, the observed lack of information and arrogance on the borrowers has led to the emergence loan companies whose goal is to exploit students. They exploit students because they are uninformed about their current loan situation and are forced to borrow even more money to try to resolve the debt. The underlying problem here is that no one goes through the importance of the wording of the loan documents and the amount they will be paying.
They do not know how much they will be paying due to amount they think is going to the loan versus how much is going to the principal. Such increased payouts for loan companiesData indicates that companies that find student loans are increasingly incurring huge profits. An example from the article, “Education Credit Management Corp,” whose boss, for instance, made more than 1 million dollars from student loan collections (Hechinger). This company that is based in Minnesota has an agreement with the United States government whereby it charges fees to borrowers and earns commissions from taxpayers -- which totals up to 31%-- when it collects on defaulted student loans (Hechinger). Such huge rewards have inadvertently prompted criticisms from concerned parties that such agencies are “reaping a bonanza from former student’s pain” (Hechinger) by charging high interest rates and not informing the students of the repayment plan.). A former deputy undersecretary of education is quoted as saying that loan programs are “enriching collection agencies and undermining a goal we all want for society” (Hechinger). College financial advisorsColleges and high school college preparatory teachersthe government are at fault for failing to educate properly and inform loan borrowersloanees about the implications of their borrowing options or even the logistics involved.
Many do not take the time explain to acquire adequate knowledge and information about the loan programs that the studentsthey are subscribing to. This is where when colleges and high schools fail to perform their role of informing and education on such matters. This disinformation, a crisis is inevitable. The crisis translates to students taking humongous loans, ; most of which lies on the students, as they are the ones who have to repay the loan. However the fault of such humongous loansthey do not only falls on the student, but the loan preparer who mayunderstand the interests incurred or may not have explicitly stated the rules of the loan.even the repayment options incurred. Some take these loans and fail to graduate while others. Others take the loans and use them to fund low-value degrees that ultimately do not help their course when it comes to repayment (Clemmitt, 892). In addition, lack of proper counseling and advising on the government education authorities part leads some students to choose to attend very expensive colleges and therefore take in huge loans to fund their education when there are colleges that are more suited for the economic burden that might ensue. better and in fact cheaper options available.
The role of advising, counseling and educating both prospective and current colleges students about the logistics involved in the borrowing of loans falls on the college preparatory courses and educators as well as college institution financial advisors.is charged to the government and relevant education authorities and this is the first step towards solving the student debt loan crisis. Students should be provided with sufficient financial information in advance before they set foot in college. Albeit, they For many students, paying for college is in actual sense the first major economic transaction that many of them take part in since most of them are fresh out of high school and have virtually no information and data regarding college financing. They do have information regarding the financial options available to them, but are made unaware of this information.. This is where the high school preparatory classes can step in and inform the students ongovernment in association with education authorities such as college management steps in; the payment choices of attending college.government should provide in advance adequate financial information. This should be done even before of choice of college has been done.
One recommendation is to hold seminars for seniors in high schools who are awaiting graduation and who look forward to joining college in the coming year. Students continuing their Relevant education stallholders should be required to take a class before they graduate on Money Managementhold seminars and theresessions with students and their parents or guardians and adequately equip them with information regarding college finance. There should be a particular focus on the issue of loans. A class that teaches students the impact of loans on their current financial situation as well as the future after they graduate would benefit the students so that they are more adequately prepared for student loans. Information regarding the loan programs available should be provided together with the pros and cons of these financial programs. The classIn addition, they should focus on the issue of interest rates as well as repayments since this is one of the areas where students lack adequate information on. OnceIn addition, once the students are preparing to join colleges, it is up to the colleges to meet with the prospective student and suggest the best loan programs available.for their students. As mentioned earlier, there are various loan- giving companies out there that wish to exploit students, for example, in the form of enormous interest rates and hefty fines for defaulting repayment. College management should select a variety of options and pick the best loan programs toand then advise the students appropriately.
A guidance counselor or financial advisor should help direct lowLow income and first generation students who have no one to advise them about college matters should be helped in choosing the best- fit colleges., in terms of finance. The best people to do this would be guidance counselors and economic teachers because they can teach students about the effects of a largespecial education loan.advisors from the federal department of education. Lack of adequate information sometimes prompts students to make unwise colleges choices and then take on enormous loans to fund their education in spite of the fact that there may be better financial options that are available to them out there. Even if these students are able to finally graduate from such colleges, their lives are hovered by unpaid college debts and it becomes even harder for them to make any economic advances. The main point of these advisorshere is to provide information to students regarding the best- fit college taking into account one’s financial position. This information should be on available for all the colleges that the prospective students desire to join. This may include information on the financial structure of the institution.
Students should also be advised on the costs of the various degrees that they wish to pursue as well as their market value. Once this information hashave been provided to students with information on student loan programs, and then they can make conscious decisions that are consistent with their current situation. For instance, a student may decide to attend a relatively inexpensive college whereby he can partially support himself and borrow a little money from an appropriate loan program to cater for the other financial requirements and use the time to take prerequisite classes. After this, he can see about a loan for a more prestigious college, transferring the credits and spending less money (and time) at the more expensive college.. Even in doing this, students will be fully aware of what they are getting into and even when it comes to the repayment of the loans, they will be psychologically and mentally prepared since they know the amount that they are required to pay.
Works Cited
Clemmit, M. CQ Researcher. Student Debt: Is the College Loan System Fair?
www. Cqresearcher.com
Ehley, B. The Fiscal Times. The Hidden Reason for the Student Loan Crisis. Print.
Hechinger, John. Taxpayers Fund $454,000 Pay for Collector Chasing Student Loans. 2013. http://www.bloomberg.com/news/print/2012-05-15/taxpayers-fund-454-000-pay-for-collector-chasing-student-loans.html
Lieber, Ron. Placing the Blame Students Are Buried in Debt. The New York Times. 2010.
