Student Loans: Should Everyone Get One?

Most people believe that everyone deserves a college education, but the fact is that default rates on student loans hover around 15 percent. The tug-of-war between the goal and the reality is causing a new debate over federal involvement in higher education.

Money for Nothing: Defaulting on the American Dream

Despite the enormous costs of higher education, most people feel it should be available to everyone. Since a college degree is so crucial to socio-economic mobility, many people feel it runs against the basis of the American Dream to deny someone the opportunity to pursue higher education.

Nowadays, just about anybody can obtain student loans. Having said that, the student loan default rate currently hovers around 13.4 percent. Not only are unpaid loans problematic unto themselves, but the return on investment of the subsidized students compounds the issue.

A recent analysis valued defaulted student loans at $115 billion, from the total $1.2 trillion in federal student loan subsidies, as a result of bunk loans made to roughly seven million students.

It’s crucial to keep in mind that this is taxpayer money. Students and citizens need to realize that, at a certain point, government oversight of education isn’t about profit, but about ensuring that the federal loan system remains a sustainable and successful practice. If nothing changes, and defaults continue as they are, the federal loan system could see heightened regulation and, even worse, sweeping cuts to the program.

Return on Investment: Methods for Accountability and Sustainability

“Return on investment” is a fairly self-explanatory phrase: what you get out compared to what you put in. In this case, what the government puts in (student loan subsidies) should be indicative of what it gets out of the investment (a successful, working graduate).

Financial experts and legislators have their work cut out for them in devising a system that produces a better ROI for student loan subsidies without totally denying applicants. The goal is to ensure that aspiring students are able to go to college while minimizing the risk involved in loaning thousands of dollars to anyone who wants them.

Some student loan experts have proposed that the government should stop looking at the students themselves, and instead begin looking at the schools and universities that these students attend. Perhaps a potential solution lies in sending aid-supported students to schools that have the best track records in producing degree-toting graduates that are working members of the economy. After all, the right to pursue a college education still stands.

The difference in this scenario is that, to an extent, the government is saying, “We’re paying for it, you’re going where we tell you to go.” Ideally, the government wouldn’t be sending every loanee to one or a select few of universities. Instead, the government would give you choices based upon where you were accepted or local community colleges.

Of course, this sets up the chance that Johnny Borrower wants to go to three certain schools but is required by the government to go to the one with the best graduation rate, student retention rate, starting salary post-graduation, etc.

Our Take

Were this practice to be adopted, many people might not be able to go to their first-choice school, but we mustn’t get too picky. A higher education at someone’s favorite school is not the same thing as the right to a college education.

Allowing the government to tell borrowers where they can and can’t go to college might be infringing upon the rights of them as independent, decision-making students. But the government, being the majority lender in certain cases, has a right to do so.

Either way, the balance between high default rates and higher education being a right is an issue that could, and should, see much reform in the coming years.