National Student Debt

1 January 2017

As the cost of education is on the rise students and their parents are trying to come up with the money to go to college. The usual steps are to seek grants from the government, private organizations, and from organizations setup through the colleges themselves. There are also loans that are made through the private sector and those from government based organizations. Some students go as far as trying to pay for college using credit cards. In the end students seeking higher education graduate with enormous debt, creating a larger burden on the economy and those struggling to pay off these bills.

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If the situation concerning the national student debt is not handled correctly then this country will find itself with a much larger problem in the near future. Proposition of Policy: The Federal and State government should institute policies to significantly reduce the national student debt. Definitions: The definition of default is provided by Business Dictionary. Com “Borrowing: Failure to meet the terms of a loan agreement. Its two types are (1) Fiscal: Failure to make repayment on the due date. Generally, if a payment is 30 days overdue, the loan is in default.

Covenantal: Failure to live up to one or more covenants of the loan agreement such as exceeding the prescribed total borrowings. ” Business Dictionary. Com provides a definition for endowment as “Gift of money or income producing property to a public organization (such as a hospital or university) for a specific purpose (such as research or scholarships). Generally, the endowed asset is kept intact and only the income generated by it is consumed. ” Claim 1: The national student debt is a large problem. Sub Claim A: The national student debt is a large problem because the cost of tuition is becoming more expensive.

Grounds A1: The research gathered by Matthew Reed in his paper, “Student Debt and the Class of 2007,” published in October 2008 by the Project on Student Debt website states, “Our analysis indicates that for colleges reporting data for both the class of 2006 and the class of 2007, the average debt of students graduating with loans rose from $18,976 to $20,098, a six percent increase. The increase was roughly the same for both public and private nonprofit four-year colleges. Average debt for the class of 2007 was $18,482 at public colleges and $23,065 at private colleges.

Data limitations cause these averages to be lower than actual levels. We estimate that the actual average student loan debt level for the class of 2007 is nearly $21,900: $19,400 for borrowers at public universities and nearly $25,700 for borrowers at private colleges. While it is still generally true that college graduates earn much more than those with only a high school education, student debt is rising faster than starting salaries for new graduates. While average student debt at graduation rose by six percent between 2006 and 2007, earnings for 18- to 24-year-olds with bachelor’s degrees rose only three percent. Grounds A2: Information provided by Marcia Clemmit in her paper “Student Aid” from the CQ Researcher dated January of 2008 states, “As the cost of higher education rises, grants for needy students have lagged behind, and more students are dependent on loans to finance their education.

At the same time, worries about college costs have been reaching higher up the socioeconomic scale. In response, states and private colleges have launched new merit-based scholarships that shift some aid from the neediest students to middle- and even upper-income families.

In-state tuition and fees (excluding room and board) for public, four-year schools average $6,185 for the 2007-2008 school year, up 6. 6 percent from 2006-2007; out-of-state tuition averages $16,640. At private four-year schools, the average 2007-2008 tuition and fees is $23,712, up 6. 3 percent from 2006-2007. The cost of college has nearly doubled over the past 20 years, in inflation-adjusted dollars, and college tuition and fees have risen faster than inflation, personal income, consumer prices or even the cost of prescription drugs and health insurance. Warrant: While the cost of school continues to rise, so too does the national student debt.

This shows that there is a direct correlation between the two. (causation) Sub Claim B: The national student debt is a harmful problem because students’ life choices will be impacted by debt burden. Grounds B1: A summary of President Barack Obama’s speech presented by Christopher Hass, “President Obama on Higher Education and Reforming Student Loans,” published in April 2009 by My. BarackObama. com, “There are few things as fundamental to the American Dream or as essential for America’s success as a good education.

This has never been more true than it is today. At a time when our children are competing with kids in China and India, the best job qualification you can have is a college degree or advanced training. If you do have that kind of education, then you’re well prepared for the future — because half of the fastest growing jobs in America require a Bachelor’s degree or more. And if you don’t have a college degree, you’re more than twice as likely to be unemployed as somebody who does. So the stakes could not be higher for young people like Stephanie.

“And yet, in a paradox of American life, at the very moment it’s never been more important to have a quality higher education, the cost of that kind of that kind of education has never been higher. Over the past few decades, the cost of tuition at private colleges has more than doubled, while costs at public institutions have nearly tripled. Compounding the problem, tuition has grown ten times faster than a typical family’s income, putting new pressure on families that are already strained and pricing far too many students out of college altogether.

Yet, we have a student loan system where we’re giving lenders billions of dollars in wasteful subsidies that could be used to make college more affordable for all Americans. ” “This trend — a trend where a quality higher education slips out of reach for ordinary Americans — threatens the dream of opportunity that is America’s promise to all its citizens. It threatens to widen the gap between the haves and the have-nots. And it threatens to undercut America’s competitiveness — because America cannot lead in the 21st century unless we have the best educated, most competitive workforce in the world.

And that’s the kind of workforce — and the kind of citizenry — to which we should be committed. ” Grounds B2: In the article by Nick Hillman, “Student Debt Burden,” published in August 2007 by the American Association of State Colleges and Universities, “Students often see higher education as the primary path to upward mobility, but when they accumulate excessive debt this pathway quickly becomes riddled with pitfalls. Students who graduate with debt may put off life milestones such as buying a car, owning a home, getting married, or entering certain low-paying professions like teaching or social work.

The latter subject was investigated in a recent State Public Interest Research Group report about careers in public service and student debt. Their research found that nearly one in four recent public college graduates who entered the teaching field had unmanageable levels of debt. Social workers fared even worse—37 percent of public college social work graduates entered the field with unmanageable debt. Debt becomes “unmanageable” when student loans and other outstanding debts take up a significant portion of annual personal income.

Students who earn incomes lower than the national average, yet have above-average levels of student debt, are likely to carry unmanageable debt. In the next ten years the country will need two million new teachers, but high student debt levels and low earning potential could discourage students from pursuing teaching or other public service careers. Students are not only taking out more loans today than ever before, they are also living with record levels of unmanageable debt. Although the average borrower graduating from a public college owes $17,250 in debt, one in four finishes school owing at least $22,822.

Particularly worrisome is that the number of college graduates with at least $40,000 in student loan debt has increased 10–fold in the past decade. These numbers pose long-term threats to recent college graduates’ lifelong decisions, but the financial future of borrowers who do not earn a degree is bleaker. It is not uncommon for students, especially low-income students, to drop out of college only after accumulating thousands of dollars in student loan debt. Nearly one in five students who do not graduate from college leave with $20,000 in student loan debt.

Borrowers who drop out earn lower incomes and face a high risk of accumulating unmanageable debt that is likely to result in forbearance, default, or even bankruptcy. When students face these financial hardships, they are more likely to require state services such as Medicaid if they are uninsured and unemployment benefits if they are out of work. The long-term impacts of debt not only affect individual borrowers’ futures; taxpayers may find themselves providing additional resources to those who cannot keep up with their debt repayments.

Living with unmanageable debt presents graduates with genuine fears about entering college, completing college, pursuing post-baccalaureate degrees, and choice of career. Living with unmanageable debt presents even greater fears to those who drop out of college. ” Warrant B: Student debt impacts the decisions made by students on what to do after graduation, or attending college all together because most realize the enormous debt they will incur if they decide to pursue higher forms of education. (causation/ generalization)

Sub Claim C: We are failing to solve the problem of the national student debt because lenders are making large profits from the loans they give to students. Grounds C1: An article posted by Foon Rhee, deputy national editor posted a speech by Barack Obama, “Obama says he’s ready to battle on student loan reform,” published in April of 2009 by The Boston Globe, “Obama wants to end the private Federal Family Education Loans program that the White House says costs taxpayers an unnecessary $5 billion a year by using private firms as brokers.

“That is a premium we can no longer afford,” he said, saying the system is “rigged” to give profits to “special interests” without any risk. Right now, there are two main kinds of federal loans. First, there are Direct Loans. These are loans where tax dollars go directly to help students pay for tuition, not to pad the profits of private lenders. The other kinds of loans are Federal Family Education Loans. These loans, known as FFEL loans, make up the majority of all college loans. Under the FFEL program, lenders get a big government subsidy with every loan they make.

And these loans are then guaranteed with taxpayer money, which means that if a student defaults, a lender can get back almost all of its money from our government. ” Grounds C2: “The Real Student Debt Problem,” is an article written by Anya Kamenetz in October of 2007 by The American Prospect says, “Private loans are handled by large banks like Citibank and federal lenders like Sallie Mae, but some of the worst abuses occur with lower-profile outfits that make only education loans. Recently, New York City Attorney General Andrew Cuomo singled out three lenders — Elite Financial Group, Academic Loan Group, and Erie Processing.

He alleged that they marketed their loans deceptively and aggressively, online and directly to students. Elite sent solicitation letters marked “Federal Loan Division” that sported an eagle seal. “ “The evidence is mounting that families are confused by such tactics and by the myriad financial aid choices available. A simple policy change by Barnard College this past year showed that contrary to the claims of lenders, many families are borrowing far more than they need to in private loans. “Furthermore, private lenders often partner with for-profit and career colleges that target the least experienced students with programs that are more expensive than, but similar in quality to, public community colleges.

At these schools, financial aid officers may sign up students for private loans even when they are eligible for federal aid. Similarly, students in film school, culinary school, and other high-cost programs are graduating with six figures of high-interest private loan debt and low or unpredictable incomes. Warrant C: As long as there are private lenders who are unregulated under the Federal, or State laws then these groups will continue to take advantage of students and their parents who are not educated in taking out loans. (Causation) To support this proposition I offer the following plan: I. Mandate: -Expand Student Loan Forgiveness programs -Eliminate the Federal Family Education Loan Program -Require that both lenders and schools are providing some type of counseling to clarify risks to borrowers –

Give tax breaks to schools who keep tuition cost down Increase Federal Grants II. Agency: -The mandates of the plan will be carried out by the U. S. Department of Education, with the help of the State Department of Education and by the colleges and universities. III. Enforcement: -This will be enforced on the Federal and State level and primarily through the colleges IV. Funding: -Funding should be provided by the Federal and state government through tax break incentives, interest collected by the loans and by the schools themselves.

All loans be made through the Federal governments Department of Education V. Legislative intent: Will be clarified by today’s discussion in the question and answer period of class. Claim 2: We can solve the problem. Sub Claim A: The change of Federal laws and regulations can help solve the problem of the student national debt. Grounds A1: The article Model Legislation: A Federal Tax Credit for Student Loan Interest, found on the Project on Student Debt published in 2007 states, “To help ensure that borrowing for college does not jeopardize families’ financial security, the Project on Student Debt has developed model legislation for a federal student loan interest tax credit.

This credit provides more meaningful relief to households with burdensome student debt than the current student loan interest deduction. It rewards work, encourages timely payment, and recognizes family responsibilities. ” Key Features • Individuals and families with student loans receive a tax credit* on up to $4,000 of the interest they pay each year. The credit replaces the current tax deduction* for up to $2,500 of student loan interest. • The size of the credit is based on the borrower’s income, loan burden, and family size. •

The taxpayer must be working in order to qualify. Loans made to both parents and students are covered, as are both government and private higher education loans. • Qualifying loans can cover tuition, room and board, transportation, books and supplies. • Eligibility phases out for joint filers with incomes between $100,000 and $140,000, and for single filers with incomes between $50,000 and $70,000. • The credit is refundable, so that borrowers get the full credit even when it is larger than the amount of income tax they owe that year. • Those who benefit from the current tax deduction will receive as much or more relief from the new credit.

Grounds A2: Evidence found in the article The Real Student Debt Problem found in the American Prospect web site written by Anya Kamenetz in 2007 shows that through educating parents and students of the risks brought on by lenders they can lower their risks of shady loans made by private organizations. “More important, by reforming repayment rules, the bill takes steps toward restoring the premise championed in our country from the creation of the land-grant universities: Higher education is a public good, not just an individual investment.

The bill creates a range of loan repayment programs for graduates who choose to enter public service and introduces Fair Payment Assurance, which allows borrowers to limit student loan payments to a percentage of income, and cancels the debt after 25 years. “The College Cost Reduction and Access Act is the most meaningful higher education reform in more than 15 years,” said Luke Swarthout, US PIRG Higher Education Advocate.

“This legislation is an example of Congress getting policy-making right. Emboldened by these successes, advocates see momentum growing for even broader reform that could offer meaningful relief to students by reining in the excesses of an ethically dubious industry. But no serious remedy is on offer for the elephant in the room: tuition increases themselves. Currently, student loan debt, like child support and tax liens, but unlike all other unsecured debt, cannot be discharged (forgiven) in bankruptcy.

Bankruptcy reforms in 1998 made federally subsidized student loans nondischargeable, and the notorious 2005 Bankruptcy Abuse Prevention and Consumer Protection Act excluded private, unsubsidized student loans as well. The amount of federal student loans a student can borrow is capped at $23,000 for undergraduates, at interest rates of 6. 8 percent. Private or “alternative” education loans, which receive no government subsidies, have no effective limits. Students may borrow $200,000 or more at rates anywhere from 9 percent to 19 percent.

As tuition soars more than twice as fast as inflation, these expensive private loans are filling in the gaps. The volume of private student loans grew a staggering 894 percent in the past 10 years, in constant dollars, to one-quarter of all student loans. Private loans are handled by large banks like Citibank and federal lenders like Sallie Mae, but some of the worst abuses occur with lower-profile outfits that make only education loans. Recently, New York City Attorney General Andrew Cuomo singled out three lenders — Elite Financial Group, Academic Loan Group, and Erie Processing.

He alleged that they marketed their loans deceptively and aggressively, online and directly to students. Elite sent solicitation letters marked “Federal Loan Division” that sported an eagle seal. The evidence is mounting that families are confused by such tactics and by the myriad financial aid choices available. A simple policy change by Barnard College this past year showed that contrary to the claims of lenders, many families are borrowing far more than they need to in private loans.

Before certifying to a private lender that a student was enrolled, Barnard began requiring that the student or family talk with a college financial aid officer. This simple conversation, making families aware of the high cost of private loans and of other available options, led to a 73 percent decrease in private loan volume. ” Grounds A3: In the previously cited article “Student Debt Burden”, it references to “Maryland and Florida, like many other states, offer loan forgiveness to students who stay in-state to teach science or math, or practice social work.

While this helps alleviate the debt burden for some students, debt remains pervasive and this is only one measure that helps a small number of borrowers. A number of other states are approaching this through efforts to reduce time-to-degree and aligning transfer agreements between two-year and four-year institutions. Colleges and universities recognize that students need more help paying for college, but they should continue to find ways to help students avoid debt. Campus administrators favor plans to increase the amount of federal and state need-based aid to address student debt.

Students still are accumulating massive levels of debt, so colleges and universities must support efforts that help students understand the long-term implications of excessive borrowing. The University of Arizona has taken a proactive approach by designing a program that teaches students about the costs and benefits of taking out student loans and the long-term impact borrowing has on life decisions. States and their higher education institutions need to continue developing creative ways to help borrowers succeed during and after college to avoid the pitfalls associated with the record levels of debt students accumulate today.

Through Federal regulation of lenders, education on taking out loans and tax breaks, or forgiveness we can manage this growing problem of the national student debt. (sign) Conclusion: If we as a society do not act now we will face ever growing challenges with education, the economy and eventually completion from countries offering superior educated individuals. We can solve these issues through the previously mentioned plan of action and reduce the national student debt.

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