Introduction
This study will examine the impacts of government public and private student’s loans have on college students after completion of college institutions in the United States. Student’s has been misled to live by the expectations of the Institutional Anomie Theory also known as the “American Dream Theory” by Steven Messner and Richard Rosenfeld as my Theoretical Framework as the American Dream interprets individuals to live a successful & self-sufficient life. The American Dream “is the promise that those who work equally hard will reap roughly equal rewards” (Shapiro, 2004, p. 87). Student loans have become a social-financial issue in the United States that hinders young professional from living the American Dream.
In the United States, the cost of higher education has been rapidly increasing, which has consequently increased the reliance of college students and their families on federal or private loans to finance their education (American Student Assistance, 2014). Students have the options to fill out a Free Application for Federal Student Aid also known as FAFSA after being accepted into any colleges/universities of their choice if they meet certain financial requirements. College enrollment is only the first step in the process of attaining the benefits of a college degree. About 60% of the students who enroll full time in higher education do not complete their degree within 6 years (Kena et al., 2016). Financial program covers expenses that allows individuals a chance to live out his or her American Dream upon completion of a degree. However, borrowed monies on a public or federal student aid accumulate over the years and must be paid back to the government on a 6.8 interest rate.
Framework
The term “The American Dream” was introduced into contemporary social analysis in 1931 by historian James Adams to describe his vision of a society open to individual achievement. After his idea was rejected by his publisher, the American Dream term soon became a sales slogan for the material comforts and individual opportunities of a middle-class lifestyle: a car, a house, education for children, and a secure retirement (Messner & Rosenfeld 2007:6-7). Obtaining a higher education is the dichotomy of being successful and unsuccessful in America. Students strive to make good grades to have a better a life than the one their parents were given. The main purpose of the American Dream is to bring a powerful force in our society because it embodies the basic value commitments of the culture: its achievements orientation, individualism, universalism, and fetishism of money. Each one of these value orientations contribution to the anomic character of the American Dream (Messner & Rosenfled 2007: 68).
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Policy Problem
Problems associated with student loan debt includes national financial crisis, garnished wages, tax refunds taken away. Defaulters are likely to have difficulty accessing credit, renting an apartment, or even getting a job when they do not repay back their student loan debt. Those that are in debt have a less likely chance of living the American Dream. These borrowers subsequently are unable to pay back their student loans but cannot discharge them because they cannot demonstrate undue hardship. The current student loans policy, which provides essentially unlimited but nondischargeable financing, only works when borrowers are likely to be earning salaries high enough to pay off their student loans (Yi, A. 2014).
This policy allows students to borrow thousands of dollars from the government that accrue interest six (6) months after graduating. This federal scheme is the biggest contributions of college student rise in student debt crisis. The student loan crisis is characterized by the fact that over 38 million students are burdened by outstanding student loans, amounting to over $1.1 trillion. “President Obama made this statement in 2010, outlining his plan to ensure that Americans are able not only to attend college but also to graduate with student debt they can afford to pay back” (White House, 2014). No one should go broke earning a college degree. Students loans debt has become a national crisis among Americans and the numbers are increasing.
The student loan market’s “lack of repayment options and flexibility in times of distress”, “has been a significant factor in bringing about the student loan crisis. Although regulators and policymakers encourage market participants to develop alternative student debt repayment options”, “consumers continue to encounter limited or no flexibility when seeking help from their lender or servicer” (Brook. J. Corp. Fin. & Com. l.) payments are not considered taxable income!
Policy Framework
The federal government sets a very low bar for students to obtain access to its loans. In order to receive a federal loan, a borrower must be considering as one of the following:
- be enrolled in an institution of higher learning;
- maintain satisfactory progress in the course of his studies;
- not be in default of any loans;
- file a statement that the loan money will be used solely for educational expenses;
- be a citizen or permanent resident of the United States; and
- have made restitution if he has been convicted of defrauding the student loans program in the past.
The federal government offers three types of student loans: (1) “Stafford loans,” (2) “Perkins loans,” and (3) “PLUS loans.” Of these, Stafford loans are the most important in terms of amount distributed. Stafford loans made up seventy-six percent of the $113.4 billion in student loan dollars (Yi, A. 2014). A Stafford loan are classified as a subsidized or unsubsidized federal student loan. The “subsidized” denotation means interest charges do not accrue during certain periods, namely when borrowers are attending school, while “unsubsidized” indicates interest does accrue for those periods (Yi, A. 2014).
Legislation
The Public Service Loan Forgiveness (PSLF) program was established by the U.S. government under the College Cost Reduction and Access Act of 2007. Its objective was to reduce student loan debt by encouraging students to work in public sector fields for a minimum of 10 years. The Public Service Loan Forgiveness Program were implemented by the government to assistant students pay back debt in a manageable time and rate. To make this program more visible and easy to individuals, here are five keys things young professional should know about The Public Service Loan Forgiveness Program (PSLF) to become debt free:
- As a full-time public park and recreation professional, you qualify for the PSLF program. The PSLF requires that you remain employed full time in a public-service profession. ‘Government’ is listed as an example of one qualifying employer.
- Your student loans must be held by the U.S. Department of Education’s Direct Loan Program. To have loans transferred from an independent debt-recovery agency, you must apply to the U.S. Department of Education for loan consolidation.
- Once your student loans are in the Direct Loan Program, you need to select a repayment method. The two most advantageous options for a public employee are the income-based repayment method or the income-contingent repayment method. Both determine an individual’s discretionary income annually and cap monthly repayments at a low percentage of that total.
- Repayment time! 120 qualified payments.
- And the best part: The amount of student-loan debt forgiven after you complete 120 payments is not considered taxable income!
Federal Student Financial Aid’s core mission is to ensure that all eligible individuals benefit from federal financial assistance-grants, loans and work-study programs-for education beyond high school. The programs we administer compromise the nation’s largest source of student aid. Every year we provide more than $100 billion in new aid to nearly 14 million postsecondary students and their families. Our staff of 1,100 is based in 10 cities in addition to our Washington headquarters (Marc Holzer and Richard W. Schwester 2016).
This program was established to reduce student loan debt by encouraging students to work in public sector fields. According to a news reporter published by CBNC proves otherwise. The Department of Education data’s showed that only 96 people out of 30,000 was actually approved for the loan forgiveness plan since implemented in 2007. To qualify for the program, individuals had to pay 10 years of consecutive payments to meet the requirements. The Public Service Loan Forgiveness program appears to be spurious to borrowers.
Debbie Baker from the article is a music teacher in Oklahoma’s public schools, paid her student loans off for 10 years, all the while believing she was on her way to debt forgiveness when she was told that she had the wrong type of federal student loans. I am discombobulated how she had the wrong type of federal loans and how the government is ripping individuals off. This article connects with my theory because congress has recognized there is a problem with student loan debt rises and has implemented programs to help ease the burden of student loan debt; however, student loans will increase over years because of requirement to be eligible for student loan forgiveness.
Over 38 million students are burdened by outstanding student loans, amounting to over $1.1 trillion dollars in the United States. Students will never be relief from debt when congress has set a fix interest rate on public & private student loans (Kish, K. 2013). This has to be unethical and goes against the standards of (ASPA) American Society for Public Administration. The government is responsible for efficient and effective management over the Department of Education and somehow borrowers are being misled as to how to payback astronomical amounts of federal loans borrowed from the government.
Resuts
Continuing a higher education has put Americans in a financial crisis doubling over years. Students are misled by the concept of being able to pay back the United States Department of Education loans back. For example, studies have shown students increase their debt by enrolling in student forgiveness programs. Randon Issacs a graduate form Gettysburg College owed a total of $139,000.00 upon graduating with a bachelor. He paid back an average of $58,000.00 to the department of education by paying $640.00 per month on the loan forgiveness plan. He now owes an average of $161,000.00 till this day (Liebenthal, R. 2018). Student loan debt is one of the biggest scammers of all time in my opinion. I believe you can only come out of default or deferment if you change your mindset to bring yourself out. One of friends changed his mind set and decided not to rely on the government for student loan help. After completing his degree from Albany State University in 2014, his principal balance of student loans was $57,637.62
after consolidating his loans. After learning gaining more knowledge about his federal student loans, he enrolled in the Public Service Loan Program thinking the plan will assist him in paying his loans. He learned that he will pay a total of $90.00 dollars a month and his loans accrued $305.00 dollars in interest a month. He decided not to depend on the government for assistance. He later found employment at three different employers to tackle his student loan debt. In November 2018, he is now student debt free. He took control of his situation after learning it will take his 10 years on the Public Service Loan Program with 120 consecutive payments before he was student debt free.
Conclusion
In conclusion these programs are not effective for college students to pay back loans to get out of student loan debt with government setting the requirements low to obtain loans. Student debt is seriously harming too many former students. But federal extension of credit to undergraduate students makes it possible for many individuals, particularly those with limited financial means, to go to college, to go to an appropriate college, and to succeed in college (Baker et al., 2017).
Student debt crisis has reached over 1 trillion dollars and it is steady growing instead of decreasing. The forgiveness programs are scams that give young professionals hope, but will not help them in the future. I don’t think these programs will be feasible to pay back student loans and these programs are spurious. New data from the Department of Education proves that
Public Service Loan Forgiveness (PSLF) program will not be as effective as the government persuade it. My readings have confirmed that the Department of Education is misleading students of becoming debt free. You will only be debt free if you change your mindset and work hard to pay off your student loans or pay for school out of pocket.
