Call Intensifies to Scale Back Student Loans

[Apr 22, 2008.]

 

There appears to be a move underway to scale back loans for college students. There are a number of good reasons for this.

For one thing, grants and scholarships are far more attractive than loans, since such financial aid awards amount to 'free money' that does not have to be repaid. In addition, grants and scholarships are based on worthiness and represent a reward for scholastic and extra-curricular achievement. One could reasonably surmise that an individual who receives a scholarship is far more likely to do well in college than one who does not.

Recently, Harvard University announced that it would be willing to offer financial aid for families making as much as $180,000 a year. Yale followed suit, which indicates that other private colleges and universities could soon become a part of the trend. The decision to expand student aid indicates that private universities increasingly want to include students of all socio-economic backgrounds on their rosters.

Meanwhile, at public universities, concerns persist about the wisdom of student loan programs. For instance, the Iowa Student Loan Liquidity Corp. is the target of a probe for its aggressive tactics and cozy relationship with colleges. It’s interesting to note that students at private universities can actually end up with lower student loan bills than students at public universities.

It can take decades for college graduates to pay off their student loans. Many forego marriage, families, and home ownership in order to pay their loan bills. The situation means that the quality of life for college graduates may not be as good as it used to be as a result of massive student loan debt.

As a result of this situation, calls are intensifying to do away with student loans altogether. Under Harvard’s no-loan plan, grants and scholarships pay a student’s way, enabling them to graduate without being crippled by debt.