Student Loan Debt: What You May Need to Know


There’s a growing debate concerning the amount of money being made from student loans. The government reportedly made $41.3 billion from student loans during the 2013 fiscal year, and this has some activists up in arms, citing that they are profiting at the expense of our younger citizens. However, is this really as bad as these protestors believe? Let’s examine some facts to get a better idea.

The reason students take out loans is obvious. They want to have a career, to make more money and probably one day own homes and lead productive lives. These individuals are investing in their future, and the government who loaned them money has placed faith in them, that they will succeed and move on to become productive, tax paying citizens. When looked at in this light, it’s a win-win situation.

Certainly the government is paid back by the students they helped, but most of those monies are reinvested into maintaining the student loan program or the continued prosperity of the government in some way. And let’s face it, we want the government to be prosperous and our country to continue to thrive.

Also, there are ways for many of these students to reduce the amount of their debt, particularly if they enter certain targeted fields, such as the military or the field of medicine. So when people such as Massachusetts Democrat Senator Elizabeth Warren advocate for the reduction of student loan burdens, it is unclear if she realizes how such a reduction might affect some of these worthwhile programs.

Elizabeth Warren

The other difficulty lies in the fact that whenever a student takes on a loan, there is always the possibility that they will not pay it back. Usually the costs of the loans take into account that this might occur, and the rates are increased a small amount to compensate. Should that buffer be removed as critics suggest, the default debt would fall back upon the tax payers instead. It makes a lot more sense to charge slightly more overall than to burden the entire population with that debt.

The truth is, it would be unwise to lower the loan rates by a great deal because of the unemployment rates. Think about it; the student completes college and becomes a member of the work force–and the “lack of work” force–at the same time. Certain areas in this country hold little hope that the successfully graduated student will be hired and thus able to pay back their debt in a timely manner. That means defaults, or extensions on those loans if allowed. However, thanks to the Obama Forgiveness Act, at least some of these students may feel less of that bite as a result.

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