Government Subsidized Student Loans Thesis

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Higher education is taken to be a safeguard against unemployment with statistics indicating that unemployment among university graduates was 4.4% whereas for people who had not completed secondary school, unemployment was near 11.5%. (The Economist, 2011)

Although the phenomenon, with the state supporting education may sound ideal, and other emerging countries too might try to emulate the model in an effort to bring their economies up to par, several contrary view points have been voiced by critics that question the economic and political feasibility of the subsidized student loans.

Foremost is the startling figure of $1 trillion worth of outstanding student loans. Secondly there are arguments that this loan is for students who have already completed their studies and hence subsidizing it further will not encourage more students to participate in higher studies. Thirdly, an argument is made that the objective of the subsidy to was to increase financial stimulus, as indicated by the government. However, this objective cannot be achieved as the subsidy will go into their savings, and there are other, better options that can be utilized in order to boost spending in the economy. Fourth, there are criticisms made based on the utility of higher education in it, where scholars have been voicing their concerns over the fact that higher education is not meant for all students, and its exclusivity is maintained by its higher costs. Additionally, students who have different aspirations, and may not need the university degrees, might find themselves in a situation where they realize that they have spent money on majors that they do not even need. (Orr, 1991)

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The debate has also arisen mainly because it is the Tax Payer's money that is being allocated, and there are concerns, that this additional sum is going from all tax payers to help those people who will already have a chance of earning 75% more than non-university students in their lifetime. (McCluskey & Edwards, 2009)

Dissertation or Thesis complete on Government Subsidized Student Loans Have Assignment

Education is taken to be a competitive industry, therefore the government when it argues that students need help to cope with rising college tuition is in fact aiding in the increase of tuition fees. In a free market, when student demand for university education rises, prices rise, and students who can't afford to invest don't. When prices go up, more universities come in and prices fall. The key here is that the supply that rises is able to provide the standard of education that is required by the market. However, when the government comes in to subsidize these loans, many of which are directly given to the universities where students have gotten admission in, it indirectly leads to an increase in fees, as universities hike up fees to get as many of the federal funds as possible. In fact this practice of depositing the sum directly at the University, to be granted to students at its approval has led to a lot of fraudulent universities propping up, that have, till date embezzled millions of government dollars. (McCluskey & Edwards, 2009)

Another part of the story is that students with loans are increasingly facing the risk of defaulting, as there are fewer jobs in the economy. The situation is deemed to be dire, and need of more intervention, especially as bankruptcy laws were reformed by the 2005 Bankruptcy Reform Bill which disallowed students to declare bankruptcy on private loans. (Madison, 2011)This in turn meant that banks and other financial institutions that were lending out money, could do so increasingly as the students would not be protected, and there was no way in which the loaned amount could be waivered, leading to banking greed, and students being indebted for a greater part of their lives. (The Economist, 2011)

Some of the other reasons for the allowing of these loans is the President and The First Lady's own college experiences, that make them more open to students' problems with debt along with the fact that tuition fees have been rising steadily in both the public and the private sectors making the case for increased subsidies to help the students to get a higher education.

While there are drawbacks of these policies that have been promulgated by the state of America, there are advantages as well, and this paper aims to consolidate the views of experts in periodicals, and journal articles in order to understand fully the concept of subsidized loans, and analyze whether such a scheme has been favorable in terms of higher aggregate advantages as compared to aggregate disadvantages.

The debate about whether or not to subsidize student loans is part of a greater problem. In fact it is a symptom pointing to a greater issue of the ubiquity of college education among all youngsters. While it is a universally accepted fact that primary and secondary education alleviates social problems and is the key to uplifting society, higher education, is meant to mainly increase the income potential of the few who chose to bear the expenses and learn more about skills and capabilities that can help them earn better than the rest.

This is the core from which the issues are diverging. Milton Friedman also argues along similar lines, where he indicates that there is a minimum level of education till which provision of education by the state is needed for what he defines as the 'neighborhood effect'. (Friedman, 1955) He implies that a certain level of literacy is needed among people in a society in order to uphold democracy and in order to comprehend the rights and duties that are available to them. This is the neighborhood effect that the government is willing to pay for from the tax payer's money, as it is for the larger good of society. However, at the same time, higher education serves the purpose of increasing economic benefits to the students who enroll in universities. Therefore, it serves no basic societal purpose in increasing or improving the 'neighbor affect', and hence, according to Milton should be left up to competitive market forces which will define its prices and quantity supplied and demanded.

There are other experts also who share in the view that the idea of everyone attending college is just a part of public greed, where all students wanting to earn more than others enroll in college even if they do not have the aptitude for such sort of education. The growing rates of government subsides plays a part in this, as students who cannot afford this sort of investment in their careers, end up paying a smaller fraction and getting enrolled into colleges. Although this argument may seem to be the root of Marxian conflict arguments which imply that the elite restrict the flow of information to the proletariat and constrain them in their lower income ranks, looking to maintain the status quo. (Wolff, 2010) But even so, statistics have started to indicate that students who get into colleges on the basis of government support, and are actually not ready for college can be seen by the fact that remedial classes are needed increasingly in colleges in order to bring the standard of students up to par with that required by the university. (McCluskey & Edwards, 2009)

There again is the argument that university education might also not be suited for those who can afford to go to college so government subsidies might not be the only factor in students unsuited to university education getting enrolled. Even then the base argument remains the same, if it is not economically feasible in the long run, students who can't afford college will eventually drop out, but in the event of a student who has availed government subsidies, he or she will be wasting precious tax-payer money.

There are others, such as David Orr who also argues that it is a result of the rat race to grab as many economic resources as possible (Orr, 1991), and the greed that "those with a college degree will earn, on average, 75% more during their lifetime than those with just high-school degrees." (Day & Newburger, 2002) There are indications that university enrollment in a span of twenty years, 1986 and 2006 has increased by 48%, which is an extraordinary number, but really, does it suggest that things have improved and that there is higher literacy in society? Does it show that resources are being utilized as needed? But have those enrollment increases been an entirely good thing?

There are calls for a national discussion on higher education, and rather than having all politicians follow the bandwagon blindly, of building up their public image by granting loans to students, who will then become their allies for the rest of their lives. Moreover, a college degree is not the only guarantee of higher incomes, which everyone has a right to. As baby boomers are retiring there is a need for… [END OF PREVIEW] . . . READ MORE

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