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This study will examine the impacts of federal public and private student’s loans have on college students after completion of college institutions in the United States. Students have 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). This financial program covers expenses that allows an individual a chance to live out his or her American Dream upon completion of a degree. However, borrowed monies rather it is public or federal student aid accumulate over the years and must be paid back to the government on a 6.8 interest rate.
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).
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).
Problems associated with student loan debt include
This policy allows students to borrow hundreds 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!
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 consider as one of the following:
(1) be enrolled in an institution of higher learning;
(2) maintain satisfactory progress in the course of his studies;
(3) not be in default of any loans;
(4) file a statement that the loan money will be used solely for educational expenses;
(5) be a citizen or permanent resident of the United States; and
(6) 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 (). 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 ().
The Public Service Loan Forgiveness (PSLF) program was established by the U.S. government under the College Cost Reduction and Access Act of 2007 to reduce student loan debt by encouraging students to work in public sector fields. These programs were implemented by the government to assistant students pay back debt in a manageable 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!
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 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. In a news report published by CBNC, data shows that only 96 people out of 300,000 was given loan forgiveness according to the Department of Education data’s. 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. As mentioned earlier, The Public Service Loan Forgiveness (PSLF) program was established by the U.S. government under the College Cost Reduction and Access Act of 2007 to reduce student loan debt by encouraging students to work in public sector fields because they noticed a financial crisis among young professional in student loan debt. 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.
- Baker, A. R., Andrews, B. D., & Mcdaniel, A. (2017). The impact of student loans on college access, completion, and returns. Sociology Compass,11(6). doi:10.1111/soc4.12480
- Elliott, W., & Lewis, M. (2015). Student Debt Effects on Financial Well-Being: Research and Policy Implications. Journal of Economic Surveys, 29(4), 614. Retrieved from http://proxygsu-sav1.galileo.usg.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=edb&AN=108930442&site=eds-live&scope=site
- Kapadia, R. (2015). A Solution to the Student Loan Crisis: Human Capital Contracts. Brooklyn Journal of Corporate, Financial & Commercial Law, 9 (2), 591-614.
- KIM, J., CHATTERJEE, S., YOUNG, J., & MOON, U. J. (2017). The Cost of Access: Racial Disparities in Student Loan Burdens of Young Adults. College Student Journal, 51(1), 99–114. Retrieved from http://proxygsu-sav1.galileo.usg.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=fgh&AN=121530619&site=eds-live&scope=site
- Kish, K. (2013). Public Service Loan Forgiveness. Parks & Recreation, 48(5), 38–39. Retrieved from http://proxygsu-sav1.galileo.usg.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=eih&AN=88152280&site=eds-live&scope=site
- Messner, Steven F., & Richard Rosenfeld. 2007. Crime and The American Dream. Belmont, CA: Thomas Wadsworth .
- Notareschi, V., & Ulbrich, T.R. (2017). Is the Public Service Loan Forgiveness Program right for you? American Journal of Health- System Pharmacy, 74(19), 1528-1531.
- Website: www.cnbc.com
- Website URL: https://www.cnbc.com/2018/09/21/the-education-department-data-shows-how-rare-loan-forgiveness-is.html
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