Repaying Higher Education Loans
Abstract
In the U.S., tertiary educational institutions are of two types: profit-making and non-profit making. The non-profit-making institutions aim to serve students’ welfare for clearing their education as a launchpad for professional victory. In contrast, the private institutions are majorly in the business to make profits. Higher education loans provided by the Federal Government and other financiers require repayment under different terms and conditions. The federal government provides the students unable to pay their loans with programs such as IBR, PAYE, and REPAYE, which help decrease student loan repayment to an affordable level founded on the applicant’s family size and income. An option available for both the federal and private loans is loan rehabilitation, and this involves signing a reintegration contract giving affordable payment options. For federal loans, one can also seek debt consolidation. According to Collinge (2009), forgiveness and cancellation of the loans apply as the option of last resort for the permanently disabled individuals. Also, states do give debt relief to their former students who have failed to pay their loans. For instance, New York has given three hundred thousand private borrowers. They were omitted from the federal incentive bill, which permitted most students to avoid making payments for six months without interest.
Table of content
Introduction
Tertiary education has advanced expressively over the ages from mixed institutes to private profit-making institutions. Specifically, one dominion that has witnessed a lot of development is the current intensification of the profit-making institutions of higher learning. The institutions have invested heavily in promoting their institutions from making television commercials, magazines inserts, and social media ads. Their marketing has become universal. To be specific between 1990 and 2010, the number of degrees earned from private institutions increased by almost seventy percent, and this was based on their capability to address the requirements for non-traditional students uniquely.
This study investigates the differences between the non-profit and profit-making universities and the debt burden they cause to students who finance their education through students’ loans given by the federal government and other lending institutions. The study will also try to establish the consequences students face once they default to pay their loans. Finally, we will try to determine if there are options that students can be given in the case. They are experiencing difficulties in repaying their student loans or at what circumstance the loans can be forgiven. The study will be based on the five boroughs (Bronx, Brooklyn, Manhattan, Queens, and Staten Island) of New York City.
Although both the profit-making and non-profit making institutions can give an equivalent level of tutoring, their attention on coaching somewhat varies because their objectives to success are evaluated contrarily. For instance, non-profit-making institutions of higher learning primary purpose are to create a learning setting that serves students welfares for clearing their education as a launchpad for professional victory (McMillan, 2015). New York has various private and monetary aid plans that help its residents pay for college.
Non-profit institutions are mostly owned by the state government of New York and are managed by a board of trustees. There are no shareholders in these institutions and therefore this leaves the management with the option of providing quality education. Due to the fact that they are owned by the state government they receive financial aid from state and federal governments and personal donors. This kind of funding enables them to operate effectively while retaining fees at affordable rates. The non-profit institutions also give students financial aid packages and scholarship programs to allow them to complete their education successfully.
On the other hand, profit-making institutions are mainly for business purposes, whose main aim is to make a profit. They compete with the state government-owned institutions to provide quality education and outshine them to attract more customers. They are managed by a board appointed by the shareholders to ensure they make profits while retaining the high quality of education to maintain their ranks and attract more students.
On the part of academic tutors for non-profit institutes usually develop their course outlines and execute their lecture plans. At times they may decide to diverge from their syllabus or review it from term to term. Conversely, non-profit making institutions have a fixed lecture plan developed by an academic board, after which an instructor is hired to execute the set lesson plan. Profit-making institutions mostly focus on job-specific and marketable courses. On the other hand, non-profit making institutions tend to offer more old-style courses in science, fine art, humanities, math, and engineering. They also provide flexible learning timetables from online, weekend, evening, therefore, attracting individuals who want to higher their education for better career attainment. Both the profit and non-profit making institutions pay fees; therefore, most students, by the time they clear their higher education, are in debt, which they are required to pay.
For instance, in the U.S., there is a student debt of approximately 1.6 trillion dollars, which is about twice the current budget for the DOD and nearly twenty-two times the budget for the education department. It is estimated that one in every six adult Americans owes the federal government in terms of student loans (Hershbein, 2015). Most students are experiencing difficulties in repaying their student loans, which are guaranteed by the federal government. The consequences of not paying your student loans are not desirable. First, your investment is marked as delinquent if it falls in arrears for ninety days and then reported to the three main credit bureaus. This will have a negative listing on your credit rating, reducing the chances of getting loans from other financial institutions. A poor credit rating also reduces your chances of getting employment since many employers check the applicants’ credit ratings. After two hundred and seventy days without payment, you are marked as a defaulter, and you are referred to a collection agency.
To avoid these dire consequences, any student who is facing difficulties in paying their students loan, the federal government has developed some programs to help students facing these challenges. The programs are IBR, PAYE, and REPAYE, which help decrease student loan repayment to an affordable level founded on the applicant’s family size and income. At times, the regime forgives the remaining amount after one pay for a certain period, mostly over twenty years (Hershbein, 2015). Individuals who are not able to finance their student loan repayment, whether private or federal, should get in touch with their lender and discuss a resolution with them. The lender might extend your grace period, reduce your interest rates, or settle for a lump sum or less than the total amount of the debt.
If one missed getting into an agreement, there are other options; they can utilize which are: Loan rehabilitation, and this involves signing a reintegration contract giving your affordable payment option. One can also seek debt consolidation, although this option is available only for federal loans and not private loans. Finally, one can find forgiveness and cancellation of the loan. This applies in situations when one is declared permanently disabled (Collinge, 2009). New York has given debt relief for three hundred thousand private borrowers. They were omitted from the federal incentive bill, which permitted most students to avoid making payments for six months without interest.
Literature Review
Many residents of New York (N.Y.) have found higher education to be the road to satisfying and financially stable lives. Due to this, there has been an increase in college costs and need for higher education in both profit and not-for-profit institutions in New York, and the utilization of student loans has affected many households in the state. Most beneficiaries of student loans face difficulties in servicing their loans, and this has contributed majorly to the increase in delinquency rates among residents of N.Y. (Carrns, 2019). The high delinquency rates and an increase in the amount of students’ loan debt is a concern for the state of N.Y.
Student loan debt has become a significant economic dilemma in N.Y. In the last decade alone, the average loan debt has more than doubled to eighty-two billion dollars. The number of students relying on loans also has increased, with approximately forty-one percent to around 2.8 million students (DiNapoli, 2016). The most significant determinant of this increase is because tuition and student upkeep fees have risen significantly by about fifty-five percent for non-profit institutions and fifty percent for profit-making institutions. The costs associated with these debts have negative consequences to both the individual and the state government’s’ economic development. The responsibilities of repaying the student debts reduce the disposable income of individuals, therefore, denying them a chance to take part in economic growth like opening businesses and paying for mortgages.
It is estimated that one million residents of N.Y. have a student loan burden of approximately thirty-five billion dollars. Out of these figures,’ fourteen percent of the loans are overdue for more than ninety days and therefore have been marked as delinquent (DiNapoli, 2016). Because of the burden of students’ credit, many N.Y. residents are suffering and are not able to live a decent life. According to human capital theory, parents are supposed to invest time and resources for their children, which can best be done in education. The philosophy proposes that a student will invest in human capital if the potential benefits outweigh the costs associated with learning.
The theory implies that financial aid enhances the educational attainment of individuals whose parents are not in a position to finance their education. When the unmet anticipated family contribution upsurges, the child has more difficulties in financing higher education and therefore has to turn to financial aid in the form of student loans (Carrns, 2019). Even though the return on education is better, an individual might repay their student loan for approximately twenty years after completion of college, minimizing their disposable income. Despite the costs associated, higher education is necessary for individuals as it increases their chances of getting employment and being successful in life in terms of making sound decisions. Due to the strain that student loans are putting on the disposable income of residents of N.Y., the governor has halted the collection and accumulation of interest for students’ investment. However, this is a relief, and it not a long-term solution.
N.Y. is working extremely hard to protect students from exploitation during the repayment of their loans and has enacted a bill to license, regulate, and give student loans oversight. There is also a detailed student loan borrower bill of rights to caution students from exploitation, especially by private lenders (Friedman, 2020). The law gives every borrower the right to access comprehensive monetary aid grants letters from all institutions in N.Y., each student should get clear, accurate, and complete information about the terms of the loans they are awarded. Students should be enlightened on the available loan repayment options and plans. They should also be notified of any available release, forgiveness, and cancellation options of loans. All higher education learners should benefit from accurate payment history reporting to open credit bureaus. In case one complains to the service provider, they should be entitled to get a conclusive response in the shortest time possible. These are some of the intervention the N.Y. state government are putting in place to caution lenders from exploiting students and therefore minimizing the student loan burden while increasing resident’s disposable income for economic growth.
Methods
Interviewed Participants
Indirect participation, we had two participants who were interviewed. Due to the issue of social distancing and safety, the interviews were conducted over the phone so that the study makes considerations of the policies in place and respect to the authorities. It is also a means of employing the aspect of the methodologies being flexible and dynamic to be in a position to conform to the prevailing conditions. The participants in the interview were Hector Lugo and Leslie Gonzalez, who cooperated and were free to answer the questions that we asked them. The information collected, though we could not read the sincerity from physical expression, was essential for making conclusions about the topic’s discussions.
Survey participant
The other method was an online survey. A link to a google document was posted on social media, especially on WhatsApp groups and Instagram, because they are the most and frequently used form of social media. The link was sent on May 1 till May 5, and we urged students to react to the questions out of the will. It was a short document with comfortable and realistic questions so that the students would not find the questions too official, or too exam-like. A total of 23 students responded to the questions on the link.
Materials
Varied materials were used in the collection of the data in this study. They include the following; cellphones for making calls to the interviewees; computers used for the storage and analysis of the information obtained. A voice recorder that was also used to record the voice calls. Interview questionnaires that were the guide for the interviews over the phones were also used. Too important were the social media and the google platforms that facilitated our survey through the survey questions. Although not categorized as materials, our professor and the group members were also vital in the whole process of data collection.
The Procedure
Selecting the sample for the interview was tough because of the current state of the pandemic, which has made it hard to reach students. We carried out the interviews to get more information and insight from all kinds of students, from those that studied in non-profit and profit institutions. In the process of getting the information, we made a list of three loan forgiveness program employees, which we intended to contact. We needed to get the data on the rate of students failing to pay their loans and the possible reasons that they always give out. We also wanted to know-how more than just lifting the loans form the students; they help such students who could not pay their loans. Unfortunately, no one that we contacted was successful due to the epidemic that has forced a lockdown and a halting of some office works. We then reached the students through the phones; one was from a non-profit, and the other from a profit college.it was a success because the students gave us their time and responded favorably. Leslie studied at Connecticut College, a private non-profit college, while Lugo graduated from Monroe College, a private institution established for profit.
The survey process started by conducting a background study on the crisis of student debt, among other information that would help in this survey. The survey was audience specific because we wanted to get information from students, and it was directed to students only. Students from profit and non-profit institutions were the primary targets of the survey, and they were expected to give their views on the issue of debt crisis among students. A similarity and difference survey was conducted between the profit and non-profit institution students. The link to the questions was sent to the WhatsApp, and responses were allowed from 1st to May 5. There were a total of ten simple questions; seven of the questions were demographic questions, whereas the remaining three questions concerning loan acquisition. We also inquired about the students’ awareness of the student debt crisis and where they had studied. The questions in the survey took a neutral standpoint and non-persuasive to the students. It is to avoid making the information that would come from the survey biased for the researcher’s advantage.
Results
Discussion
References
Collinge, A. (2009). The student loan scam: The most oppressive debt in U.S. history, and how we can fight back. Boston: Beacon Press.
Carlson, D. (2019). Student loan solution: 5 steps to take control of your student loans and financial life.
Hershbein, B. (2015). Student loans and the dynamics of debt. Kalamazoo, Michigan: W.E. Upjohn Institute for Employment Research.
McMillan, C. T. (2017). Lower Ed: The Troubling Rise of For-Profit Colleges in the New Economy.
Carrns, A. (2019, September 27). Two-thirds of college students take on debt, but the amount is rising more slowly. The New York Times – Breaking News, World News & Multimedia. https://www.nytimes.com/2019/09/27/your-money/student-debt-what-to-do.html
DiNapoli, T. P. (2016). Student Loan Debt in New York State. Office of Budget and Policy Analysis.
Friedman, Z. (2020). New York Stops Collection Of Student Loan Debt. Forbes. Retrieved 4 May 2020, from https://www.forbes.com/sites/zackfriedman/2020/03/17/student loans-cuomo/#62fb3bee46db.
Appendix
Questionnaire
Interviewee: Leslie Gonzalez
How? – conducted over the phone
What college are you currently attending?
“I am attending Connecticut College.”
Is your college a non-profit or for-profit school?
“I am unsure, but I believe it is a non-profit school.”
How much does it cost to attend your college?
“Connecticut College cost about seventy-five thousand dollars per year.”
-Do you receive any scholarships?
“Yes, I have a Merit scholarship from Connecticut college called Trustee Scholarship. I receive about twenty thousand dollars a year.
Are you taking out any student loans to attend Connecticut college?
“Yes, I am.”
If comfortable, can you share how much you are currently being loaned? And which loan/s are you taking out?
“I am currently taking out a federal loan, at about two-thousand five hundred dollars for my freshman year. It changes every year, but I intend to keep receiving a loan at around that price.”
How was your process in taking out these student loans?
“To take out the federal loan, I had to take a loan course, which is a presentation explaining what a loan is, how interest works, when you need to pay, etcetera. Then I had to sign a paper, and I got my loan.”
Was this done online or in-person?
“It was done online.”
What is your plan after graduating in terms of your loans?
“I don’t have a full-on set plan on what I will be doing, but if I were to assume, I would probably make a monthly payment of X amount of dollars. Based on my future salary, I hope to pay my loans by the time I am 30 years old. So, I’d like to pay off my loans five to seven years after I have graduated.
-Do you know your options when it comes to paying back your student loans?
“Well, I know there are different plans available, but I am not sure of any specific program I probably should look into since my interest rate will begin to be applied six months after I graduate.
-Do you think the experience/education is worth the amount you are paying?
“Yes, I think it is beneficial and reasonable, compared to how many other students are paying to attend private colleges.
-Were you giving enough information on loans that you are currently on?
“Yes, I believe so.”
What is your opinion on how student loans are being taken out? Would you change the format in how students can receive student these student loans?
“ Well, I think the course presentation is helpful, but it is more so up to the person who is taking out the loan, whether or not they truly want to educate themselves on what they are doing, which I believe is highly unlikely, because many students don’t fully pay attention since the process is pretty quick and simple.
-How will these loans affect you in the future?
“Surely, it will influence my budget skills, knowing I have an extra bill to pay, and overall affect financial decisions I have to make in the future.
Lastly, is there anything you would like to add?
“For future students, I suggest doing personal research on their particular loan, because it is not as simple and easy as it looks.”
To be continue……..