Week 5 Student Loans: Part 2

Students loan Systems

Students Name:

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Instructor’s Name:

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A student’s loan is a loan that is offered to students that helps them in their post-secondary education and other associated fees and living expenses. This type of loan differs in many ways from other types of loan as the interest that is offered is subsequently lower and the payment schedule may differ while the student is still in school there is also a difference in the loans depending on the country (Mitchell, 2021). However, there are strict rules that govern and regulate the submissions and allocation of loans. Countries such as the United States have two types of students loans; private students’ loans and federal government-sponsored loans (Mitchell, 2021). Private student loans include state-affiliated institutional and non-profit loans offered by schools.

Most of the available student loans are federal government-sponsored loans. The federal government-sponsored loans can be unsubsidized or subsidized. A subsidized federal government loan has no interest accruement when the students are still in school. Student loans can be offered in various forms (Mitchell, 2021). Such loans can be provided as part of a complete financial aid package including such things as scholarships, grants, and work-study opportunities. Unlike tax-deductible business investments, student loan interests are usually not deductible. This has attracted criticism as businesspeople have cried foul tax disadvantages (Mitchell, 2021). Failure to include interest deduction in education loans has been attributed to slow economic growth, labor shortage, and labor inefficiency.

The three main reasons that can lead to opposition to student loans is the lack of interest deductible on such loans. Failure by the federal government to insert deductible tax interests on such loans has led to slow economic growth, labor inefficiency, and labor shortage as outlined above (Bernasconi & Celis, 2017). This is contrary to business investment loans that attract deductible tax interests. The student loan systems stipulate that a student is only required to pay back a loan upon completing school and securing a job (Bernasconi & Celis, 2017). This has led to slow economic growth and labor shortage. Some students may opt not to be employed thus labor shortage. In other circumstances, no job opportunities are leading to labor inefficiency.

However, it is helpful to have students repay their school loans upon completing their studies and securing jobs. Unless it is a work-study program, the students will struggle to pay back their educational loans while still in school (Bernasconi & Celis, 2017). This is a positive or helpful view by the loans board. Student loans such as grants and scholarships are not repayable. This offers students from poor backgrounds access to quality education. This has helped in achieving equitable quality education accessible to all students of all races and socio-economic statuses (Bernasconi & Celis, 2017). Through these students loan boards, students from marginalized communities and ethnic minorities have been able to access quality education.

References

Bernasconi, A., & Celis, S. (2017). Higher Education Reforms: Latin America in Comparative Perspective. education policy analysis archives, 25(67), n67.

Mitchell, J. (2021). The Debt Trap: How Student Loans Became a National Catastrophe. Simon and Schuster.