In recent years, student loan debt has reached a crisis level in the United States. The federal government has made it easier for students to borrow money to pay for college. Although, millions of Americans are now burdened with debt they cannot afford to repay (Collinge 3). In the article “The Federal Student Loan Program is Finished,” Alan Collinge argues that the federal student loan program is broken beyond repair, and it is time to end it. The student loan system in the United States has become unsustainable, with borrowers struggling under the weight of a trillion-dollar debt burden. The article argues that the only solution is allowing borrowers to discharge their student loan debt in bankruptcy. Student loan debt has become a significant issue in the United States. In order to alleviate the financial burden on graduates, it is necessary to implement policies that offer greater access to financial aid, lower interest rates, and loan forgiveness programs.
The history of student loans in the United States dates back to the 1950s when the National Defense Education Act (NDEA) was passed to provide low-interest student loans. The loans were intended to help students pay tuition, fees, and living expenses. In the 1960s, the Higher Education Act (HEA) was passed, which expanded the availability of federal student loans to all students, regardless of their field of study (Yao and Xiao 37). The program provided students with low-interest loans, grants, and work-study programs. Over time, the program has been expanded and revised to meet the changing needs of students and the education system.
In the early 1990s, the federal government began to take a more active role in the student loan program by creating the Direct Loan program. This program allowed students to borrow directly from the federal government rather than through private lenders. In the early 2000s, the federal government continued to expand its involvement in the student loan program by creating the Federal Family Education Loan (FFEL) program (Collinge 8). This program allowed private lenders to provide federal student loans. Still, with a guarantee from the federal government (Asare et al. 1600). The FFEL program was eventually phased out in 2010, with all new federal student loans being made through the Direct Loan program.
Despite the expansion of the federal student loan program, the cost of higher education continued to rise, and students were increasingly burdened with debt. In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act was passed, which made it much more difficult for borrowers to discharge their student loan debt in bankruptcy (Collinge 5). Over time, the problem has only worsened, with the total outstanding student loan debt in the United States surpassing the proposed limit. Today, there is a growing movement to reform the student loan system and relieve borrowers struggling with debt. Advocates are calling for changes to the bankruptcy laws to allow borrowers to discharge their student loan debt, as well as for increased funding for grants and work-study programs to help reduce the need for student loans in the first place (Manes et al. 5). As the history of student loans in the United States shows, the student loan system has evolved to meet the changing needs of students and the education system.
There are several consequences, costs, and benefits that must be taken into account when considering Collinge’s argument. One potential consequence of allowing borrowers to discharge their student loan debt in bankruptcy is that it could tighten credit. This makes it more difficult for borrowers to access credit in the future (Kelchen et al. 5). This could make it harder for people to finance homes, cars, and other major purchases and negatively impact the broader economy. Another consequence is that it could be difficult to determine who qualifies for bankruptcy discharge. Some borrowers may have taken out loans intending to discharge them in bankruptcy, which could create a moral hazard problem and lead to more risky behavior in the future.
There are also costs and benefits to consider regarding student loans in the US. On the one hand, allowing borrowers to discharge their student loan debt in bankruptcy could provide significant relief to those struggling under the burden of their debt. This could lead to improved mental health and better quality of life for borrowers (Kelchen et al. 5). On the other hand; it could also negatively impact borrowers’ credit scores, limiting their ability to access credit in the future (Yao and Xiao 41). People who disagree with Collinge’s argument may argue that the federal student loan program has enabled millions of Americans to afford a college education and that ending the program would negatively impact the ability of low-income and underprivileged students to access higher education. They may also argue that allowing borrowers to discharge their student loan debt in bankruptcy could lead to a moral hazard problem, with borrowers taking out loans they do not intend to repay.
It is argued that the federal student loan program is broken beyond repair and must be completely overhauled. However, some argue that the student loan program is still necessary and can be reformed. One such contrary source is Robert Kelchen and his colleagues, the higher education professors at Seton Hall University. They acknowledge that there are problems with the student loan system but argue that the program can be improved with targeted reforms, such as better counseling for borrowers and the expansion of income-driven repayment plans (Kelchen et al. 5). He points out that many students rely on federal student loans to pay for college and that eliminating the program would leave them with few options.
While Kelchen and his colleagues make some valid points, I am not persuaded that targeted reforms to the student loan system are sufficient to address the current crisis. The student loan system is burdening millions of Americans with debt that they may never be able to repay, and the current system is not sustainable. In addition, many proposed reforms, such as income-driven repayment plans, only prolong the problem by pushing the debt further into the future (Darolia and Andrew 20). What is needed is a more comprehensive solution that addresses the root causes of the problem, such as rising tuition costs and a lack of investment in higher education (Asare et al. 1600). Furthermore, the argument that eliminating the federal student loan program would limit access to higher education ignores the fact that there are other ways to make college more affordable, such as increasing funding for grants and scholarships. Eliminating the federal student loan program may encourage colleges to reduce their tuition costs to remain competitive.
I am not persuaded by the argument presented by Robert Kelchen that the federal student loan program can be fixed with targeted reforms because I believe that the problems with the system are too deep and systemic to be addressed through incremental reforms. Firstly, the current student loan system is unsustainable and is burdening millions of Americans with debt that they may never be able to repay (Manes et al. 5). Even with income-driven repayment plans, many borrowers are still struggling to make their payments, and the amount of student debt continues to rise. This suggests that the current system is not working and that more fundamental changes are needed. Secondly, many proposed reforms, such as income-driven repayment plans, only prolong the problem by pushing the debt further into the future. This does not solve the underlying problem of rising tuition costs and a lack of investment in higher education.
Finally, the argument that eliminating the federal student loan program would limit access to higher education ignores that there are other ways to make college more affordable, such as increasing funding for grants and scholarships. Eliminating the federal student loan program may encourage colleges to reduce their tuition costs to remain competitive (Asare et al. 1602). While I acknowledge that Robert Kelchen makes some valid points, I do not believe that targeted reforms to the student loan system are sufficient to address the current crisis. A more comprehensive solution is needed to address the problem’s root causes and provide relief for the millions of Americans struggling with student debt.
In conclusion, the federal student loan program is a deeply flawed system that burdens millions of Americans with unsustainable debt. While some may argue that targeted reforms are the solution, I believe that the problems with the system are too deep and systemic to be addressed through incremental changes. The federal student loan program must be completely overhauled to provide relief for the millions of Americans struggling with student debt.
Works Cited
Andy Ohemeng Asare, et al. “The Pandemic Semesters: Examining Public Opinion Regarding Online Learning Amidst COVID‐19.” Journal of Computer Assisted Learning, vol. 37, no. 6, 2021, pp. 1591-1605, Web.
Collinge, Alan. “The Federal Student Loan Program is Finished.” Medium, 19 Aug. 2022, Student Loan Justice. Medium.Com/The Federal Student Loan Program is Finished, pp. 1-9. Web.
Darolia Rajeev, and Andrew Sullivan. “Federal student loan servicing accountability and incentives in contracts.” Discussion Papers (Federal Reserve Bank of Philadelphia), 2020, pp. 1-74. Web.
Kelchen Robert., et al. “The Effects of State Performance Funding Policies on Student Loan Debt.” Economics of Education Review, vol. 91, 2022, pp. 1-10. Web.
Manes Jordan., et al. “Student Debt Incidence: Recent Data and Conceptual Issues.” Economic Commentary (Federal Reserve Bank of Cleveland), no. 2022-16, 2022, pp. 1-12. Web.
Yao Rui and Jing Jian Xiao. “Financial Capability and Informal Bankruptcy: Comparing Student Loan Holders and Non-Holders.” International Journal of Bank Marketing, vol. 41, no. 1, 2022, pp. 34-51, Web.