Student loan history and financing higher education in America

¶ … College Students Loans

College students\' loans are the form of financial assistance or financial aid that students must repay, which are a contrast to scholarships that are never repaid. In the United States, the student loans play an important role in financing higher education, and nearly 20 million Americans use loans to cover costs of higher education. While governments in Europe support college students through funding, however, students and families in the United States fund their college costs through loans.

The objective of this paper is to explore the concept students\' loans higher education and methods students use the loans to pay to finance their education.

Analysis of History of the College Student Loans

In the United States, many Americans did not pursue a college degree in the 20th century because higher education was not considered important as it was today. However, the history of student loan is traced as back as 1840. The first student loans were offered to Harvard University students in 1840. To manage the standard of higher education, the government formed the Department of Education in 1867, however, it did not offer a student loan program. The GI Bill was passed in 1944 to allow the veterans of the Second World War to attend college cheaply.

After the Second World War, there was an increase in the number of people seeking for college degree leading to a gradual increase in the college tuition costs. It was after the 1950s that a significant increase in the college tuitions was recorded. The issue made the federal government start guaranteeing student loans delivered by banks and other financial institutions.

In 1958, the federal government granted the first students loans through National Defense Education Act following a recommendation of Milton Friedman. In 1965, the budget rules mandated that a direct loan should show up in the budget. The Higher Education Act provided loan program or loan subsidies to students in critical needs. In 1972, the Educational Opportunity Grant as developed to help college students to complete their studies. In 1990, the federal government guarantees a subsidy for every loan program including the student loan. In 1993, the government passed the Omnibus Reconciliation Act to offer direct loan to college students. (Kelly, 2015). In the same year, the federal government offered the unsubsidized Stafford loans to college students. In 1993, the government started a Direct Lending Program where they provided loans directly to borrowers. In 2005, the government allows graduate students to receive PLUS Loans. (Woo, 2011). By 2012, the total amount of student loans was more than $1 Trillion.

2. Analysis how College Students debt for College) has changed over Time

An increase in the number of students\' enrollment in college and universities has led to a rise in the costs of education in the United States making the student loans to play a critical role in higher education financing. As being revealed in Fig 1, the student loans continue to increase across the age group between 2004 and 2012. In 2004, 900,000 college students graduated with load debt. However, the number of students who graduated with the student loans increased to 1.1 million in 2008. In 2012, 71% of students who graduated from colleges had student loan debts that represented 1.3 million students who graduated from colleges. In 2012, 75% of students in non-profit private college had student loans while 66% of students in public colleges has student loans. Moreover, 88% of students in for-profit private colleges had student loans.

3. Possible Solutions and Ramifications for Higher Education

The best solution to address the student\'s loan increase is that the federal government should reduce the amount of loans offered to college students, and use the net funds to increase the number of higher educational institutions across the United States to reduce the tuition costs offered by colleges. It is essential to realize that an easy access to government loans make many colleges raise tuitions costs at the expense of students. The Bennett Hypothesis shows that many colleges increase the tuition costs for undergraduate and graduate students without raising the quality of education. Thus, if the government increases the number of colleges that offer online undergraduate and graduate programs across the United States at affordable costs, many colleges will be forced to slash down their tuition costs.

4. Analysis of the Impact on Higher Education Today and towards the Future.

Analysis of market forces of higher education has shown that there is a gradual increase in the demand for a college education which is more than the supply. The major reason is that colleges and universities have become a major societal hub to acquire knowledge. Typically, higher education provides a significant contribution in a recent advanced in science and technology. While higher education has provided the immense contribution to an advance in technological development, however, the internet has offered the opportunity for a large number of people to acquire knowledge. Typically, the transmission of knowledge will no longer be offered in the traditional college campus with increasing number of online courses springing up at every corner of the United States. In the future, the cloud computing will offer a quality education similar to the traditional education.

\"By 2020, higher education will be quite different from the way it is today. There will be mass adoption of teleconferencing and distance learning to leverage expert resources. Significant numbers of learning activities will move to individualized, just-in-time learning approaches. There will be a transition to \"hybrid\" classes that combine online learning components with less-frequent on-campus, in-person class meetings.\" (Anderson, Boyles, & Rainie, 2012 p 3).

5.Ethical Implications of Financing Issues Handled in Higher Education.

The ethical issue surrounding the financing of higher education has made an increasing number of students challenge the quality of the education offered by colleges versus the tuition costs. Typically, the federal student loans have created an incentive for colleges to increase the tuition costs without a corresponding increase in the quality of education offered to students. Moreover, students are overpriced compared to the quality of education received. Since higher institutions in the United States depend on students\' payments for financing, thus, they often increase the tuition costs without notice leaving a large majority of students in debts after graduation.

Conclusion

The student loan started in 1840 in the United States. Over the years, students\' enrollment to colleges starts to increase making colleges increase the tuition costs. Today, more than 70% of students after graduation are in debts. The study suggests that the federal government should reduce the loans offered to students and use the net funds to establish more colleges across the United States to slash down the tuition costs.

Reference

Anderson, J. Q. Boyles, J.L. & Rainie, L. (2012). The Future Impact of the Internet on Higher Education. Pew Research Center\'s Internet & American Life Project.

Kelly, A.P. (2015). Reforming Higher Education Finance to Align the Incentives of Colleges, Students, and Taxpayers. American Enterprises Institute for Public Research.

Razaki, K. A., Koprowski, W., & Lindberg, D. L. (2014). The Student Loan Crisis: Background, Motivations of Participants and Regulatory Issues. Journal of Business and Accounting, 7(1), 100-113.

Woo, J., H. (2011). The Expansion of Private Loans in Postsecondary Education. Stats in Brief. NCES 2012-184. National Center for Education Statistics (2011): ERIC.