Forgiving Student Loan Debt Leads To Better Jobs, Stronger Consumers

Republic of the Philippines
Surigao del Sur State University

Tandag City , Surigao del Sur
Telefax No. 086-214-4221
www.sdssu.edu.ph
Forgiving Student Loan Debt Leads

to Better Jobs, Stronger Consumers
In partial fulfillment of the Requirements in

Financial Management 1
3:00 – 4:00 PM (Tuesday)
Presented to
Mrs. Judith Sanchez
Instructor
Presented by
Laraville E. Fracisco
BSBA – 2FME
Telefax No. 086-214-4221
www.sdssu.edu.ph
As I’ve read the article about the student loan debt I can say that these
are the real problems but I have researched that impose solutions that can
improve access for low-income students rather than scare them off. The student
loan problem seems clear enough on the surface: students are
incurring oversized student debt, and they are defaulting on that debt and
threatening their ability to access future credit. The approaches to student loan
debt collection are fraught with problems, including improper recovery tactics and
informational asymmetry regarding repayment options.
Many of the problematic student loans are held by individuals who left

college before graduation, meaning they have incurred “debt without diploma.”
This reality distorts default statistics, making indication of school quality
misleading. The cost of education is not necessarily proportionate with the quality
of the education received, meaning some students pay more and get less, and
they do not have an adequate system for measuring educational quality other than
accreditation, which is a deeply flawed process. Students and their families are in
agony unaware of the ton repayment options, and therefore abstain from existing
benefits or are taken advantage of by loan servicers. Given these facts, it becomes
clearer why some of the current government reform suggestions are misguided.
Some illustrations are evaluating colleges on a rating system based on the earning
levels of their graduates assumes the overwhelming majority of students graduate
and that the employment chosen will be high-paying. But we know that not to be
true, and for good reason: some students proudly enter public service or other low-
paying but publicly beneficial employment. And, in today’s economy, not all
students can find employment directly correlated to their field of study. They also
know that those from high-income families have greater networking opportunities,
given family connections. Some schools offer degrees with little or no value, but
the solution to student loan indebtedness does not rest on an earnings threshold.
Looking at loan default rates as a measure of the success of a college misses that
many colleges welcome students from lower income quartiles, and these students
have less collegiate success – understandably, although obviously many are
working to improve these statistics. The fact that some of these students do not
progress to a degree is not a sign of institutional failure any more than student
success at elite institutions is a guarantee of those institutions’ quality. One
Telefax No. 086-214-4221
www.sdssu.edu.ph
approach to consider is linking default rates with the types of students being
served by an institution. But one thing that should not change, to the dismay of
some: many of the government student loans should not be based on credit
worthiness.
There are things that can and should be done to improve the
government-run student-lending market to encourage our most vulnerable
students to pursue higher education at institutions that will serve them well. There
are five timely and doable suggestions worth considering now such as lower the
interest rates on government-issued subsidized Stafford loans. The government is
making considerable profit on student loans, and they need to encourage quality,
market-sensitive, fiscally wise borrowing, most particularly among vulnerable
students. Student loans to their most financially risky students should remain
without regard to credit worthiness (the worthiness of the academic institution is
point. Improve the accreditation process so that accreditors assess more
thoughtfully and fairly the institutions they govern, whether that accreditation is
regional or national. Currently, there are vastly too many idiosyncrasies in the
process, including favoritism, violation of due process and fair dealing, and
questionable competency of some of the accreditors. And the government has not
been sufficiently proactive in recognizing accreditors, despite clear authority to do
so. We know that income-based repayment is under-utilized, and students become
ostriches rather than unraveling and working through the options actually
available. Consideration should be given to information at the time repayment
kicks in – usually six months’ post-graduation. Incentivize college and universities
to work on post-graduation default rates (and repayment options) by establishing
programs where they (the educational institutions) proactively reach out to their
graduates to address repayment options, an initiative we will be trying on their own
campus. Lastly, to create a new financial product for parents/guardians/family
members/friends who want to borrow to assist their children (or those whom they
are raising or supporting even if not biological or step children) in progressing
through higher education.
Telefax No. 086-214-4221
www.sdssu.edu.ph
The suggestion, then, is contrary to the proffered government

approach: taking away benefits. Importantly, we cannot mandate a meaningful
minimum default rate because default rates are clearly correlated to the
vulnerability of the student population, and we do not want to disincentives
institutions from serving first-generation, underrepresented minority and low-
income students.
Home ownership and education are both part of the American dream.
Both benefit the individuals and larger society. How they foster both is, however,
vastly different. They need to stop shouting about the shared crisis and see how
they can truly help students and their families access higher education rather than
making them run for the proverbial hills.

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Republic of the Philippines

Surigao del Sur State University

Forgiving Student Loan Debt Leads

In partial fulfillment of the Requirements in

Many of the problematic student loans are held by individuals who left

The suggestion, then, is contrary to the proffered government

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