The need for financial help has arisen over the years, as the tuition fees went up as a proportion of the household income. According to Geiger & Heller, (Geiger & Heller, 2011): "By 2009, these proportions had increased dramatically
" The parent loan market has changed drastically since last year, and it may be that if parents' circumstances change as a result of tough economic times, their own credit rating will suffer and families may find they don't qualify for as much (lending) in the future," she said. (Halcom & Benedetti, 2008) Economic Analysis of Loans The economic analysis will look at both the individual benefits of these loans as well as look at how they have led to indebtedness among students from the onset of their academic careers
Student loans are an instrument with which the government tries to make acquisition of higher education easier as costs of acquiring university education escalate, to the current average of $35,000 per annum. (Kogan, 2011) The plan under which students are given education loans is the Income-Based Repayment System which works as an easy installment method of loan repayment through which students can better match their loan repayment installments to their income
The situation is deemed to be dire, and need of more intervention, especially as bankruptcy laws were reformed by the 2005 Bankruptcy Reform Bill which disallowed students to declare bankruptcy on private loans. (Madison, 2011)This in turn meant that banks and other financial institutions that were lending out money, could do so increasingly as the students would not be protected, and there was no way in which the loaned amount could be waivered, leading to banking greed, and students being indebted for a greater part of their lives
The percentage of those who are graduating in six years from these for profit colleges are much less (38%) as compared to public (53%) and private not for profit colleges (64%). (Maher, 2010) These institutions are also responsible for encouraging students to take on loans for their studies
Additionally Pell grants, which are need-based grants given to low income students pursuing higher studies were proposed to be increased and making the Pell grants an entitlement program that would not need to be budgeted separately by the Congress. (McCluskey & Edwards, 2009) Additional measures have also been taken by the government that have further intensified the debate against and for government subsidized loans
Any discrepancy and changes in law that might affect the voter population in terms of reduced loans and student subsidies will likely be put on the congress so that the Republicans don't lose their popularity before election year. According to Bruce Merrill, a senior research fellow at Arizona State University's Morrison Institute for Public Policy, (Nowicki, 2012) if the interest rates on student loans are increased to match market rates for federal loans, there might be an uproar and it could cause a loss in the voter bank for the candidate proposing such a hike in prices
Additionally, students who have different aspirations, and may not need the university degrees, might find themselves in a situation where they realize that they have spent money on majors that they do not even need. (Orr, 1991) The debate has also arisen mainly because it is the Tax Payer's money that is being allocated, and there are concerns, that this additional sum is going from all tax payers to help those people who will already have a chance of earning 75% more than non-university students in their lifetime
A case in point is the American Academy of Arts and Sciences which has indicated that in the 30 years from the mid-1960s to the mid-1990s the GPA of college students was increasing, but the SAT scores that were required for admissions were lowered. (Rosovsky & Hartley, 2002) Another startling indicator in terms of the economic aspect of providing student loans is that the number of students who are graduating, with finished degrees has also fall, as students and colleges realizes, after wasting precious resources, that the students are not suitable for University education
The interest rates are at a difference of more than 6% and the fees that are paid for originating the loans are 9% higher. (Schemo, 2007) Loan programs that are giving out loans to students are also based on the credit history of the applicant as well as the cosigner
The revision of student loans and the subsidies awarded to students was perhaps the measure of the Bush Government that lost him support from the households and the college going students' especially themed income bracket that would not qualify for federal loans, and yet did not have enough resources to pay the tuition fee completely. (Taylor, 2006) Looking at the unpopularity of the Bush government's moves and the fact that election time is near, there are indications, that despite the economic disadvantages, the loan schemes and more importantly the subsidies are likely to continue
37%, and that an additional year of schooling increases an individual's income by 10%, implying that expenditure on education is a worthwhile investment that can help in eliminating many social and economic issues that are faced by the world today. (United Nations Educational, Scientific and Cultural Organization, 2011) With particular reference to student loans, proponents argue in favor of the student loan subsidies where the subsidies are expected to encourage spending on ailing sectors, and as the spending increases, the proponents argue that jobs will be created and the economy will get a boost
This is the reason why enrollment has increased, despite the fact that some students might really not need a university degree. (Vedder, 2004) There are other costs associated with this phenomenon as well
Hence, subsidized governments loans can help them repay their loans early and invest themselves in new businesses that can help create more jobs in the economy and pull it out of recession. (Wolfers, 2011) The proponents would further argue that the subsidies were meant to lure youth towards higher education, and help them get better employment opportunities and a chance to earn higher
Although this argument may seem to be the root of Marxian conflict arguments which imply that the elite restrict the flow of information to the proletariat and constrain them in their lower income ranks, looking to maintain the status quo. (Wolff, 2010) But even so, statistics have started to indicate that students who get into colleges on the basis of government support, and are actually not ready for college can be seen by the fact that remedial classes are needed increasingly in colleges in order to bring the standard of students up to par with that required by the university
The middle tier credit applicant with scores between 620 and 750 was approved at a slightly lower but still strong rate of 82%. The subprime borrower with scores below 620 had traditionally on average, approval rates of 60% however, during the last years of recession and subsequent slow recovery the rate of approval was nine percent (Pitt, D
During periods of crisis, however, several mechanisms may amplify liquidity shocks across the financial markets, creating systematic risks." (Kolb, 2010, pp
A composite rating of 1 o 2 indicates a financially sound bank, while a ranking of 3, 4 or 5 signifies a problem bank with some near-term potential for failure." (Koch, 2009, pg
This is exactly what happened in September 2008, when Lehman Brothers filed for bankruptcy and it appeared as if a variety of companies were on the verge of following suit including: AIG, Citigroup, Wachovia, Countrywide, Merrill Lynch, Goldman Sachs and Morgan Stanley. (Mosquera, 2010) It is also important to note, that with Fannie Mae and Freddie Mac aggressively selling subprime mortgages
40 (Kwan, 2010) Mergers and Acquisitions that occurred after the Repeal of the Glass Steagall Act Year Merger Closed Purchasing Company Acquired Bank 1998 Citicorp Traveler Group 1999 Fleet Bank of Boston 1999 Duetsch Bank Bankers Trust 1999 HSBC Republic Bank Corp. 1999 AmSouth First American National 2000 Chase JP Morgan 2000 Washington Mutual Bank United 2000 UBS Paine Webber 2001 Firstar US Bank 2001 First Union Wachovia 2001 Fleet Boston Summit Bank Corp 2002 HSBC Household International 2004 Bank America Fleet Boston 2004 JP Morgan Bank One 2004 Sun Trust National Commerce 2004 Wachovia Sun Trust 2005 PNC Bank Riggs Bank 2005 Bank of America MBNA Financial 2006 Capital One Northfork Bank 2006 Wachovia Golden West Financial 2007 Bank America LaSalle Bank 2007 Bank of New York Mellon Financial 2007 Bank America US Trust (Russell, 2008) Bibliography Comparative Analysis