Point/Counterpoint: Are student loans worth it? No

Point/Counterpoint: Are student loans worth it?

No

Sean Whatley

Columnist

According to The Project of Student Debt, “Seven in 10 college seniors (71 percent) who graduated last year had student loan debt, with an average of $29,400 per borrower.” In 2010, students held over $830 billion in student loan debt, which exceeded the amount of credit card debt held by Americans. These are scary numbers, and it’s no surprise that many people are dissatisfied when it comes to the issue of student loan debt. There are many calls to lower the interest rates on federal student loans or give amnesty to the current holders of debt, but many people fail to look at the other side of the issue.

As of July 2014, the interest rate for a Stafford federal loan is at 4.66 percent.  In fact, the rate for any federal loan is capped at 6.8 percent. 

If this seems high, then what are the other options are available to students? Having a job, part-time or full-time, to help pay for school is one route that many students who want to remain debt-free choose. One study that tracked college students through the 90s showed that those who did not borrow money to attend universities had a dropout rate of 44 percent, versus 23 percent for those who borrowed money. The cited reasons were the division of time between school and work leading to lackluster marks, as well as the added incentive to graduate—having incurred debt.

For students who don’t want to work while in school, there is the option of borrowing from banks or carrying debt on their credit cards. Banks often require a borrower to show ability to pay back the loan, either through capital or a good credit score—things that most college students do not at the time of entering college possess. Credit cards, with the average interest rate among Americans being 21 percent, are simply not viable vehicles on which to carry five-figures of debt.

Sen. Elizabeth Warren, and other democrats in the senate, have tried to keep interest rates on federal student loans low; however, anyone paying attention during the mortgage crisis in the mid-2000s know that if you keep interest rates artificially low it leads to a bubble. Once people realize how useless their degrees are, can’t get money to pay them back, and default on them, the bubble will pop. It would be nice if school were free or amnesty could be given on federal loan debt, like in some European countries, but in Europe they pay high taxes—something that Americans will just not get behind. The fact is, 4.66 percent is not a high interest rate, considering the other options available to college students, and taxpayers aren’t willing to pay a little more to make college more affordable. If you have a problem with the system, as a current holder of student debt, then perhaps you should reconsider the idea of raising taxes.

Another option is to tell the government that you’re tired of cuts to the education budget—but who are we kidding, they don’t care what you think, right, guys?