Student Debt: an Opportunity for Students with Low Incomes

Student loans are often seen as a necessary evil for those with low incomes. With rising costs of goods come the rising wage requirements of the average person. To makes ends meet most turn to getting a college education to make a better wage; that either comes with paying for it entirely by themselves or taking out student loans. According to Debt.org, the average student loan debt in 2017 was $37,127 and rising every minute. Many questions remain; is the financial struggle worth it, does it bring that much more to the table, and what are the alternatives?

Bureau of Labor Statistics shows that the average person with a high school diploma makes about $700 a week, while a person with a four-year degree makes an average of over a thousand dollars a week. This averages out to be a gross of $37,000 a year, and $55,000 a year respectively, assuming the person would take no sick or vacation days. This shows a correlation that it might be a good investment to take out student loans if you’re going to be making more money. However, those with student loans are shown to report having more financial struggles than those without student loans and no college degree. Pew Research Center found that only 32% of those who have student loans say they are living comfortably, compared to 51% who have no student loans. Based on this data, I would suggest that taking out loans in some cases does not give enough benefits to outweigh the financial struggles that come with them.

College prices nearly doubled for the average four-year degree between 1980 and 2019, even after adjusting for inflation. This figure is not expected to go down anytime soon, and with increasing costs is coming lower enrollment rates. National Student Clearing House has reported that for-profit four-year Colleges have seen a decline in enrollment every single year since 2011. With schools increasing their prices every year, and fewer students enrolling every year, where are they turning?

Trade schools are becoming more and more popular. With a survey from the College Savings Foundation about college finances among Gen-Z students in 2017, 39% of them are searching for higher education alternatives, purely based on cost (para. 11). And 79% of them said that cost will affect the college they choose. This is a major decision to make here, take on nearly $50,000 in debt (not including dorm and board fees) and struggle to pay it off for the rest of your life. Or, pay a lower cost of $35,000 for an entire education, including all fees and housing (many of these schools offer housing during their programs). Many trade schools don’t require academic prerequisites at all besides a Highschool diploma or equivalent, rather than requiring nearly 15 credit hours before even starting your degree. Some of these certifications can be completed in as little as six weeks and allow you to enter the workforce quickly with hands-on experience. Trade schools overall take less time, take less money, and graduates carry little to no debt in some cases due to the larger amount of scholarships and aid available.

Despite rising prices and solid alternatives in higher education, student loans offer many advantages though. If a student only cares about the return investment from taking out student loans, then it’s an amazing idea. It allows low-income students to get a comprehensive education, an opportunity they otherwise would not have. Having a good credit score isn’t required to get student loans, meaning those with bad credit despite having an already well-paying job still have an opportunity to get a better education if they want to. In addition, a traditional College’s credits are often transferrable to another degree, so those who already have debt but need a career change, they could transfer the credits to a different degree. This is not possible almost at all with a Trade certification. Paying off student loans promptly also allows young students to obtain a good credit score too.

But perhaps this positive reasoning raises also raises a question; Are low-income students at a higher risk due to student loans? According to Demos.org. Black and low-income students take out larger student loans 84% more often than any other group to get a Bachelor's Degree. Low-income students also have a higher probability of getting financial aid too, but even after those grants still end up working often more than one job to try and cover living costs and debt at the same time. This means their time is more restricted, and they’re less likely to be on campus making student-staff relationships. So, when they get a bad grade, they’re more likely to be discouraged and feel that they do not have the time to fix it.