Student Loans Hold Students Accountable

Ryan Heshmati

June 24, 2022

In recent elections, the rise of student loans has become an increasingly contentious topic of discussion. Many politicians attempt to energize voters by promising student loan cancellation. On Elizabeth Warren’s website, for instance, she promises that on day one, if she is ever elected president, she will, “…implement my student loan debt cancellation plan that offers relief to 42 million Americans...” On the surface, letting many who were forced to borrow to receive higher education seems like a positive move, but in reality, it may not be. Having to consider paying back a student loan is a key consideration that makes it more difficult for students to justify majors that fail to add value to the American economy. 

First, while many tout the student loan industry as “predatory,” it provides a crucial opportunity that would otherwise not be accessible to many Americans. According to Melanie Hanson, of the Education Data Initiative, almost 92% of student loans are federal, with the average interest rate of those federal loans being 4.12%. To put this rate into perspective, inflation, according to the most recent consumer price index data, sits at 8.6%. While the country is facing unusually high inflation, it is important to note that the real interest rate, with 8.6% inflation, then sits at -4.4%. The federal loan's average interest rate is also quite low when compared to mortgage rates, which says sit at 6.10% for a 30-year fixed-rate loan. When contrasted with interest rates being charged in other areas, student loans fail to emerge as “predatory.”

Debt, at any rate, is still a weight on borrowers’ shoulders, but it may not necessarily be a negative one. Being forced to consider majors that pay better, which likely are more beneficial to the economy, is one potential positive that can come out of the decision to borrow to further one’s education. While some may see it as unfair that one may have to abandon a passion in favor of a more lucrative field of study, it is important to consider that more lucrative genres to study likely will be more impactful to society. 

Eleanor Roosevelt told Americans, “With freedom comes responsibility.” Considering that the rates of most student loans are hardly high and the impact of that debt could potentially be positive, specifically with regards to choosing majors, student loans stand as an effective vehicle to hold students accountable for their decisions without bankrupting them.