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Student loans from federal funding conceal tuition hikes, increase debt

By Daily Bruin Staff

Feb. 8, 2012 12:18 a.m.

Bruins, do not fear. In his State of the Union address and subsequent visit to the University of Michigan, President Obama threatened to withdraw funding to universities that are unable to prevent endless tuition increases.

But there are deeply rooted problems with the president’s proposal for higher education reform. His speech hinged on the ideal that it is imperative that every family in America strive to send their child to college and that tuition should remain low enough to keep this door open. But given the fact that today there are more college degrees than job openings, the question becomes: Are too many kids going to college?

A necessary economic evaluation of universities must be coupled with a social assessment of the value we place on a university education. Students are starting to realize the true cost of an education ““ without state subsidies ““ yet loans have essentially lowered the barrier to enter college, allowing tuition increases to continue.

It is an eternally complicated issue. If we hope to successfully combat the high costs of education, then the discussion of administrative pay and construction ventures must include examining the structural faults with our lending system.

While controversial, the argument that not everyone needs to attend college has a viable place in today’s conversation. The American dream should not be to attend college, but rather to make the lives of our subsequent generations even better than ours ““ whether that includes attending college should be determined on a case-by-case basis.

Despite the alarming trend of diminishing state funds, federal aid in terms of student grants and loans has increased by 164 percent over the past decade. This type of aid has enabled millions of students, myself included, with an additional way to pay for college ““ portions we have to pay back and other portions with no repayment obligation.

But there are inherent problems with this federal policy. Federal grant money, which is not paid back by recipients, is disbursed without incentives for students to succeed academically. Furthermore, student loans are given to students regardless of academic merit, choice of major or likeliness to be able to repay the loan.

Personally, I completed the FAFSA application with my parents and, months later, I was given the option of thousands of dollars in student loans, almost like it was magic.

However, these loans ““ in the context of the current economic climate ““ are exceedingly risky as loans become larger to match tuition hikes and post-graduate job opportunities become scarce. A good comparison might be that, like our health care system, costs have been able to soar because of a third-party payment system. Student loans and grants remove the student from the real price of education the same way insurance has hidden the true price of care from patients.

Thus, the billions of dollars spent on financial aid for higher education by the federal government has enabled tuition inflation because aid can effectively hide tuition increases. But now we find ourselves in a situation where we are sending many kids to college only to end up in debt, working jobs that previously did not require a bachelor’s degree ““ and tuition, in effect, becomes higher for everyone else.

When re-evaluating the importance of going to college, it is dangerous to consider restricting access by reducing aid else these institutions become a cycle of privilege. But it is even more dangerous to continue forcing students to obtain egregious loans for something lacking practicality.

Americans need the opportunity to specialize and adapt to the complexities required to be successful in today’s job market, but four expensive years at a university shouldn’t be the only viable option.

These are the times that foster creativity to fix a system in limbo. Perhaps institutions will rise in affordable ways to deliver unique skill sets to funnel students into careers in a more prominent way than they currently do.

Do you think loans for higher education need to be more merit-based? Email Ugarte at

[email protected]. Send general comments to

[email protected] or tweet us @DBOpinion.

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