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Should We Really Do Away With Federal Student Loan Limits?

Posted By admin || 7-Jul-2011

Should We Really Do Away With Federal Student Loan Limits?

The ironic thing about what's happening in our economy is that while ordinary Americans are losing jobs and experiencing salary cuts, the cost of living continues to rise.  These rising costs include the cost of education. A matter of fact, the cost of education is rising so much that some proponents of a college education are pushing for the banishment (or at least an adjustment upwards) of  the limits on how much students can borrow from the government federal aid programs.

Currently, students can only borrow government backed student loans up to a limit which may not cover the full cost of tuition. Private, costly student loans cover the gap. But some are pushing to remove the limits so that students don't need to rely on costly private student loans. On the surface this may seem like a great idea; but in practice it could play out quite differently.

Here's the problem:

  1. As we have mentioned in the beginning of this post, higher education is too costly and that price tag is getting steeper.  The average American can't afford to pay cash for college and even with grants and scholarships, most are left taking out student loans. If we remove limits, we could end up with more students who have high student loan debt .
  2. According to some critics, one of the reasons that the cost of education has gone up is because there are student loans available for students to borrow.  If the ceiling on these loans is banished, we could also see the restraints on education costs disappear.  As with any goods or service in our society, the price is set at what the market can bear. If students can fund an unlimited amount of education costs, what is the incentive to keep those costs down?
  3. Finally, because students are not yet able to discharge student loans in bankruptcy, any debt taken out will be with them until they can repay it.  Do we really want to see more students with $100K or even $300k in student loans that they have no possibility of discharging in bankruptcy unless something catastrophic happens?
Categories: Student Loans
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