Federal Student Aid Policy

Policy analysis involves gauging a line of argument that rationalizes the course of action of a government. This case analyses the possibility of reducing the financial burden imposed on students in the United States through student loans. This is specifically through the high interest rates imposed on the student loans. These loans are meant to boost the schooling of students from low-revenue settings and the high interest rates on loans are a great setback to their enrollment. Rising costs of higher education and inflation rates have forced a tremendous increase on the interest imposed on student loans. In America, the student debt has outshone the credit card debt. Increase in tuition fee in higher learning institutions forces students to take loans. The United States has been advocating for the support of higher education after the implementation of the GI Bill (Gladieux, 1995). It was after this bill that the issue of student loans was guaranteed. A grant program had been created, but the mechanisms to support the system of the central commitment of supporting higher education were under attack.

Reducing Student Loan Burdens

Several problems facing higher education student support called for the incorporation of government policies (Gladieux, 1995). The government policies had to be analyzed in terms of how they had evolved in their accomplishment and any future adjustments in attempting to reduce student debts burdens. It is true that much has changed over the years since the legislation of the current federal aid programs. The greatest section of the system was developed in the 1960s and 1970s under a student-based strategy congress (Gladieux, 1995). This was to provide financial aid to students through lending rather than lending funds to institutions. Over nine tenths of the US Higher Education Programs are provided through financial aid.

There have been some shifts in the policies that support the system. This has made the current system to be very different from the earlier legislative framework. There is now a large reliance on loans. The issue of student debts in financing their tuition in higher education has enabled the creation of equal opportunities in higher education, in the United States. Most students rely on loans to make it through their higher education programs (Gladieux, 1995). Any efforts to reduce debt burdens has direct social benefits, but some negative economic implications such as a reduction in investment and increased government funding in the sector.

Helping Americans in Managing Students’ Loan Debts

The idea of helping an ordinary American student manage debt has been considered as great. It has observed that student debts are currently being problematic on college graduates. Those who end up being jobless end up in organizing for protests on the streets (King, 2003). This has recently called for President Obama stepping in to advocate for ease of student debts in the country. He advocated for policies that would ensure this and the fact that entrepreneurs would not put much pressure on those fresh graduates who could not repay their debts immediately following lack of employment. He called for a policy that would ensure that borrowers would pay only ten percent of what they earned until they completely settle down their debts. However, there has to be some negotiations with the lenders concerned. This would involve some readjustments in their agreements. The effect of these new policies is that most of the lending entrepreneurs may be discouraged in their willingness to keep on running their businesses (King, 2003). At the same time, any potential investor may be discouraged to start the same business.

Opportunity of Consolidating Loans and Reduction in Interest Rates

There have been actions that are directed at providing opportunities that are aimed at consolidating student loans and reducing the interest rates. The actions were targeting the reduction in the interest charged on student loans. Any moneylender issues funds at a cost imposed through interest rate on the loans given. Though the loans benefit needy students, the inclusion of some specified level of interest rate on student loans has it implications.

Student loans are considered the major source of financial aid to the student but seem to be a burden to others. This comes after they finish their college or university programs and the time of repayment has to commence. As the number of students joining the higher education programs increase, the amount set aside for lending students also increases. The increase also increases demand and the willingness of establishing such student loans businesses by entrepreneurs. 

From this policy of trying to reduce the student debt burden, the interest charged controls a big deal of the resources that are used to finance student loans. The extra amount that a student repays as interest is very useful in many aspects. First, this department may be standing on its own. There are workers who need compensations in terms of salary and wages. If no interest charged, there could be some financial problem within the organization. This regards to the issues of the dynamic technology and other development issues within the department. The rate charged is also aimed at covering any possibilities of inflation (Fox, 2010).

In conclusion, any policy that is imposed with the aim of reducing the United States student debt burden should also consider the economic implications. Though the social aspect is worth considering, equilibrium should be established considering the economic effects and the social benefits achieved or to be achieved from the implementation of the policies (Fox, 2010). Therefore, a serious analysis is important.