Depending on where you grew up, you may be familiar with “Payday Loans” or “Cash Advance” shops. These loan offices are known to prey on low-income people in dire financial situations; their high interest rates often end up placing their customers in more debt than when they started. While some states are taking measures to prevent loan sharks from preying on low-income borrowers, I would argue that these predatory tactics have merely taken another form. In an age where a college education is increasingly crucial for socioeconomic mobility, federal loans take advantage of desperate or uneducated families, leaving them in decades of severe debt. With all of these factors working against students, both the government and universities should ensure that families understand the binding nature of student loans and the severe consequences of not reading the fine print.
While the tuition rates of public universities have started to decrease in recent years, the rates of private universities have increased beyond the scope of inflation. Combined with the cost of living crisis and the FAFSA fiasco that is still unfolding, this rise in tuition could lead to more prospective college students feeling forced to take out student loans. Despite President Joe Biden’s strides in student loan forgiveness, student debt is still a major issue in the social and economic fabrics of the United States. Individuals burdened with huge amounts of debt are less likely to make big investments in their future, such as buying cars or houses. These decisions not only harm the nation’s economic growth but also hurt people under constant financial stress due to a decision many of them made before they were even adults.
Even worse than direct student loans are Parent Plus loans. Starting in 1980, the Federal Bureau of Education introduced an option to allow parents to take out uncapped personal loans to send their children to college. However, compared to loans available to students, these incur higher interest and lower payment flexibility and are far less likely to be forgiven. If a family is desperate enough to take out these loans, they have a higher chance of missing a payment, which could destroy their credit, put their mortgage in jeopardy and destabilize the future of their other children. Similar to payday companies, these loans tend to burden low-income families — and, disproportionately, low-income families of color. 44% of Black families that take out these loans make less than $30,000 annually, compared to only 10% of white families.
Some universities will sneak federal loans into their financial aid packages, expertly misrepresenting how much a student will actually pay for their years of higher education and how that cost could potentially haunt them for decades. While many top universities have ceased this practice, and have even increased student aid to combat student loan debt, those without billion-dollar endowments to pull from are not budging. Only a year ago, before I got into Brown, I was looking over financial aid packages of state schools, including University of Tennessee Knoxville. Tennessee’s financial aid included loans, as if one couldn’t go to college without going into debt. When I got into Brown, I was pleasantly surprised not only by the amount of aid offered, but that Brown didn’t add loans to the ‘aid’ they were offering. While Brown has taken a huge step forward by not including federal loans in their student aid packages and increasing their financial aid budget in recent years, there are still many ways to improve and resources that could easily be made available.
With more than 50% of undergraduate students taking out student loans, financial literacy education should enjoy a more prominent spot in college and high school curricula. Literacy on the rules and terms of all types of student loans should be introduced to students before they have to take them out, and preferably before their senior year, when they already have enough to worry about. An overall understanding of how loans work can not only help students well beyond college, but is also necessary for anyone who plans to have a secure financial future.
At the very least, the government should make sure that every available resource is accessible to these families and students for them to fully understand the implications of what they are agreeing to and, more importantly, understand the consequences if they fail to comply. The best way to counteract increasing student debt is through awareness. Schools need to prioritize transparency by not including student loans in their financial aid package. However, students and families also need to think critically and carefully assess whether they believe that an expensive undergraduate degree is worth potentially compromising financial security for the rest of their lives.
Mary O’Riordan ’27 can be reached at mary_oriordan@brown.edu. Please send responses to this opinion to letters@browndailyherald.com and other op-eds to opinions@browndailyherald.com.
