Federal loans remain today’s most attractive loan option for undergraduate students: low interest rates, multiple repayment options, and the possibility of forgiveness for public service careers. However, over the years federal funding for college costs has increased so dramatically. People have argued that how much the federal government offers is not enough, and that government loan limits should be increased. Conversely, federal spending on higher education amounts to about $170 billion a year as compared to 1970 when federal spending totaled about ten billion dollars a year. There are millions of students throughout the country who need help financing college, raising federal caps will only enable colleges to continue raising tuition and induce more borrowers to incur a debt they should not be taking on.
A team from the Federal Reserve Bank released a paper in the summer of 2015 suggesting that its data alluded to the increase in federal aid correlated with increase in college tuition. Looking at both public and private nonprofit colleges during the mid-2000s, they found that schools raised tuition by fifty-five cents for each
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They offer another way for students to finance their education when their federal aid package is capped, but are still left with tuition costs and expenses that need to paid off for the up-coming academic year. While private loans share some qualities with federal unsubsidized loans, students play the risk game when they approach private lenders. Private loan interest rates fluctuate with the market, and students only learn of their “risk-based rate” the lender will offer once the loan is approved. Conclusively, this makes interest rates inconsistent and variable across the repayment and borrowing period. Inexperienced students become bound to the savvy investors until their debt it paid off, if that ever happens without the borrower protections that the federal government