Home > 2014 > Students

Is It Too Easy to Get Student Loans?

Advertiser Disclosure Comments 0 Comments

It’s not difficult to take out a student loan — if they were hard to get, it’s unlikely they would be the largest form of outstanding consumer debt in the U.S. (except for mortgages).

A major factor? For federal student loans (a large part of the $1.3 trillion in current U.S. student loan debt), little is done to vet borrowers’ ability to repay. In fact, ability to repay has very little to do with student lending, because they are very difficult to discharge in bankruptcy. That’s a huge comfort for lenders, but consumers are unlikely to see it that way. Sure, someone whose student debt exceeds his or her salary should perhaps have known better before taking out the loan, but it can be frustrating to have been offered money you can’t afford to repay.

How to Get a Loan

There are barriers to financing an education: Federal loans are available in limited quantities, and private loans require a creditworthy borrower or co-signer. Even with limits (for example, dependent students can only borrow up to $31,000 in federal loans throughout their undergraduate education), loan affordability greatly depends on career path.

A $29,400 debt load, the average for the class of 2013, is going to have a completely different impact on the finances of someone going into engineering than on someone pursuing a career in social work. Should people with such vastly different earning potential be allowed to borrow the same amount of money?

“I’ve got so many mixed feelings about this, to be fair,” said Mitchell D. Weiss, a debt expert and Credit.com contributor. “On the one hand, you want to try to protect people against themselves, but is that really [the government’s] job?”

The idea of protecting people from seemingly unaffordable debt could mean cutting off loan access to people with no other means of paying for higher education. To many, that sounds like a recipe for inequality rather than a solution to climbing student loan debt.

Where to Draw the Line

It may be pretty easy to get a student loan — you fill out the Free Application for Federal Student Aid (FAFSA) to qualify for federal loans and get a co-signer for private ones — but ideally, finances shouldn’t be the deciding factor in access to education.

“Do you want to make it prohibitive for a student who wants to try to get ahead and get the life they want for themselves?” said Elizabeth Keuffel, president of the New Hampshire Association of Student Financial Aid Administrators and director of financial aid at St. Anselm College. “That’s the conundrum for access in general. Yes, there is an ease of ability to get the loan, but you also have to do well.”

If you don’t meet the academic standards of the Education Department or your school’s financial aid office, you won’t be able to get federal student loans for another term, until you get your grades up. That standard is called satisfactory academic progress, and it varies by institution.

Choosing an Investment

For college-bound students and their families, education decisions need to involve a lot of math. It’s not just the cost of the school but the value of the education and how that will translate into the student’s future earnings. It’s hard to turn the future into tangible numbers, but failing to try is a huge financial risk.

“I think ultimately it has to come down to the consumer to make better choices in terms of the educational institutions that they’re contemplating,” Weiss said. Families need to decide how willing they are to take on debt and whether they can reasonably expect to repay it — those are tough, but necessary, decisions.

How do you know if you’re making the right choice? Lots of research helps. There are plenty of websites out there with potential salary information on various careers, lists of schools that give a lot of scholarship money and calculators that help you understand what your future student loan payments may be. Being able to afford those loans is serious business, because if you fail to make student loan payments on time, you can do serious damage to your credit standing.

Using the interactive tools on Credit.com, you can see how just one or two mistakes can make a mess of your credit. At the same time, consistently making student loan payments on time will help you build credit. Taking out loans to get an education is an investment full of potential — if you know how to handle it.

More on Student Loans:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team