A Review of the Deferred Student Loans System

Finance Dept.

From the Finance Research Center

Do deferred student loans really work? It all depends on how well you make use of them. Some students have achieved a great career through learning while others have wasted their time on frat parties and drinking. This financial facility is designed to help students achieve a university education by providing them with the means to pay for the tuition. Some of the home students in European countries are expected to pay up to $15,000 per year in tuition. This is clearly beyond an unemployed student living at home. The alternative is to go back to the old systems where Higher Education was free and automatic. Many governments are finding this model too difficult to implement. Therefore the deferred student loans were seen as a good compromise.

  1. Extending the repayment period: Do not make the mistake of assuming that deferred student loans are free of charge. You will have to pay them back in full. Sometimes you may even be charged some interest rates. Normally the facility will allow you to wait 12 months after graduation before the monthly installment. A typical case is a student that does 3 years at a recognized university and accumulates debt worth $90,000. They can expect to pay between $300 and $700 per month after the grace period. It is possible to make the process faster and avoid long term debt.
  2. Bankruptcy and terms: Some students previously abused the deferred student loans system in the hope that they could make use of the lax bankruptcy laws. The government has since created strict limits on the renegotiation model. You cannot turn round and intentionally remain unemployed in order to avoid paying back this money. In fact there are private companies which have been awarded the contracts so that they can pursue defaulters without fearing the political consequences of their actions. The benefit that you get from these agreements is the reduction in your overall interest rate.
  3. State arrangements: In the USA there is a distinction between the Federal program and local grants. The EU has arrangements for its students across the relevant area. For example Sweden can offer deferred student loans to its students to study in France. The appropriate remittances are sent according to the government protocols in place. The Education Department in the USA guarantees these loans on a subsidized basis. You can supplement the income with other scholarships and grants. Employers are also seeing the benefits of attaching work study programs to their contracts.
  4. The Qualification model: As a minimum requirement you should either be a citizen or a legal resident. The issue of undocumented aliens or illegal immigrants is causing some debate in conservative states. The drain on public resources is counterbalanced by the view that these are people in the middle of a crime and being supported to benefit from it. The other view is that all students deserve an education regardless of their immigration status. At the moment you will be required to provide proof of residence and citizenship before you can access these programs.
  5. Income and means testing: A basic formula has been designed in order to ensure that the deferred student loans are primarily targeted towards the low-middle income students. Trust Fund babies need not apply because they will be unceremoniously rejected. The financial requirements mean that you have to provide proof of income and expenditure. They will want to see loan agreement, tenancy agreements, contracts, bank statements and investments. This is where the temptation to falsify figures becomes very strong. Remember that there are legal consequences for providing erroneous information.

The crafting of the deferred student loans program has been a success in as far as it has enable a lot more people to enjoy the benefits of education. It has been instrument in removing some of the income and class barriers which led to the cycle of poverty. The downside is that the government may struggle to fund these programs in the wake of the recession. Sometimes students have not used the opportunity well and there are problems with high student debt. That is why some graduates come up with debts of $100,000 even before they start holding a steady job.

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