Why are college loans considered financial aid when in the long run, after paying off my loans I will have spent even more money? How are loans “aid” when they put me in debt?
Because just like with grants and scholarships, loans are a tool used to help students afford college when they otherwise might not be able to afford it.
It may not be the aid that is your first or second choice, but it does aid in helping you afford college.
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I’m happy with the loans. It will allow me to build credit, and most likely my family will pay them off for me before I start paying interest. So, loans are helpful that way. However, it seems like it is misleading to put them in the same category with grants and scholarships which actually are aid. Loans just defer the burden spead out over a longer periord. Actually they increase the burden.
The more I think about it, the more it seems calling loans “aid” is like deceptive marketing. Like, “let’s call it aid so kids think it’s actually a gift like a grant is a gift.”
A loan, just by the word itself, is obviously not a gift. If you can’t go to college without the aid of a loan, than the loan is aiding you, right? If you don’t need a loan to pay for college, than don’t take out a loan.
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Financial aid is aid. It includes scholarships and grants and loans. If you don’t need the loan don’t take it. it is not deceptive marketing.
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I was just reading that some 9,000,000 people are in default. I wonder if they would consider it not deceptive. I mean, why can’t they grant the loan and not put it in the same group as grants and scholarships? That part seems deceptive. The loan is actually helping one go to school without helping financially.
They are in default for several reasons. Many take out too much in loans in order to attend their “dream school”. Most of those are private loans as federal loans max out. Others choose majors that do not lead to good paying jobs…or any job. Others lose their jobs and are unemployed and had already used up their deferment time.
I you cannot go to college without the loan then it is aiding you.
The people in default fall into three different buckets:
1- took out loans for for-profit colleges which grant sham/unnecessary degrees and now they can’t pay them back because they are stuck in low wage/go nowhere jobs
2- took out loans and had a medical crisis, unable to work, and paying their health care costs were a higher priority than their college loans
3- took out loans- and then more loans- and then more loans… and have been using the proceeds to live on, to pay a relatives household expenses, and other non-tuition related items. So their loans have now ballooned to an outrageous amount and they’ve got no hope of ever getting control over even the minimum payments.
Millions of people took out educational loans and paid back every cent. They read all the documentation so they knew what the terms were, they had a clear educational goal in mind and a career plan after that, and they didn’t use their loans to finance a relatives shaky business startup or help grandma buy a big screen TV.
I took out loans, read every single page of a massive loan packet, paid it back on time. Took the bare minimum for my maternity leaves so I didn’t have to suspend my loan payments while I wasn’t getting a paycheck. There is nothing deceptive about the loans- they lend you money, you pay it back with interest. But tens of thousands of people can’t be bothered to read the paperwork or study the repayment charts to understand what their monthly payment is going to be, or to understand that if you’re 21 years old and are going to need 10 years to pay off your loan, that will make you 31 years old- and potentially at an age where the monthly payment is going to be REALLY painful if you can’t afford to move out of student-type apartments, get a car loan, etc.
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Yeah, the loan aids you to go to college. When you are done, it is doing the opposite of aiding you. For that many people to be in default it’s difficult to see loans simply as aid. They definitely are not aid like a grant is aid.
So skip the loans and just use the grants and scholarships you were awarded. Schools give out millions and millions of dollars but they don’t have bottomless coffers and loans stretch those funds a bit further to more students.
Schools also don’t hide the fact that loans are part of financial aid.
Very few schools have the financial reserves to give out “free money” to every student who needs FA.
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I will add to this list borrowers with mental health issues. There is honestly no reason to go into default, because there are income driven repayment plans. What I found when I reached out to my grads who were behind in repayment was that many of them were ignoring repayment because it made their anxiety worse. The servicers can add to the stress by making things difficult sometimes. IMO, automatically putting people into income driven repayment plans if they are behind in repayment, based on IRS information, can really help with this.
But back to the original concern. Loans are financial aid. The federal government is allowing students to borrow money that they might not otherwise have access to, and the in school deferment & repayment terms are better than what they are likely to get in the private market. There is no deception … schools and the federal government provide lots of information on terms of loans. In my experience, students often choose to ignore the information. One young woman at a school where I once worked comes to mind. She threatened to sue us because she said we couldn’t really expect her to pay attention to the entrance and exit counseling she was required to do. You can’t fix that!
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Well I understand where the OP is coming from. It’s not aid. It’s a loan (that aids you to pay for college). It’s not financial aid grant that you don’t pay back. My wife and I paid back all of our combined $250,000…back in the day. Many people we knew bought fancy cars, condos, houses as we lived in our small apartment. But… We were done paying for our loans quicker and then bought our house and cars and those pesky kids came along. We live in a major city where we bought our house. They all moved to the suburbs since they couldn’t afford the City… Since they were all still paying back their loans.
So. Take what you need to get by.
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Nice example of doublespeak.
No kidding. Just because it’s not “free money” doesn’t mean it’s not financial aid. Would you argue that federal work study is not financial aid because it has a work obligation?
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This is why I consider it financial aid:
As a poor kid, from the barrio, no bank or loan office was ever going to
consider loaning me or my parents ANY money! Where ELSE can you get a loan, no questions asked, to attend a school?
As an 18 year old, the federal government took a chance on me and gave me a small loan. This helped me to purchase a computer (Apple IIE), school books and dorm supplies. My tuition, R&B were covered.
If the federal government chose to “aid” me, WITHOUT ANY COLLATERAL, other than the word of a poor student, then I had a responsibility to pay back this financial obligation that was entrusted to me.
I read through the actual paperwork and had to meet with the financial aid counselor to indicate that I knew I had to pay back the loans. Then I signed for the loans.
I made sure that I finished my courses and program, thus paying back every cent when I was no longer a “starving student”.
Maybe you don’t see it this way, but I wouldn’t have finished my Bachelor’s and Master’s degrees without the AID of a few small loans.
That’s why it’s called FINANCIAL AID.
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i get it, LaContenta - my kids all went through that shock too when looking at their financial aid paperwork. Aid includes loans, but in high school it’s not touted that way. I’ve seen so many “get your free FAFSA filled out early for the best AID available” - and it seems like it’s all free money coming your way. Nope.
Same with your EFC - expected family contribution. SO MANY kids think – Wow! that’s what I have to pay! but no, for the majority of kids, it’s not. (they are changing the name soon of that one.) my neighbor had a fit recently when she realized her oldest’s - class of 21 - EFC wasn’t the amount they will pay; just the amount the feds think they can pay going to a state school.
but it’s good you learn these things sooner than later.
Why are being so rude? I didn’t even say anything about your second subject. You just fabricated that.
I also had financial aid. Without it I couldn’t go to undergrad or medical school. I read every line etc but it didn’t really matter. With out it I couldn’t progress. My loans defaulted and were in forbearance etc since at that time I didn’t have a choice. But thank goodness to rapid home equity growth since that is what paid them back.
Most people I know don’t think of loans as aid. They question even on CC over and over why their financial aid package has so many loans and not just free aid money /grants. It is hard for people to understand the concept. Just read the hundreds of threads with this question every year. We come across it many times a "season " on the Michigan threads.
Yes this ^^
Work study is not financial aid, just as a loan is not financial aid. Work study aids by giving the student the oportunity to work. Financial aid aids by giving the student the opportunity to borrow. In both cases, the student is paying their own way and either doing work for someone or paying interest to someone. Nothing is free. There is no gift except the opportunity to work or to borrow. The person who is supporting the student is the student. This is very different than a grant and for this reason should not be considered part of the same “package.” Calling it all financial aid only benefits the people marketing these loans. I’m sure the people lending money would not like it if loans were not marketed as part of the financial aid package because they would likely lose customers.
I’m not against loans. I’m against the way they are marketed to students. Calling financial aid “debt aid” would be more accurate.
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For low-income students in single-parent households with terrible credit scores, the opportunity to borrow can be nearly as great a gift as a grant. That reality is likely very difficulut for someone from a higher SES level to grasp. There are huge swaths of America where people can’t qualify for a mortgage or even a car loan. There are people who cannot even rent an apartment because their financial situation is deemed inadequate.
Maybe the opportunity to be granted the ability to qualify for a loan is not very important to you, but to at least 1/5 of America, it is a great and welcome opportunity.
And ditto for work study jobs.
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As I already said, I’m not against loans. They are helpful. They just are not financial aid. They are “debt aid.” And it’s not just semantics. It’s marketing for the purpose of profit, to get tuitions paid, etc.