The United States has made the step on enacting policies to promote its economic development. These policies are put in place to ensure operations are cost-effective. The development of students’ loans as enables school enrollment to increase, thereby increasing the number of student loan debtors. Repaying of the loans has been facilitated by subsidy by the government and the introduction of repayment strategies. These methods include interest reduction, income-based plans, and income-driven plans. Further, the United States has initiated regulations that limit free trade. All these approaches by governments affect the economy either positively or negatively.
During the 2008 recession, the Federal Family Loan Program (FFELP) had failed as many lenders in the United States credit markets. It was unsuccessful in securing private capital that made up students loans. The government had to clear the loan hence impacting the economy where they depended on the taxpayers to fund student loans. Thereby removing the FFELP, it would save federal governments money and consequently provide Americans with affordable quality education, making the economy secure (Gleeson, 2016). The demand to get college education has resulted in many people seeking loans to finance their education. In return, it has increased the size of student loan debt. It further outdoes other consumer debts, which affects the ability of a young person to borrow money, for instance, to buy a home. Their money goes to servicing the student loans, thereby affecting the real estate sector. To save the situation the Fairness in Student Loan Lending Act accepts students to pay their loans to a rate equal to the scale on the 10-year Treasury bond
Delegate your assignment to our experts and they will do the rest.
For a country to spur economic growth, it needs to have skilled labor. Competent human resource has to come from school. When the government initiates policies to reduce interests on student loans, it offshoots an increased in college enrollment (Dynarski, 2015). Strategies to subsidize student loans reduce their interest thereby decreasing the costs of college life. It further makes payment of the loans manageable hence reduces defaults. The acquisition of college education is a lifetime investment as the individual can earn more than a high school graduate. Although this mode of payment may be convenient, it is less advantageous to the income-based model. The income-based model requires repayment depending on one's earnings, thereby the payment increase and reduces with one's income. It reduces the pressure of the payer. The establishment of Pay As You Earn program (PAYE) is an income-driven repayment model. This system necessitated loan repayment for 10 percent of their discretionary income (Dynarski, 2015). The advantage of this model is that any remaining loan balance is forgiven. The disadvantage is that the lender will lose when low-income earners are forgiven after completing the repayment period. A recommendation the payment plans would be to extend the period one is required to pay their loans.
Having free trade in an economy is beneficial as it results reduced unemployment, increases the availability of goods and services, and increased economic output. Imposing tariffs on foreign goods leads to an increase in their prices. A country may introduce taxes to protect local products, but the effect would be its people paying more than they would have. When there is free trade, the United States can specialize in producing goods,it is effective in hence comparable advantage. It will lead to increased employment in industries in their best sectors, and to its drawback, they will be employment losses in the industries regarded as less efficient. It is suitable for the economy when countries engage in cross-country trade, as is a source of foreign currency. When trade barriers are established, it makes the currency more valuable, therefore making it difficult for exports in the global market. Additionally, it leads to lower output and incomes, thereby reducing investments hence result in a smaller economy.
For instance, a 25 percent tariff on steel has lead to an increased cost of importing the material. The duties might have benefited the local steel industry, but it consequently affected smaller manufacturing companies. This cost affects the companies’ profits, which is transferred down to the employees and customers (Ciuriak, 2018). Other tariffs such as the 30 percent tariff by the Trump administration on imported solar panels (Carbaugh, 2019). As a result, the cost of home solar installations increased together with the price of solar higher at 5.6 percent. This means that Americans have to spend more. When America introduced tariffs on washing machines, their prices rose by about 12 percent (Flaaen, 2019). Additionally, it increased the cost of buying dryers, which is a complementary item that was not subjected to the tariff. Domestic manufacturers were able to hide the 12 percent in another item instead of increasing 25 percent on the washing machines. It may have generated revenue for the government, but the American consumer paid the price. Free trade helps the market operate efficiently; thereby, there are the right productions by manufactures and better pricing. Free trade may lead to domestic manufacturers being affected. It also results in manufactures moving to areas with lesser restrictions. The government ought to review existing trade barriers on imports for the United States to have competitive authority in the global market.
For the United States to maintain its economic superiority, it needs to evaluate how it relates to its trading partners. It is necessary to review the current trade restriction and develop strategies on how it will benefit the consumer without affecting domestic manufacturers. Besides, it is crucial to maintain policies that do not lower local incomes and investments. The economy of a place depends on the number of disposable income people have. By extending the number of year student loans are to be paid will enable people more money to spend other than a huge part of their incomes going to loan repayment.
Reference
Carbaugh, B. (2019). Trump’s America First Program: A Flawed Approach. Challenge , 1-19.
Ciuriak, D., & Xiao, J. (2018). Quantifying the Impacts of the US Section 232 Steel and Aluminum Tariffs.
Dynarski, S. M. (2015). An economist's perspective on student loans in the United States.
Flaaen, A. B., Hortaçsu, A., & Tintelnot, F. (2019). The Production Relocation and Price Effects of US Trade Policy: The Case of Washing Machines (No. w25767). National Bureau of Economic Research.
Gleeson, M. (2016). Student loan debt and the effects on the broader economy.
