Abstract
Financial aid has become an issue of grave focus in the American society. The US is currently facing a financial crisis due to the accumulation of debt since most borrowers have failed to pay, as required. The paper aims at identifying various flaws in the financial aid sector and its processes, as well as the various solutions to the identified flawed areas, to make the system more effective. The data used in this paper has been primarily obtained by conducting analyses of various qualitative studies on financial aid. The research findings attribute inefficiency in the financial aid sector to a number of issues. The first one is the complexity of FAFSA which has deterred individuals from making timely applications, as well as accessing financial assistance for the attainment of their higher educational goals. The second reason is the ineffective communication strategies between the financial aid sector and the loan borrowers. The final cause of inefficiency in financial aid is the voracious practices embraced by for-profit colleges to attain profit maximization. The research is critical since it can enable the financial aid sector to identify its areas of flaws and make effective transformations to those areas, to promote service efficacy.
Financial Aid
Introduction
College enrollment has heightened tremendously over the years. Approximately twenty million individuals have joined various colleges in the United States since the year 2010 (Bednarz, 2018) . The intensification of the number of college entrants has impacted a vast number of challenges in the financial aid sector. The higher education board in the US is currently facing myriad financial problems. Based on various reports, one point five trillion dollars which were allocated to forty-four million students have not been paid ( Bednarz, 2018). The huge debts continue to plague the economy of the United States. It is crucial for new effective methods to be employed in the financial aid system and processes, to prevent the accumulation of massive amounts of debt. More productive approaches would ensure that students are provided with funds that coincide with their financial capabilities so that they can be able to pay their debts in the future. Additionally, a new refined system would also protect students from exploitation by for-profit colleges. Moreover, a refined system would enable more learners to apply and access financial aid, increasing the number of productive and skilled individuals, who can make meaningful contributions to the economy and the society as well. Furthermore, a flawless financial system would also make sure that students pay what they can genuinely afford, which can enable them to sustain other aspects of their life, and contribute in a meaningful manner to the overall state of the economy.
Delegate your assignment to our experts and they will do the rest.
Literature Review
Scholarly Articles
According to Bednarz (2018), the American financial crisis is attributed to for-profit colleges. Furthermore, the researcher argues that t he financial aid system is flawed and is failing various students who are in need of college funds and assistance. The failure in this system is further attributed to incentives policies which higher education institutions consent and respond to but fail to accept the implications passively. The policies enable these institutions to augment their prices and general spending. According to Bednarz (2018) intensification in financial aids allows the institutions to increase their tuitions since they are self-assured that the federal loan grants would assist to mitigate this intensification, a theory known as the Bennet Hypothesis.
The theory has proven to be true since the tuition prices at higher education institutions have heightened at a rate which is four-and-a-half times more than the inflation rate. According to Bednarz (2018), the current financial aid epidemic can be attributed to the challenges of reform. The faulty system has impacted the closure of a vast number of for-profit institutions. Consequently, massive numbers of students have been left with great amounts of debt, and the lack of a college degree. A good example of such a college is the ITT Technical Institute which has recently experienced closure as a result of the revocation of their federal financial aid fitness. Apparently, a cancellation of the loans may occur for every individual that joined during the time of institutional closure. Nonetheless, the same does not apply to all the students.
According to Bednarz (2018), twenty-six thousand claims of loan forgiveness have been made and received by the DOE. Nonetheless, a mere fourteen percent of these claims have been accepted. The loan forgiveness program is aimed at excluding those students that can provide sufficient evidence to prove that their respective institutions employed unlawful or deceptive strategies in convincing them to borrow money on behalf of the Scholl. Actions which are in deviation from the law. Nonetheless, the process is very challenging to navigate, and the presented cases are seldom fruitful.
The flawed financial system has a grave impact on students in the society. Majority of the attempts made by these students to present their cases in court have proven futile. Furthermore, the students are left with massive debts which force them to forgo other needs in life so that they can pay loans. Consequently, these students are deterred from being successful in life, since all the income they generate is directed to the loan payment.
Bednarz (2018) puts across the idea that the prevalence of student debts and the declining American economy is due to the rapacious nature of For-Profit Colleges, as well as the ineffective financial aid processes. First, the Director of Education is responsible for the incessant approval of the federal student aid. The DOE funds the practices of for-profit institutions, as well as the profits that accrue, and then allocates the profits to their respective investor-owners. The stakeholders of these institutions, therefore, gain maximum profits at the cost of the learners. According to Bednarz (2018), the DOE admitted that he/she recognized the heinous practices that are prevalent in for-profit colleges. This was after the closure of the Corinthian Colleges.
The DOE further claimed that he had no power to withhold federal aid from institutions as a result of mere accusations after he/she was interrogated on the financial disbursements to subpar, for these types of institutions (Bednarz, 2018). Nevertheless, the flawed, corrupt, and unethical practices of the financial aid sector are depicted since many of the colleges which have proven to embrace illegal practices have still retained their entitlement to access financial aid funds from the DOE. Bednarz (2018) argues that the Education Management Corporation is a great example of the institutions that still obtain funds from the DOE even though there is sufficient evidence to prove the institution's engagement in illegal endeavors.
EMC operates in approximately one hundred and ten for-profit higher institutions in America. The organization's main field of specialty is various forms of trades, for instance, cooking and arts. Nonetheless, the institution has been subjected to immense investigations after being sued in approximately twelve states for unethical and unlawful practices. In the year 29014, EMC was legally charged for dishonest enrollment practices, as well as the manipulation of grant platforms, and federal student loans. Nonetheless, the institution was granted one point two five million dollars by the DOE, regardless of the ongoing investigations, and a vast number of lawsuits in the subsequent academic year (Bednarz, 2018).
According to Bednarz (2018), for-profit higher institutions have become prodigious at exploiting loopholes, dodging rules, and manipulating the yearlong petition procedure, to acquire federal aid from the department of education. Bednarz (2018) claims that for-profit institutions are triumphant in retaining the financial aid entitlement since they can manipulate validation, financial, enrollment, and employment practices, to mask feeble players. Moreover, Bednarz (2018) argues that in the year 2014, institutions that surpassed the tolerable standard for the permitted undergraduate loan reimbursement rate were still provided about one hundred and sixteen million dollars by the DOE. At the University of Everest, approximately two percent of the students who had benefited from federal loans had paid at least one dollar to refund the loans they had been given, in three years, after they had left the school. Cases such as these have become extremely common, forcing thirty-seven attorney generals to take legal action against for-profit higher education institutions. One hundred and fifty-two colleges are currently under investigation since they collectively owe eight point one billion of federal aid dollars to the DOE as of the year 2015.
One of the most extreme cases of manipulation can be traced to the recently closed Corinthian Colleges. The chief target of these institutions was needy potential learners, to capitalize on the institution's profit (Boatman & Long, 2016). The administration department recruited poverty-stricken and homeless individuals, enticed them with promises of lucrative careers, and manipulated them into taking up thousands of dollars’ worth of student loans. The administration team was fully aware that the students were incapable of reimbursing these huge amounts.
Furthermore, individuals with low self-esteem and those who were deficient in any caregivers were the primary targets of the colleges. High demand programs were effectively advertised to entice the targeted students, even though the programs were not offered in any of the colleges. The students were then motivated to borrow private funds from a financially tied bank. Based on these actions, the manipulation tactics of the for-profit organization are highly evident ( Kimmelman, 2016 ). The primary target of these institutions is susceptible individuals who have high eligibility for the maximum allotment of federal assistance. The existence of these profit-based education institutions fosters the prevalence of predatory practices and the accumulation of great debts that impact a decline in the American economy.
Moreover, such malicious practices deny students a successful life and career, since their core mission in life becomes to pay their debts. Additionally, such illegal practices rid students the chance to pursue their academic goals and obtain a college certificate which is critical for securing good prominent job positions in the modern world. Most students are left in great debt and without a certificate since most of these institutions are closed down due to unethical practices. It is therefore crucial for a transformation to be made in the federal student’s assistance programs and processes, to ensure that the students benefit from federal funds, attain their certificates, and are given enough time and reasonable terms of pay (Boatman & Long, 2016), to enable them to prosper in other aspects of their life. A transformation in this sector would ensure that there is a continuous flow of cash in government revenue since students are provided with loans, and dedicate themselves to paying the loans, so that others can also benefit as they did. The changes would be effective in enhancing the American economy.
Castleman, Meyer, Sullivan, Hartog, & Miller (2017) argue that the intricacy of the Free Application for Federal Student Aid (FAFSA) has contributed to the ineffectiveness of the Federal financial aid programs, which has impacted the academic lives of students in a negative way. Castleman, Meyer, Sullivan, Hartog, & Miller (2017) argue that one out of every ten college students fail to apply for FAFSA since they do not meet the requirements for the eligibility of the need-based financial assistance. Furthermore, the researchers argue that one of every six college freshmen who has acquired a Pell grant is reluctant to reapply for FAFSA for their subsequent year in college.
Castleman, Meyer, Sullivan, Hartog, & Miller (2017) attribute the socioeconomic disparities regarding college entrance and success, to the barriers imposed by FAFSA, as well as the imposed by the financial aid application procedure. Additionally, Castleman, Meyer, Sullivan, Hartog, & Miller (2017) argue that the lack of effective, qualified consultants and mentors to poor students and their families also hinders undergraduates from accessing the FAFSA funds, and completing a college education. Professional advisors and mentors have extensive experience and knowledge of intricate college and financial aid claim procedures. Therefore, they can facilitate the navigation of forms and timelines. The approaches entail prompting action via timely reminders, making simple the difficult concepts and procedures by transforming the manner in which information is presented in forms. There is a need for hassles to be decreased, to facilitate the connection between students, their families, and experts. Castleman, Meyer, Sullivan, Hartog, & Miller (2017) also argue that personalizing data can make the claim procedure more striking.
Moreover, Castleman, Meyer, Sullivan, Hartog, & Miller (2017) argue that the lack of effective communication between the financial aid sector and the students in need of this assistance makes it impossible for students to make timely applications for the loans. Majority of states have strict application deadlines for the allocation of state-based financial assistance to students. Moreover, the deadlines are not effectively communicated to the potential beneficiaries and also change now and then (Boatman & Long, 2016). As a result, most students fail to apply on time, making the financial aid inaccessible to them.
Furthermore, the CSS profile which is a core requirement creates another critical barrier to student’s accessibility to financial aid. It is a core requirement for students to submit both the FAFSA and the CSS profile at a similar time, to access the requested loans, in some educational institutions. In addition, students are required to pay a specific fee so that their paperwork can be effectively processed. Paying this amount creates a barrier in the access to student loans since most students from poor backgrounds are unable to meet this requirement. Furthermore, failure to pay this amount jeopardizes a student’s accessibility to the loan since the two documents are supposed to be submitted at the same time.
Castleman, Meyer, Sullivan, Hartog, & Miller (2017) also argues that higher education institutions are deficient of effective ways to communicate and impart a deeper understanding of the financial claim process, which inhibits students accessibility to the loans. Majority of institutions have this information attached to their websites, request forms, and admission forms. Nonetheless, these mediums of communication on financial aid are deemed ineffective since most students have little knowledge on the issue. According to Douglas-Gabriel (2018), President Donald Trump plans on dismissing loan forgiveness for individuals employed by the government. Additionally, the president aims at modifying the terms of income-based student loans, for the period when the beneficiaries are still in school. The three transformations are expected to heighten the prices of advanced education.
President Trump also aims to combine a total of five income-induced plans in the single plan which will lessen the payment period. The plan will reduce the payment period to fifteen years for students and graduated individuals. The plan also intensifies the monthly bill to twelve pints five percent of income for both of these parties (Douglas-Gabriel, 2018). Nonetheless, graduates will be given approximately thirty years to pay their dues. Furthermore, the plan will no longer necessitate future loan borrowers to work as instructors or social workers to attain debt forgiveness after ten years of paying their loans. The current American administration is targeted at a laceration of approximately seven hundred and ninety million dollars from the federal world study platforms (Douglas-Gabriel, 2018).
Furthermore, the president is targeted at transforming the allocation criteria for the program, to offer to fund grounded on an organizations enrollment of Pell beneficiaries. Consequently, there would be a transference in money from prominent and wealthy private institutions which receive massive amounts of money under the existing system. President Trump’s budget plan will ensure that the work-study program is saved severe cutbacks in funding. In addition, President Trumps aims at increasing the Pell eligibility to students from poor backgrounds, which are pursuing technical courses, in order to attain short-term certificates. The actions of the president are aimed at augmenting the number of skilled construction staff, a critical requirement in the redevelopment of America’s disintegrating infrastructure.
Analysis
According to Ratcliffe et al. (2014), America has been gravely impacted by the mountains of debt owed by individuals who have benefited from federal aid. The United States economy is drastically declining. It is evident that the citizens of this state are living beyond their means. According to Nutting (2018), household debt in America constitutes one hundred and sixteen percent of the country’s annual disposable income in the year 2006. In the year 2018, the total sum of household incomes was determined to be ninety percent of the yearly disposable income. The Country’s debt to income ratio has been extraordinarily stable since the year 2012.
Renzulli (2018 ) presents an analysis of the various classes of people who have debts in America. Individuals under the age of thirty-five years have a debt amount of sixty-seven thousand, four hundred dollars ( Renzulli, 2018 ). People of thirty-five to forty-four years of age have a total debt of one hundred and thirty-three thousand, one hundred dollars. Furthermore, those who are forty-five to fifty-four years of age have a total debt of one hundred and thirty-four thousand, six hundred dollars ( Renzulli, 2018 ). Additionally, individuals of between fifty-five and sixty-four years have a debt of one hundred and eight thousand, three hundred dollars ( Renzulli, 2018 ). On the other hand, individuals who are sixty-five to seventy-five years of age owe sixty-six thousand dollars while those who range from seventy-five and above have thirty-four thousand, five hundred dollars worth of debt ( Renzulli, 2018 ).
The main outcomes of these massive amounts of money are a declining American economy. The economy is drastically deteriorating since people have been unable to pay their debts fully. Additionally, the huge debts have also contributed to a decline in the country’s growth, due to the lack of enough capital to fund various critical projects such as the development of infrastructure. Furthermore, individuals who are reluctant to pay their debts put the education of others in the society in jeopardy, since the system depends on the payments of borrowers, to assist others. Therefore, reluctance to pay debts impacts a constant flow of money out, and not into the system. It is therefore crucial for borrowers to make partial and constant payments so that they can clear their debts, and promote the provision of financial assistance to others who are in need.
Strategies to Fix the Current Situation
Presidential Ideas
President Donald Trump intends on dismissing loan forgiveness for public officials. Additionally, the president aims at modifying the terms of income-based student loans, for the period when the beneficiaries are still in school ( Marquit, 2018 ). Furthermore, Trump is targeted at changing the financial aid distribution criteria, to offer to fund grounded on an organizations enrollment of Pell beneficiaries ( Marquit, 2018 ). Consequently, there would be a shift in funds from prominent and wealthy private institutions, which currently acquire great amounts of money under the existing system
Personal Ideas
The best way to promote financial efficiency in the state of America is through imposing strict policies and penalties for loan borrowers so that people can be able to pay what is owed. Additionally, since most of the students have been incapable of paying their debts due to the lack of employment, the government should embark on the quest of creating more employment opportunities for a vast number of fields, so that people can be able to earn lucrative incomes, in order pay their loans ( Harvey, 2017 ). Furthermore, the financial aid sector should award student loans based on the ability of the student and future profit expectations of the fields, so that effective decisions about the ability of the student to pay their loan can be determined. For instance, information obtained on the course being pursued by the student should be beneficial in fostering research on the occupation.
Additionally, the financial aid system can analyze the student’s potential salaries, and their potential to acquire jobs easily based on their profession. After such an analysis, the system would be able to gauge the amount that is suitable for allocation, with confidence that the students will be able to pay. Additionally, it is crucial for the DOE to suspend the eligibility of for-profit institutions which have been accused of various ill practices after extensive investigations have been conducted. Additionally, all the institutions which have been proven to employ manipulative practices for profit maximization where the loans are concerned should be closed immediately. Nonetheless, the students in such organizations should be extended loan forgiveness, since they are the victims of malicious crimes (Weissman, Connel, & Society for Research on Educational Effectiveness, 2016). The use of these steps would promote positive transformations in the financial aid sector.
Synthesis/Integration
The DOE and the America government should employ the economic principle of tradeoffs in their pursuit of efficacy in the financial aid sector. Trade-offs refer to the act of losing one aspect, in the attempt of enhancing another vitally important aspect. Extensive investigations should be conducted to identify for-profit organizations who employ malicious and unlawful acts against feeble students (Bednarz, 2018). Additionally, the institutions should be legally charged and closed upon ascertaining the truth behind accusations, to stop these malicious practices. Nonetheless, students should be spared from these negative outcomes, and transferred to other colleges, to continue with their education.
Furthermore, the victimized students should be granted loan forgiveness since they are the victims and not the perpetrators. Consequently, this would be a tradeoff, since one aspect would be eliminated or foregone, to enhance another important aspect. Additionally, by doing this, the DOE and the government would have observed a critical economic principle, which is that rational individuals think at the margin. Rational thinking is depicted by the implementation of actions only when the marginal advantage of the act goes beyond the marginal cost. The execution of the above actions against for-profit colleges would depict this principle.
Furthermore, the financial aid system should eradicate the extra fee that is imposed so that the FAFSA and CSS profiles can be processed. The system should prioritize the needs of the less advantaged and spare them the additional costs that are imposed during the application process (Castleman, Meyer, Sullivan, Hartog, & Miller, 2017). The eradication of this amount would remove the barrier which deters low-income students from accessing student loans.
Castleman, Meyer, Sullivan, Hartog, & Miller (2017) argue that the promotion of effective communication would be an effective strategy in increasing the number of individuals who apply, and are granted financial aid. Effective tactics such as sending personal emails to students should be employed to stimulate communication efficacy. The emails should be inclusive of details on priority deadlines and should be used to encourage, and most importantly, to remind undergraduates to spare their time to fill the FAFSA forms. The strategies would increase the number of students who effectively apply and are granted students loans.
Conclusion
The financial aid sector has faced a myriad of challenges in the modern society, promoting service inefficiencies. Consequently, students have been negatively affected by the inefficiencies in this sector. One of the primary causes of the identified inefficacies is the predacious nature and malicious practices of for-profit colleges. The colleges have manipulated needy students and influenced them into taking up massive loans, even though they know the students will be unable to repay them. Additionally, the closure of these institutions has resulted in the lack of effective attainment of educational goals and the accumulation of great amounts of debt to students who cannot pay. Furthermore, these students are denied loan forgiveness; even though they are, they are the victims, as opposed to the perpetrators of the illegal practices. It is critical for the DOE and the government of America to take legal action, and more pervasive measures, against such heinous practices. Furthermore, the government should ensure that students are not victimized in such cases so that they can build on successful futures, and become productive members of the society. Nonetheless, there is also a need for communication to be enhanced between the financial sector and the students so that individuals can be able to apply for loans on time. Additionally, eradication of the payable fee that is imposed so that the students CSS profiles and FAFSA forms can be processed should be drastically implemented. The system should cater most to the needs of the feeble and low-income students in the American society. The execution of the discussed changes would impact a remarkable positive transformation in the financial aid sector.
References
Bednarz, K. A. (2018). Higher education law—the negative effects of student loans: a plea for impacted students. Western New England Law Review , 40 (1), 121.
Boatman, A., & Long, B. T. (2016). Does Financial Aid Impact College Student Engagement?. Research in Higher Education , 57 (6), 653-681.
Castleman, B. L., Meyer, K. E., Sullivan, Z., Hartog, W. D., & Miller, S. (2017). Nudging Students beyond the FAFSA: The Impact of University Outreach on Financial Aid Behaviors and Outcomes. Journal of Student Financial Aid , 47 (3), 2.
Douglas-Gabriel, D., (2018). Trump and DeVos call for massive cuts to college student aid programs . The Washington West: Democracy Dies in Darkness. Retrieved from: https://www.washingtonpost.com/news/grade- point/we/2018/02/13/trump-and-devas-call- for-massive-cuts-to-college-student-aid programs/?noredirect=on&utm_term=.8289c90d528f
Harvey, M. (2017). Game of Loans: The Rhetoric and Reality of Student Debt. Journal of Policy Analysis & Management, 36(3), 708-712. doi:10.1002/pam.21992
Kimmelman, E. S. (2016). Student loans: path to success or road to the abyss? An argument to reform the student loan discharge exception. Temple Law Review, 89(1), 155-190.
Marquit, (2018, January 31). Trump Student Loan Policy: Winners and Losers/ Student Loan . Hero. Retrieved from: https://studentloanhero.com/featured/trump-student-loans-policy-for- borrowers/
Nutting, R., (2018). Don’t Worry: Americans Aren’t Taking on A Lot of Debts . Market Watch. Retrieved from:
https://www.marketwatch.com/story/surprise-americans-arent-taking-on-too-much-debt- 2018-01-09
Ratcliffe, C., Theodos, B., Mckernan, S. M., Kalish, E., Chalekian, J., Guo, P., & Brief, O. I. (2014). Debt in America. An Opportunity and Ownership Initiative Brief , 1-12.
Renzulli, K., A., (2018). This is How Much Debt the Average American Has now-at Every Age. Family Finance. Retrieved from:
http://time.com/money/5233033/average-debt-every-age/
Weissman, E., O’ Connel, J., & Society for Research on Educational Effectiveness, (2016). Aid Like a paycheck: Engaging with Policy Makers and Practitioners to Evaluate and Improve Financial Aid.
