The Student Loan Repayment Crisis and Possible Resolution through the Use of an Automated Payroll Deduction System
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Access to higher education has been a priority for the federal government for many years. In effort to advance this cause, the federal government offers students loans to individuals who would not be able to secure favorable financing otherwise. In recent years, the number of borrowers who have taken out federal student loans has risen and the growing number of borrowers who are delinquent or have defaulted on student loans is a reason for the government to be concerned. Borrowers with high levels of debts may be forced to consume less in order to pay down obligations, causing macroeconomic impacts. Borrowers in delinquency or default may be ineligible for certain federal loans, and may find it more difficult to find private credit to take out loans to purchase homes or cars which can create further negative impacts on banks and financial institutions within America. This capstone proposes and evaluates the use of an automated payroll deduction for student loans that would help reduce payment amounts for all borrowers to stimulate additional participation in the economy. It would also help borrowers avoid incessant paperwork, steer clear of delinquency and default, and it would not require payments from distressed borrowers below an income threshold. With political support from the United States House of Representatives and Senate, this proposal would help ensure that attaining an education with the use of federal loans does not come at a life-long cost to borrowers.