Are Student Loans Financial Aid?

There is no doubt that student loans have helped students who otherwise couldn’t afford to go to college gain access to higher education, but are these loans financial aid? Families normally don’t think about this question until they receive financial aid award letters. But it’s really important this question is pondered during the college application process because then families can decide together what can kind of aid they’ll accept for both themselves and their children.

Defining student loans as loans

This Salon article discusses looking at student loans for what they are: loans.

“ Student loans are an economic transaction, the same as if the government had contracted out to build a bridge or hired a person to serve in the military or police force or be a teacher. The money spent here isn’t “aid.” Hiring someone to build a bridge exchanges labor for cash. Student loans exchange cash now for cash later plus interest.”

Student loans should never be looked at as free money for education. They come with interest rates charged and really are financial transactions. Parent loans are also financial transactions. Families need to think about these loans in similar ways as they would other types of loans. Does that mean they’re bad? No. When individuals takes out a car loan, it’s because they need a car to get to and from work or school. They’re not thinking, “Great, I just got a loan for nothing.”  They’re thinking, “I borrowed money for this great car.” As long as education debt is borrowed at reasonable amounts, the answer is the same for education loans.



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