Consequences of Not Paying Student Loans

Consequences of Not Paying Student Loans

Consequences of Not Paying Student Loans

What happens if you cannot repay the student loan you have received? You may have this question from time to time. In spite of the utilities, refinancing and consolidate plans of lending organizations, if you do not repay the loan, it is certain that you will experience bad things. To get a general idea, the following “Consequences of Not Paying Student Loans” article will help you.

Higher Education and Labor Market Coordination Problem

Resources are increasingly allocated to U.S. educational institutions through a market-based process. Students with admissions offers from multiple schools resemble customers who pay for the education they receive and can choose from several different options. Educational institutions, like suppliers in any competitive market, offer discounts to preferred customers. Students with financial resources or access to credit decide where they will study, and what they will study. This market-based approach is consistent with values that emphasize autonomy for individual students and political independence for academic institutions.

However, this freedom may come at a steep price to employers, lenders, and ultimately to the students themselves. As discussed above, government support for mass higher education has always been intended to supply skilled labor, boost economic growth, and encourage social mobility through increased wages and employment. However, skewed incentives and information asymmetries have increasingly shifted educational resources away from human capital investment and toward present consumption.

— Students as Customers Create Pressure to Reduce Academic Standards

The student-as-customer approach creates pressures toward grade inflation and lower educational standards. Because universities depend on enrollments for revenue, and students decide where to enroll, administrators and faculty have strong incentives to ensure that students enjoy their time at the university. Universities can and do cater to students’ appetites by offering amenities such as luxury dorms and athletic facilities— amenities many students appear to value more than good instruction. Emphasis on keeping the student-customer happy also extends into the classroom.

One of the ways that universities can encourage faculty to focus on student enjoyment is by linking departmental funding and professors’ promotion to student enrollment numbers and course evaluations. Professors can increase enrollments and boost course evaluations by assigning better grades for less work. Students actively shop for classes with professors who give generous grades. Students also give better course evaluations to professors who grade more generously and who flatter students—and worse evaluations to professors who demand more work and more substantive learning.

Presumably, many professors respond to such incentives by reducing the rigor of their classes and inflating grades. The result is that student-customers study less, learn less, and are more satisfied with the experience—at least until it is time to enter the labor market. Potential employers may not be so satisfied with the quality of the education job applicants have received, and recent graduates may not be very satisfied with the employment opportunities that are available to them.


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