Beyond Tuition: The Social Returns of Student-Friendly Financing
“The result is a ripple effect for professional and socioeconomic development for students and throughout their communities.”
Ripple Effects
In the past, we have looked at how accessible financing options for higher education can impact the schools that offer them. However, the positive effects of accessible financing extend beyond better student outcomes, and creates benefits for society and the economy as a whole. This blog aims to highlight how empowering students can simultaneously empower our future.
The most visible first order effect of better education financing is in the professional outcomes of students. The increased enrollment and persistence of students from student-centric financing programs will allow more students to obtain degrees. Students who achieve higher education degrees then tend to have lower unemployment rates and higher earning potentials. In addition, these degree attainments have a positive correlation with the degrees attainment rate of other people in the students’ community, especially siblings. For instance, an older sibling’s success in college may inspire younger siblings to follow in their paths or be connected with similar scholarship opportunities. The result is a ripple effect for professional and socioeconomic development for students and throughout their communities.
Career Freedom
Less stressful financing options also allow for more flexibility in students' career paths. First and foremost, students with manageable debt are more able to pursue post-graduate opportunities such as legal, medical, doctoral, or other professional degrees. Debt and high financial constraints are frequently cited as two of the biggest factors hindering students from pursuing further education, which posits that better undergraduate financing options can directly boost advanced degree attainment. Additionally, these students are more likely to obtain careers aligned with their passions. Heavy debt often forces students to focus on which opportunities give the highest immediate salaries rather than what they are passionate about or what might lead to career growth.
There is also the tendency for indebted students to give up on riskier sources of income, especially regarding entrepreneurship. In a 2015 publication, the federal reserve bank in Philadelphia found a significant negative correlation between student loan debt and small business start up rates. Even if some students are less risk-averse, the burden of student debt on credit can directly hinder their ability to raise capital and consequently lead to them choosing other career options. By removing the reliance on debt heavy financing mechanisms, we can enable students to choose the career paths that they want.
“By removing [debt] burdens, accessible financing options can strengthen a labor market and expand the opportunity for prosperous outcomes”
Socioeconomic Outcomes
Student friendly financing programs also lead to positive economic outcomes at a national scale. One study found that countries whose populations obtain higher levels of education also generated higher GDP growth. While GDP is a stiff numerical metric, the result is that a better educated populace translates to further economic and social development through new businesses, increased tax base, higher paying jobs, and more education spending which compound these effects. Ultimately, these effects highlight how investing in students can lead to great economic and social dividends.
An increase in degree attainment across populations also shore up socioeconomic challenges such as income inequality and poverty rates. However, while education can be a catalyst for socioeconomic mobility and equalize economic disparities, student debt can often hinder this goal and actually exacerbate inequalities. The compromised career choices and financial and mental stresses that come with debt can get in the way of professional and personal investments, which can then get in the way of wealth and life building. In fact, these effects are even shown to become intergenerational with financial strains perpetuating cycles of poverty. By removing these burdens, accessible financing options can strengthen a labor market and expand the opportunity for prosperous outcomes.
A Better Society
Finally, educational attainment has been shown to affect civic engagement and social participation. Educational attainment is linked to higher voter turnout, higher community engagement, and is the strongest predictor for volunteering rates. Financially safe access to education can net significant secondary effects that benefit students, our communities, and the country as a whole. By focusing on investing in our population’s educational aspirations we are not only helping them to pursue their dreams, we are also strengthening our society and contributing to a brighter future.
