Banks will not offer anyone within the determined low income bracket, and without any credit history, any type of loan or financial assistance. But of course, there is a type of loan that exists in the developing world that is being offered to those who fit this criteria exactly. It is principally designed to encourage entrepreneurship and to assist those without even any collateral to cover their potential loans with. The name of this financial product is called a ‘microcredit’. Although one might argue that student loans are a type of specialized loan, it can in no way be compared to microcredit.

Students have assets that are not material (house, stocks, bonds, 401K, investments) but are almost like administrative collateral. This is to say, being at the very beginning of a career leads to the belief that they will have no issues in paying back the loans. Microcredit is reserved for those who are established as existing in the poverty bracket.

Nevertheless, could microcredit be employed to assist student loan debt consolidation?

Imagine for a moment that once a student graduates and they fit the criterea, they are entitled to microcredit. This would help to consolidate student loan debt as they would effectively be consolidating their existing debts onto the books of a microcredit contract. They would be essentially swapping a corporate interest rate for a so-called ‘benevolent rate’ provided by the microcredit loan.

Microcredit is endorsed by the United Nations as a means to eradicate poverty and encourage growth in developing countries. There can be no denying the success of microcredit the world over and it holds great potential for years to come. Indeed, the very field of microcredit has produced a Nobel Prize winner in the form of Younse. With such high profile benefits, why then could this concept not be geared towards students who, some say, are just as in need of financial stimulus as any would-be entrepreneur. It would also stimulate the lower-income family or families to achieve their goals of financial independence and freedom.

The major obstacle one may find would be to find domestic institutions willing to engage in such a reform of the student loan process, with so much money being generated from it every year. This would be another issue, and one to be considered by the government. Theoretically, however, it remains an inspired option for change in the issue of student loan debt.

Thank you for taking the time to read my Article! Please visit the Student Loan Debt website for further reading.