Solving Student Loan Debt with Semantics

by JT McGee

Scholarships, Pell grants, Stafford Loans, Parent loans, Hope and the American Opportunity Tax Credit—all of these are terms of the modern college payment system, and all of which are likely in the vocabulary of your average college student.

The problem that I’ve found, however, is that all of the above (with maybe the exception of the two tax credits) are included under a larger umbrella: “financial aid,” also known as “financial award.”  Since all fit under one larger category, it seems that we’ve confused the value of each type of aid, loan, or scholarship.

Photo by: Ralph and Jenny

What Words Mean

We’ll start first with “award,” and I’ll allow Merriam to do the talking:

Award -to confer or bestow as being deserved or merited or needed

Okay, cool. Financial aid is a distinction of my awesomeness; Rock on, right? Well…no, not exactly.

Award, as it is used in college cost planning, is a name for any kind of money used for education expenses. Besides the repayment terms, there is a very distinct difference between being “awarded” a $4500 Pell Grant and being awarded a $4500 in Stafford Loan.

To be “awarded” $4,500 in Pell Grants is to be given an amount of money for having very little income or too few assets as decided by the government. To be “awarded” $4,500 in Stafford Loans is to have too few assets and income, but enough to make later payments. You get debt.

If this were explained to students, I think they might have a different perspective.

When Aid is Aid—and when it isn’t

Aid – to provide support for or relief to; help: to aid the homeless victims of the fire.

Hmm, it means to help, or give relief.  Financial aid is used to describe all methods of paying for school—Grants, Loans, Scholarships, etc—and is lovingly adorned by many.

That doesn’t mean, though, that these actually help; in fact, only grants and scholarships erase the enormous cost of attendance at most universities.  Loans, on the other hand, only defer and magnify such costs.

Aid in Practice

Have you ever asked someone for help…say, in moving you cross town? After asking for their help, did you offer to repay them by moving them 1.062 times?  (6.2% is the current going rate on a Stafford loan ;))

When international aid poured into Haiti following the earthquake, did the donors expect something in return? No, that’s ridiculous–that’s not aid!

So here’s my solution to the problem:

  • Grants are to be called assistance.
  • Scholarships are to be called aid.
  • Student loans are to be called debt.

Here’s my expected example scenario:

“Yo, Sam!”
“What’s up, man?”
“Nothin’, just got my financial aid!”
“Aw wow! You got a scholarship!”

See, scholarships are aid. They help, and don’t compound the problem as loans do.   Why anyone sees the two on a level playing field is beyond me.

So how about the opposite:

“Yo, Sam!”
“What’s up, man?”
“Nothin’, just got my student loan debt–$15,000 this year!”
“Ouch! Maybe you should reconsider that degree in underwater basket weaving.”

That speaks for itself, I think. 😉

While the semantic differences are small—just words, people!—changing the wording greatly influences our perspective on the situation.

I can’t remember how many times that I have heard “My financial aid just got here! Go to the bar?!

Now imagine if that student had instead received his student loan debt. “My student loan just got here! Go to the bar?!” As an outsider, the first sounds celebratory while the second sounds reckless.

Anyway, that’s just my opinion. Give me yours!

(See also the statistics on the average student loan debt…insanity!)

This blog post was included in the 295th Carnival of Personal Finance.

{ 13 comments… read them below or add one }

Little House January 30, 2011 at 11:40

I like how you pointed out that semantics can make all the difference in understanding a grant or scholarship vs. a student loan. Universities really should re-word “aid” for student loans to “debt.” I think more students would end up with less of it in the end if they actually called it what it is – a debt!


JT McGee January 30, 2011 at 11:48

The financial “aid” office workers are really good about saying “Yeah, the total cost is $x but you’re eligible for $x + $y, so it won’t cost anything out-of-pocket.” Little do students know that they’re signing their life away.

Thanks for stopping by 🙂


brokeprofessionals January 30, 2011 at 12:38

Haha, so true. I don’t think I have ever read a post about this misuse of language all of us who bought in to student loans probably suffered from. I really enjoy the creativity of your blog. I liked your example about moving across town in particular.


Money Reasons January 30, 2011 at 12:38

I see where you are coming from. I hate when society uses incorrect words…

Turn on the TV (there is no longer a knob to turn…)
Turn off the Lighter, etc…

Another thing that I mildly dislike is “Lifestyle Creep” vs “Lifestyle Inflation”. First “Lifestyle Inflation” should mean that the price of the same product that you guy has gone up. So if you buy a Mercedes but previously you had a Honda Fit, you had lifestyle inflation (this can also be consider Lifestyle Creep).

But if you also bought a boat, but you didn’t previously have a boat, well in that same I would consider it “Lifestyle Creep” because you are expanding into areas that you previously didn’t exists. However, most pf bloggers consider that “Lifestyle Inflation” too.

Sorry for going off on a tangent.. 🙂


Jessica07 January 31, 2011 at 20:56

Under water basket weaving?! Ha-ha! That was great! I’m completely on board for the vernacular update.


JT McGee January 31, 2011 at 21:29

Oooh, vernacular. Now that’s a $5 word right there. 😛

Thanks for stopping by!


Squirrelers February 1, 2011 at 12:43

Semantics can go a long way toward making/breaking one’s reaction to these funds. Really, if one gets funds that need to be repaid -i.e. student loans – it’s a monkey on the back of the recipient. It’s hardly a reason to be celebratory.

I recall hearing about people back in the dot com days when I was in grad school, who would take the loans for the purpose of investing and earning a righer rate of return than the interest paid. Not a good idea, in my opinion!

It’s a matter of semantics and perspectives.


JT McGee February 5, 2011 at 13:30

Yeah, that’s a little scary.

It’s one thing to play with consumer debt money, I suppose, but student loan debt is forever. Play with the money you can BK…

Actually, you probably shouldn’t play with borrowed money at all. LOL


Buck Inspire February 1, 2011 at 18:51

Hmmm, great point! I never thought semantics could shape a college student’s future. If you are taking on debt, you better make sure it pays off in the back end. Aid does sound like free money and an excuse to party it up. Once again more focus on financial education is needed. The sooner the better! 🙂


LaTisha February 2, 2011 at 15:45

This is great knowledge for new college students. Lot’s of students don’t realize the difference between loans and scholarships. Good info. I’ll be back


Mark February 4, 2011 at 12:21

They make the language misleading on purpose. People are enticed into signing their life away with “aid” that will far outweigh their salaries.


Nico May 29, 2011 at 12:27

Good point! The way you use words matter, so that the consequences can be seen in figures of the total debt! The student loans are the no.1 debt burden that americans carry, eclipsing for the first time in history, this year the credit card debt. America is close to $1 trilion student loan debt. Considering the actual economic situation the future is not painted in bright colors!


Marie June 4, 2012 at 06:15

Interesting read. For students, its necessary to clear off the due right after completing the college in order to avoid the financial crisis. Once they get over the student loan debt, it will be much easier for them to plan for a academic and financial future without much hassle. Most of the time students tend to fall into big trouble due to not taking the loan debt issue seriously, therefore once stepping out of college they tend to face financial doom.


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