Ethical Leadership project
If you were a Sallie Mae loan officer, what would you do if you were directed by your boss to issue a high-risk loan to a student who, according to your calculations, has a 92 percent likelihood of default?
According to my calculations, I would emphasize the negative consequences of defaulting and let the student decide.
Why is this the right option to choose?
This is the best choice amongst the alternatives to select since, based on my estimates, there is a 92 percent likelihood of default. As a result, emphasizing the negative consequences of loan delinquency and letting the student choose will offer them enough reasoning, whether to select in or out of the loan. Some of the negative impacts of loan default that I would stress includes; failure to reimburse student debts can result in severe monetary repercussions for debtors, such as collection expenses; income deductions; finances deferred from earnings tax cashback, and other national payouts; borrowing rating damage, and perhaps disqualification for other assistance initiatives, such as home-ownership assistance (Esther, 2017). These consequences can also have a negative impact on a household’s economic stability. Borrowers’ loans remain to accumulate interests even when they are in delinquency. Furthermore, students who engaged in income-driven reimbursement schemes, which link with monthly payments to debtors’ earnings and household sizes and grant loan forgiveness upon 20 to 25 years of qualified repayments, forfeit accessibility to these initiatives and their advantages while in delinquency (Esther, 2017). Moreover, defaulted students are disqualified for further governmental student funding.
What are the ethics underlying your decision?
The morals behind this choice will ultimately be detrimental to the student. Releasing the loan amounts right away is unethical and harmful to both the student and Sallie Mae. This is due to the computations indicating a larger likelihood of default. Nevertheless, given Sallie Mae’s history, an outright denial of the loan is not conceivable. As a result, allowing the student to decide after learning all of the circumstances creates an acceptable choice-making and ethical strategy for dealing with a circumstance.
References
Esther Berg. (2017). Student loan default has serious financial consequences. The Pew Charitable Trusts | The Pew Charitable Trusts. https://www.pewtrusts.org/en/research-and-analysis/fact-sheets/2020/04/student-loan-default-has-serious-financial-consequences
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