For most students attending four year universities, the cost of attendance is simply too high to pay out of pocket  --  here at the University of South Carolina, for instance, total cost of attendance for an out of state student is $41,000. To bridge the gap between what families can afford to pay and what universities charge, the federal government and private lenders offer loans to help students pay for college. However, students often find themselves saddled with large amounts of debt, and repayments that prohibit them from achieving long term financial stability. Student loans allow for college attendees to pay for the high costs of tuition, but because of weak job prospects, underemployment and the massive amount of debt that can accumulate, the loan bubble has the potential to drag down current and future generations of college students if a solution cannot be reached.

In a New York Times piece, Kevin Carey reveals startling statistics about the trouble students have in repaying their student loan debt. Information recently released by Congress on the matter indicates that students from low income backgrounds, those most likely to take on the highest amounts of debt in order to pay for college, have the hardest time repaying their loans. This instance is counterintuitive to its core; the groups needing the most help to pay for school should not be trapped under so much debt that they cannot begin to repay it in the first place.

Additionally, Carey spotlights the issue that the colleges experiencing the greatest amount of loan defaults among students are for-profit universities, such as the University of Phoenix. Many of these schools have undergone investigation by the federal government into their loan practices. According the the congressional report, these schools have taken advantage of welfare recipients and people from the low end of the socioeconomic spectrum. By deceiving these persons into signing into large loan agreements which the schools know they will not be able to repay, the students default on the loans, but the schools keep the money.

In direct correlation with the amount of rising student loan debt is the ever-increasing cost of attendance at universities across the nation. The amount tuition has been rising is startling, at over three times the rate of inflation over recent decades (Taibbi). It is difficult to believe that the value of education is outstripping the inflation rate at such a high pace. Can the argument be made that a college degree is worth significantly more than it was 20 or 30 years ago? In fact, the opposite is more than likely true, seeing as more people are attending and graduating college, which would logically drive down the value of an undergraduate degree.

A potential explanation for the increase in the price of college comes from the Chivas Regal Strategy. When colleges see their position decline in national rankings, a common tactic is to increase the price of tuition, in order to make potential students feel like they are paying a higher price for a better product (Strauss). It may seem counterintuitive, but colleges and universities all over the country have used this tactic to achieve higher application numbers, which in turn brings in greater numbers of matriculates and leads to more revenue for these schools.

Perhaps one of the most egregious reasons college tuition continues to rise centers around the system it supports. According to Matt Taibbi of Rolling Stone, there are two main parties who stand to benefit from the ever increasing cost of tuition: university contractors and the federal government itself. 

The companies that universities, both public and private, for-profit and non-profit, contract to build their campuses benefit directly from these tuition hikes. With more money at a given university's disposal, there is greater opportunity for development of campuses and the remodeling or expansion of university infrastructure. Even here at South Carolina we can see this principle at work. The recent completion of the apartment complex 650 Lincoln was met with keen interest from students around campus because of the location and amenities provided in this new building. Supported by university funds, the apartment complex went beyond the amenities typically supplied to student residences, driving the cost up, and undoubtedly creating the opportunity for larger profit margins for the company hired to construct it.

The first instance of local contractors benefitting from universities can be viewed on a case-by-case basis, but the federal government's role in the matter is much more clear cut. As a result of the most recent deal reached by Congress, the Department of Education stands to profit $184,715,000,000 off of student loan repayments in the 10 years following the deal (Taibbi). $184 billion dollars is a substantial amount of money, no matter where it is coming from. However, to think that these profits are being generated from the debt students are taking on to further their education is simply preposterous. 

With this vicious cycle creating profits for large corporations and the federal government at students' expense, there is little incentive for the figures in power to change the status quo. Taibbi points out that college aged students have next to no representation on Capitol Hill for their interests, so there is little opportunity for real change. So long as it its profitable for the two parties, the contractors and federal government, to continue this operation, students will continue to suffer the consequences.

With an understanding of the factors that drive college tuition up, it is important to examine the other side of the situation. After a student graduates from college, the issues that plague him or her as a result of this debt can be devastating. As interest continues to accumulate on loans, these former students run in to difficulty repaying these debts, holding them back from securing financial wellbeing for themselves and their families. Additionally, the impact that this debt is likely to reach beyond that of household livelihood, and extend into the economy of the nation as a whole.

One harsh reality of the student loan issue at hand is the burden it places on a recent college graduate. When a student enters in to the "real world," so to speak, he or she is faced with a variety of new expenses. From paying rent, a phone bill, insurance, trying to save money for retirement, and the wide variety of other typical monthly expenditures, a costly loan repayment does nothing to help the financial security of young individuals who are starting out on there own. 

With a large amount of student debt, loan repayments can equal that of a house payment. This forced expense each and every month piles up, and money that could be otherwise spent stimulating the economy is instead pushed aside to pay for debt. This large amount of money not going towards the consumer cycle of supply and demand has serious implications. With less money being pumped into the economy, a decline in GDP, both real and nominal, can be expected (Harvey).

As these former students struggle to pay off crippling amounts of debt, the entire reason they attended college in the first place seems to become less and less attainable. College is an investment in one's personal human capital, and is meant to increase earning power. What difference does that increase in earning power really make if such a large portion of wages goes towards repaying debt? The argument then arises that there is a cut off point as to where going to college is more detrimental than beneficial. If a student had entered the workforce immediately upon graduation from high school, he or she would not have racked up loan debt to begin with. This person could have made money for the four or more years that were instead spent in school. Also, those years could have been spent advancing positions within that job, potentially creating a higher salary than a student just getting out of school.

This is a real choice high school graduates will face if there is not a resolution to the issue of student debt. The economy is still not fully recovered from the crash of the past decade, and many college graduates are forced to take positions they are overqualified for simply to pay the bills that they have accrued from their time in school (Harvey). The value of a college education is excellent, but the cost of loans, both in money spent and money not able to be spent, will certainly cause students to reconsider the thought of going to school to incur debt that they may not be able to repay.

Student loan debt also has the potential to spiral in to a problem much greater than a lack of demand or consumer spending. First, it is important to gain a grasp of the monetary implications of the current crisis. Total student loan debt now totals over $1.2 trillion, with over 60% of that debt held by households in the lowest quartile of total wealth. 70% of all students graduate with at least some debt. And perhaps most strikingly, student loan debt accounts for 45% of financial assets held by the government (El-Erian).

Mohamed El-Erian likens these factors to similar circumstances that caused the mortgage crisis in 2008. Although he is careful to point out that this situation does not appear as dire or far reaching as the events leading to the Great Recession, he sees a similar "bubble" forming. If the amount of debt continues to increase, with more of the burden falling on those individuals who cannot truly afford to repay those loans, a significant collapse could occur where a mass default on loan repayments takes place.

El-Erian offers a few potential solutions to the issue at hand. He suggests that universities could make greater use of grants and philanthropic financing of demonstrated financial need. Before even making those contributions to help students, he suggests that universities reign in costs of attendance in the first place to help alleviate the need for such high amounts of financial aid. Some combination of these ideas could help lessen the burden on students, particularly those coming from disadvantaged economic situations. If less money has to be borrowed to begin with, the risk of default will be lower, and students will be able to take on manageable amounts of debt instead of the sky-high amounts causing the problems at hand today.

Another potential issue that could arise from these student loan repayments is the effect it may have on future generations of college students. Senator Bernie Sanders, and Presidential candidate this year believes that the question of whether the loans are worth the price for admission or not in his platform. (Sanders)The first, and perhaps most obvious implication, is that people graduating with debt today are less likely to pay for their children's education in the future. Individuals with large amounts of debt may very well still be making loan repayments by the time their children reach college age, and may be turned of to the idea or simply unable to contributing to paying for school or taking out loans to help their children pay (Novak). This trickle down effect has the potential to continue for generations if a solution to the current crisis is not found.

The second implication is the potential for an increase in the rates at which loans are issued. If more and more students have issues repaying their loans, the federal government may increase the interest rates assigned to student loans in order to offset the costs associated with debt collection or loss. Saddling responsible students who actually can repay their loans with higher payments and rates may seem unfair, but it is a logical step for the federal government to take in order to protect its interests and make sure it is still turning a profit in its loan giving operations. 

Although the amount of student debt that American's has racked up is daunting, and the ramifications of this debt have the potential to be serious and long lasting, there are some silver linings to taking out student loans. Most obviously, these loans allow students to chase their dreams and pursue courses of study which interest them. There is a silver lining for  By providing students the opportunity to learn what they want, loans make the cost of attending college less of an obstacle to many middle class families.

Benefits of student loans also include teaching students about watching their money from early on in their adult lives. If a student knows that he or she is facing a significant amount of debt, they can put in to place spending practices to help curtail how much money they are spending during their college years (Hopkins). This can prove to be a useful tool later in life, giving current and future generations real experience in dealing with debt and its ramifications. If students are exposed to debt now, it makes it all the more likely that they will shy away from taking on large amounts of debt in the future, and work towards saving up for the large purchases they want to make down the road.

Secondly, for students who do a good job of managing their debt, student loan repayments can actually help build credit, especially when the student pay on time.(Fieldporte) Students who make payments on time and are fortunate enough to have the necessary income to pay off their debts can see the money and effort they put in to loan repayment benefit them later on down the line (Hopkins). Building credit is always a major stepping stone for young adults, and student loans provide an excellent avenue for young people to gain a solid credit base.

Finally, students who have taken out loans have a greater incentive to well in their classes and make the most out of their education. Knowing they have skin in the game should push students to work harder to ensure that they are eventually able to pay off their loans. Students who have a greater attachment to the real costs of their education are more likely to take advantage of the resources at their disposal and get everything they can out of their time in school.

In sum, students are facing sky rocketing costs of attendance at universities across the nation. President Barack Obama was not able to finish paying his and his wife, Michelle's student loans until 2004 when Obama was elected to Congress. (Vice News) Colleges and the federal government share a huge responsibility for the rapid increase in student debt, and must do their part in order to combat the student debt crisis. With the looseness of a college Stafford Loan being inconsistent and private loans have too much profit in interest rates, students are left alone.(Forbes) With such a large amount of money at stake, and so many people struggling to pay back their loans, it is imperative that a solution is found to the current situation. If not, the student loan problem of this generation could haunt future generations for years to come.

