Phuc Le of the Cornell Daily Sun examines the issue of student loans and government solutions in a new article.

BARELY LEGAL: Government as a Solution to Student Debt Crisis? Not So fast.

While skyrocketing tuition is indeed a problem, finding the right cure requires us to look at the bigger picture. It is no secret that rising law school tuition is part of a larger trend of increasing tuition in higher education. This is largely due to two things: 1) The backing of private loans by the government (which ended in 2010) and 2) the low interest rate on federal loans, which is possible because of subsidy. Government-backed loans cannot be discharged in bankruptcy unless the student can show “undue hardship.” This showing requires, among other things, that the borrower is living close to the poverty line, that this state of living is likely to persist, and that he has used good faith effort to pay back the loan. In other words, most students will not be able discharge their loans.

The consequences of these policies are predictable enough: Before 2010, private lenders, like Sallie Mae, threw caution to the wind and allowed students to borrow as much as needed. This problem has been exacerbated by the large gap between the time when students initially apply for loan and their first repayment. The prospect of beginning to pay back one’s loans four to seven years down the road is remote to young adults like us.

The system that we collectively set up has allowed students to be momentarily insensitive to the actual cost of education. Faced with students who have a substantial capacity to borrow and are at least presently insensitive to price, what have colleges and universities been doing? They have, predictably, largely stopped competing in terms of cost. Instead, they have been competing by building nicer facilities and hiring more prestigious professors to draw in students. In this kind of contest, is it really surprising that student debt exceeds one trillion dollars? If the underlying problem of student loans looks similar to that of the housing bubble in 2008, that’s because it is.