Many students are shocked by the enormous debt load they are carrying to fun their college education.

University of Colorado – Boulder student Ellis Arnold says that the country’s debt situation is even scarier.

Congress ended the fight over the debt ceiling last Thursday, raising it to a limit that is expected to be hit again in February. But what is the debt ceiling, and why is it such an important issue?

The debt ceiling is a limit on the amount of money that the federal government can borrow. According to the U.S. Department of the Treasury, the federal government borrows money from individuals, corporations, local and state governments, Federal Reserve Banks and foreign governments and entities.

When the borrowing limit or “ceiling” is reached, Congress and the President must agree to raise the debt ceiling in order to keep borrowing. Raising the debt ceiling does not mean raising the debt itself. It means raising the limit on how much money we are allowed to borrow.

The reason we need to borrow money at all is that only about 54 percent of what the federal government spends is money from revenue, or money the government collects from taxes. The remaining 46 percent comes from money that is borrowed.

That’s why raising the debt ceiling is such a hot issue: If we wait until the government hits the limit, and then proceed not to raise the limit, the federal government would have to choose between cutting spending from certain obligations or fail to pay interest to its loaners. Those obligations include paying Social Security, Medicare and Medicaid benefits, as well as paying military salaries to citizens who need them.

The issue frightens me because no one knows for sure what will happen if the debt ceiling isn’t raised. It’s a political no man’s land. Failing to raise the debt ceiling is unprecedented.

When Congress argues it prolongs a long-term solution, it has the potential to destabilize the economy because world markets begin to worry. Even the potential threat of the U.S. default — that is, being unable to guarantee that it will pay interest on its debt — means that banks and credit markets around the world wouldn’t be able to borrow from each other in the same way. The U.S. dollar would be seen as less dependable, thus lowering the value of the dollar and raising the cost of borrowing money if the debt ceiling is raised.