To elaborate a bit more, imagine there were some federal loan program to give out up to $20,000 of low-interest loans to every person who wants to buy a car. Now, as it stands, nearly everyone who wants to buy a car can buy a car, and automakers are capable of making profits at current prices. Now, what if you introduce this loan program? What do you do as an automaker? The answer is obvious. You simply raise the price of every car you sell by $20,000 and pocket the differential. Same exact thing happens with colleges. "Not-for-profit" colleges literally have made more money than they know what to do with (and this after paying the college president $6 million).
In addition, government policy that aims to increase college attendance also decreases social mobility, since employers will simply start demanding additional qualifications of new hires. When you think about it, there are almost no jobs, except doctors, lawyers, accountants etc. that really require a college eduation. But an employer will still pick a more qualified hire if they have the chance, which is why you have the situation now where Ph.Ds are stocking shelves. This also means that the very poorest in society, those who can't afford even a loan or to be away from home for four years, are completely shut out of the upper echelons of the labor market.
Bingo.
By the way, pretty much the only growth in consumer credit over the past 4 years is student loans, and the generalized increase in tuitions/combination of loans suggests a pretty obvious bubble in higher education extending back to early part of last decade.
Where student loans are different than everything else is their inability to discharge in bankruptcy created by the 2005 amendments. That should naturally be repealed, but the question remains is to whether kids would actually do that, since so many of them are either underwater or close to drowning.
I happen to know for a fact that a number of the kids are getting these ridiculous loans with the assumption that the Feds will eventually bail them out.
Of course, the smarter kids would make it such that their total loan amount is no greater than a standard mortgage debt-to-income ratio, presuming an average salary after finishing said degree. That, however, is becoming nearly impossible, except at state institutions, even with working part-time.
