The student loan debt crisis: How it started and where it's going

This guest post is contributed by Katheryn Rivas, who writes for online universities blog.  She welcomes your comments at her email Id: katherynrivas87@gmail.com.

If you have student loans or if you keep abreast of current events, you've likely heard the statistic that for the first time in history, student loan debt has surpassed credit card debt, closing in quickly on a trillion dollars. Many economists fear that the next debt crisis will be a fall out from student loans, as tuition and student loan interest rates skyrocket and as college degrees become increasingly necessary entrance tickets to the workforce. Making matters worse is an employment landscape that is especially bleak for young graduates.

Over the past two years, student loans have been hotly contested in the media and among average citizens. In fact, one could argue that a very significant part of Occupy Wall Street was composed of students who felt helplessly engulfed in student debt that they couldn't afford to pay back. The reasons for mounting student debt are various, but perhaps the biggest reason is that tuition rates are far outpacing the rate of inflation. Even state university tuitions, which typically have been drastically lower than private university tuitions, are unaffordable for the average family.

Completing a college education, for the average American, necessitates taking out on average $23,000 in loans for a bachelor's degree. Because student enrollment in college is so high, a bachelor's degree, while certainly a requirement for most good jobs, is not necessarily a guarantee of securing a good job as in the past. There are just too many bachelor's degree holders out there, all competing for a small number of jobs. Another factor in the student loan debt crisis is that students, who are often a mere 18 or 19 years old when taking out these crippling loans, don't necessarily always understand the magnitude of their decision nor the precise terms of repayment.

There's been talk in the media, too, of a student loan debt bubble similar to the mortgage crisis, which was responsible for igniting our current economic depression. While there's certainly something to be said for this theory, it's unlikely since, unlike subprime mortgages, student loans are mostly backed by the government, and the government often goes to extreme lengths to guarantee repayment, even if it means wage garnishments, tax levies, repossession of homes, etc.

Essentially, student loan debt won't bring our economy down to its knees, but it certainly has kept our economy down since so many former students are paying back loans instead of putting money into the economy by making purchases. Congress has discussed various ways of fixing the student loan debt crisis. Some of the proposed legislation discussed recently includes the Student Loan Forgiveness Act of 2012, which would use various measures to help distressed students repay, like improving the public works option to forgive debt, as well as enabling former students to refinance loans.

For those of you mired in student debt, be on the lookout for government legislation that can potentially help you. The most important thing to remember is that there are various options you have already before defaulting, including a deferred payment plan for low-income earners and loan consolidation. Defaulting on student loans almost always spells certain financial ruin.