Student debt — few phrases cause the air to rush out of a college student or college graduate quicker than this one.

Yet, student debt as a result of college student loans has grown to astronomical proportions, especially in the rush back to school after the 2008 housing market crash.

Like the national debt, there is a student debt clock, hosted appropriately at the Student Debt website.

According to this clock, student debt in the United States now stands at roughly $1.45 trillion.

Much of this debt comes in the form of federally backed student loans. Like the interbank lending system, the system for lending money to college students is federally — and therefore taxpayer — insured.

Should the entire system go south, the average American taxpayer will again be footing the bill. This thought experiment represents but a fraction of the complexity of the student loan system.

For many, however, this exposure of the American taxpayer to this level of risk merits only one logical conclusion: dismantle the federal system underwriting America’s student debt.

The logic behind this proposal is deceptively simple. If the government stops backing student loans, this will signal to universities that they will not have ready access to loan-based tuitions.

Without this access to easy cash, universities will be forced to reduce tuition in order to attract students.

This scheme would naturally leave millions of students unable to afford college educations — educations necessary to compete in the modern economy. At least until tuitions adjust downward.

An adjustment of this sort would undoubtedly hurt many. However, the story is again more complicated than just a government allowing universities to arbitrarily fill their coffers with ever greater amounts of loan dollars.

Susan Dynarski, a University of Michigan economics professor, wrote in a paper for the Brookings Institution that government involvement in the student loan industry is a response to the inherent market failure of the industry.

“Students cannot put themselves up for collateral: They cannot contractually commit to hand over their future labor to a lender in exchange for upfront cash, because indentured servitude is illegal,” Dynarski wrote.

Even though investing in a college student could be beneficial, private lenders are loathe to make unsecured loans with higher interest rates like student loans and credit cards, according to Dynarski’s paper.

Unlike conventional loans, like for a house, students do not receive loans contingent upon a prior down payment.

At most, a parent or legal guardian might need to endorse the loan depending on the loan originator.

For the most part, however, student loans are issued without much prior knowledge of the student or their educational potential.

The plot thickens after the loan. A lender, government or otherwise, has no assurances of whether the student will spend the money wisely, claim their education fully or pursue a marketable and hirable course of study.

In essence, lenders take on enormous risks for vague promises of future earning potential. On the student side, aspiring future college graduates take out loans to fund tuition. However, this is not the only constraint students consider when taking out loans.

Benjamin Cowan, an economics professor at WSU, has studied both the student tuition constraint and a second constraint: not being able to consume, or purchase goods and services, at one’s optimal level while in college.

“I found that roughly five to 10 percent of low income or minority students do not attend college because of consumption,” Cowan said. “It is an important consideration for many students.”

Cowan also noted that it is difficult to determine the net benefit of ready access to student loans for students from lower socio-economic backgrounds.

This is because correlative effects between both monetary constraint and lack of social and human capital due to background hamper attempts at estimating this net effect.

Though discerning the empirical impact of student loans, especially in the lives of students from less-affluent backgrounds is difficult, it can be safely assumed that stripping away the ready availability of loans will negatively impact many students.

Jordan Weissmann, a journalist for the Atlantic, wrote in 2012 how federal involvement in a flawed industry benefits from those of humbler origins.

“Federal loans max out at about 6.8 percent for students. Meanwhile, companies like Discover Financial Services and Sallie Mae are offering fixed rates as low as 5.75 percent and as high as 12.75 percent. So we can assume a few students with exceptional credit might get a great deal,” Weissmann wrote.

The implicit flip side is a raw deal for students with poor or no credit.

Weissmann wrote in a separate piece, “A 2005 paper by the National Center for Public Policy in Higher Education, which tracked undergraduates who enrolled in the 1990s, found that 23 percent of borrowers dropped out, compared to 44 percent of non-borrowers.”

Therefore, students who take out loans become more invested in an education if they need the future earning power to pay the debt off. This hinders another commonly touted solution: free college.

The problem with anything free is the moral hazard associated with it — if it is completely free, it becomes ripe for abuse. All of this is not to say that the student loan scheme currently hampering millions of students is not in need of desperate reform.

However, this does not require a completely flipping the table over. Rather, lawmakers should focus on policies of kinder interest rates, sustainable repayment plans and more generous debt-forgiveness schemes in public or military service.

Moreover, researchers and policy-makers should further investigate student equity programs where a student signs away a fraction of future earning in exchange for a loan. This way a lender receives return on investment while also ensuring a student incurs no immediate debt.

Like all complicated issues, prudent and thoughtful answers are required. Nuclear options like tearing down the system entirely rarely end well.

Editor’s note: This column is part of a head-to-head series. Read the other side here.

Tyler Laferriere is a graduate student pursuing his master’s in economics from Phoenix, Arizona. He can be contacted at 335-2290 or by [email protected]. The opinions expressed in this column are not necessarily those of the staff of The Daily Evergreen or those of The Office of Student Media.