Part of the problem is the high interest rates charged for student loans. My wife started school at 45 and accrued about 80k getting her Bachelors and Masters degrees. 6.75 percent interest becomes significant. We paid that off with a house refinance when we bought our house a few years ago. My current loan is sitting at 2.5 percent.
The government makes money by giving out student loans. No wonder college outpaced inflation. Education became a game.
That is part of the reason why student loans is a form of double taxation. You get a degree and should be paying more taxes, but the interest is essentially another tax.
I think there is a misconception that home loans and government financed debt should be correlated. They are not. Home loan rates are going to have some correlation to the rates at which banks borrow money from each other. That rate is influenced by the Fed.
Student loan rates that come from the Federal Government are going to be financed by government debt. So the government has to borrow money to lend money. The CBO basically takes the governments 10 year borrowing rate (10 year treasury) and tacks on 2%.
You might think that they Fed rate and treasury rate follow each other, but they can actually differ quite a bit, so if you compare home loan rates to student loan rates at a time when the Fed dropped rates to 0%, then it is going to look like there is a giant spread between the two because the mortgage rates were at historic lows, but that is not going to be the norm over the long run.
So, I did a little research and the CBO basically sets the student loan rates about 2% higher than the 10 year treasury. Despite that 2%, the operation tries to be budget neutral, not making or losing money for the government. That extra 2% is going towards offsetting administrative costs, default and forbearance costs, the subsidizing of some loans, etc...
6.75% may seem high, but it is actually pretty low by historical standards and it used to be worse when most education loans were held privately. I used to pay close to 10% interest if I remember correctly.
