Another major contributing factor to widespread debt is the untrammeled expansion of the credit market (which is now much larger than the equity market), especially since money merchants are backed by various bits of legislation promoting their interests. Compounding the issue is that the credit industry basically operates by selling money to make money out of interest.
As for student debt, the Federal Student Aid currently charges interest rates of 4.20 per cent on undergraduate course loans and 5.84 per cent on graduate and professional studies loans. Bankruptcy laws have been recently amended to prevent students from discharging their loans, and money merchants charge interest rates far higher than those of the FSA – while paying only a miniscule interest rate of 0.02 per cent. Experts noted that this is a far cry from the situation in other developed countries, where higher education is free, or at least almost free.
According to official figures, the American consumer credit market is deep in debt with over $8.17 trillion in mortgages, $1.19 trillion in student loans, and $900 million in credit card debit. Experts noted that interest rates of 3 to 30 per cent have played a large part in this credit crisis.