In the United States, a new financial enemy has found a way to elude us while we have been occupied with other matters. As time goes by, this financial enemy grows bigger and stronger, burying young Americans and their families under a mountain of debt. Who is this enemy? It is the student loan program.

At one point in history, the student loan program administered by the U.S. Government provided a way for American families and students to pay for college. It was a simple and relatively easy process to take out a student loan. Now, along with the increase in cost of college, the process is more cumbersome and costly and has created an impediment for many young American students.

According to Jillian Berman of "Market Watch," student debt in the U.S. has climbed to nearly $1.3 trillion dollars. As of September 2015, 40 Million Americans have student debt. On average, those 40 million Americans, have at least $23,000 in student loan debt. This is a problem that must be solved. And if we don’t solve it, by changing the current student loan system, then a situation similar to that of the 2008 Housing Crisis, will occur and the impact to the economy could be devastating.

Josh Freedman of "Forbes"calls the current student loan system a “complicated hodgepodge of these various subsidy programs." When a student takes out the typical undergraduate loan for college, that student is not required to pay back the loan while in college. Once a student graduates from college, the banks give that student a grace period before they begin repaying the loan. Once the grace period is up, the student is put on a standard repayment system usually 10 years.

Neither the grace period nor the payment amount takes into account the student’s capacity to repay the debt. Often times, the student must begin repaying the debt before they are employed. The payment is often times so large that it consumes all of the student’s disposable income that otherwise may have been used to purchase consumer goods. The typical college graduate is saddled with so much debt upon graduation that they remain at home and do not set up independent households. These new graduates who have no disposable income impede the growth of the economy.

As an undergraduate student paying for college on your own, you will encounter two different kinds of loans: direct subsidized or direct unsubsidized. Both of these loans have interest rates of 4.29 percent. The subsidized loans start accumulating interest after graduation and unsubsidized loans accumulate interest immediately. How do you know which kind of undergraduate loan you can get? The U.S. Department of Education states, “Direct Subsidized Loans are available only to undergraduate students who have financial need.'" So, to be eligible for a Direct Subsidized loan, you must show that you need financial aid. For Direct Unsubsidized loans, the U.S. Department of Education states, “You are not required to show financial need to receive." Susannah Snider of U.S. News reports that guardians who are paying for their students’ loans and grad students who are paying for their loans get to use a special kind of loan, the Direct Parent Plus Loan. How is it different? "The average interest rate for the loan is 6.84 percent," Snider said.

"American Student Assistance" created a survey with Americans who had taken out student loans in the past and were still paying off their debts. According to the survey, 73 percent said they have put off saving for retirement or other investments, and the vast majority, 75 percent indicated that student loan debt affected their decision or ability to purchase a home. Student debt is affecting other areas of the economy. Money that could be spent on consumer products is going towards student debt and climbing interest rates. Phyllis Korkki of the New York Times states, “A new study has found that areas with higher relative growth in student debt show lower growth in the formation of small businesses." She goes on to say, “60 percent of jobs are created by small business."

Our current student loan system is grotesque. It's causing millions of Americans to accumulate debt at an early age. It is also hurting the entire economy because current borrowers have accumulated too much debt to the point where they can't spend money on homes, cars and other consumer products.

Also, people with student debt do not have the debt capacity to take out more loans to start a small business. This is important because 60 percent of jobs are created by small business. Proposals to fix the current student loan program hinge on the payment and repayment aspect of the program. It is suggested that students begin to pay back student loans once they are employed and that the payment is based on the earning capacity of the student. This is in stark contrast to the current student loan program where students are tied to a fixed payment based unrelated to earning capacity.

Obviously, the student loan situation is very complex, but if more awareness of the impact of student loan debt is raised, then we can possibly find a solution that benefits all students and academic institutions while not stifling the economy.