Further insult to injury...
Student loans are not only held by the government but *guaranteed* by the government. They are one of the only forms of debt that you are not allowed to get out of by declaring bankruptcy. The crazy part is that the loan is *always* paid to the college/university - even if you die and have no estate and no one to pay of the loan, the college gets the money from the load guarantor - the US Government. Which is really you and me.
So now imagine you're a car company, and you have a guaranteed loan like this.
* First of all, there's no incentive to put out a better product. Bumper falls of after 2 years? You still get your money. The car only gets 10 mpg? You still get your money.
* Secondly, all economic guards for pricing are gone. Want to charge $40K for the car? Sure, don't worry about the cost, you always get a loan, even if the car isn't worth 40K. Want to make it 50K for the same car? No problem - there's nothing to stop you from raising your costs.
You can see what havoc this causes by examining why universities charge the same for all 4-year degrees regardless of their actual worth. Tuition for engineering degrees costs basically the same as tuition for liberal arts degrees. Especially given that one is a 50-60K a year degree and the other is 30-40K. If this were not a supplemented economy, you'd quickly see tuition varying greatly by the degree you're majoring in. You would also *not* see all tuitions increasing by generally the same percentage over time, but rather the increase tied to the value of the school/degree.
The *best* thing the government could do is to completely eliminate guaranteed student loans. Still offer loans, but make the colleges be responsible for the product they create. Have a crappy degree? Declare bankruptcy and the college gets nothing.
Screwing with a natural economy results in unnatural prices, and that's what we're seeing.