College is supposed to give young adults a foundation of knowledge they can use for the rest of their lives. As much as some critics mock colleges for giving their students book-learning that isn't practical for the real world, most college students get a very realistic introduction to the world of adult finance through their student loan debt.

College's cost-benefit analysis
These days, a college education is almost a necessity for a wide range of jobs. With statistics showing that college graduates have significantly higher average salaries throughout their careers than those who have only a high-school diploma, going to college definitely provides economic as well as intellectual value for students.

On the other side of the ledger are the increasing costs of a college education. According to figures from the College Board, the IC 500 index of the most expensive independent colleges rose above $40,000 for the 2010-11 school year. At several institutions, the cost of a four-year education exceeds $200,000.

Parents used to be able to count on a variety of financial aid packages to supplement their own savings. But increasingly, especially as endowment funds at top universities plummeted in value during 2008's market meltdown, schools have moved away from outright grants and instead toward extending loans to students. As other sources of funding, such as state aid, dry up in light of financial crises at state and local governments across the nation, further cuts in grants will only make students more reliant on loans to pay their way.

Navigating the student loan climate
Schools and lenders are definitely working together to increase the importance of loans for college financing. Specialized lenders like Sallie Mae (NYSE: SLM) offer a suite of different loans for students and parents, while privately held National Education Services works directly with colleges to structure aid packages that already incorporate loans. Some of the features of these loans can actually encourage good credit management, tying forgiveness of a big portion of the loans' principal balance to building a history of on-time payments. But they can also bring higher rates and other fees, especially for those who don't have the means to keep up with their debt.

In fact, debt is so connected to college that some now question whether college is really worth it. Part of the controversy around for-profit educational companies like Apollo Group (Nasdaq: APOL) and Strayer Education (Nasdaq: STRA) stems from inquiries about whether high default rates among graduates signify that the schools aren't doing enough to ensure their students can turn their education into a profitable career.

Despite the growth in the industry, the financial crisis and some of the regulation that resulted from it has led to consolidation in the student loan industry. In 2009, Bank of America (NYSE: BAC) stopped making certain types of federal student loans, citing plans for the federal government to make loans directly to students. Last year, Citigroup (NYSE: C) sold its student loan business to Sallie Mae and Discover Financial (NYSE: DFS). That's concentrating the business into a smaller number of players, making it more important for students and parents to shop among the remaining lenders to get the best deal.

What the future holds
Debt levels are likely to become even more of a problem in the future. Already, Sallie Mae reports that average debt rose 14% during the 2009-10 academic year, to almost $8,600. Wells Fargo (NYSE: WFC) has seen student loan originations rise 20%.

For students and parents alike, student loans are an unfortunate necessity. But with a variety of different loans available, you have to take the time to understand all of your choices thoroughly. In particular, knowing how your loan works, what interest rate you're going to have to pay, and what the repayment terms are will help you figure out whether you can truly manage your debt after you graduate.

The earlier you know how much debt you'll be able to afford to carry, the better off you'll be in knowing whether a particular college could prove more of a future financial burden than it's worth compared to a less expensive institution. Moving down on price for a college education may not seem like the book-smart thing to do, but with the ever-increasing costs of college, it's the only practical answer for many families.

Debt's not just for students; everyone needs to get a handle on all of their debt. Visit the Fool's Credit Center and get all the answers you need to beat back the credit vultures.

Fool contributor Dan Caplinger put his student loans behind him a while ago, but he still remembers them well. He doesn't own shares of the companies mentioned in this article. Discover Financial is a Motley Fool Inside Value choice. The Fool owns shares of Bank of America and Wells Fargo, and through a separate account in its Rising Stars portfolios also has a short position on Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy teaches you about us every day.