The Long Road to the Student Debt Crisis; A series of well-intentioned government decisions since the
1960s has left us with today's out-of-control higher education market.
The U.S. student loan system is broken.
How broken? The numbers tell the story. Borrowers currently owe more than $1.5 trillion in student loans, an
average of $34,000 per person. Over two million of them have defaulted on their loans in just the past six
years, and the number grows by 1,400 a day. After years of projecting big profits from student lending, the
federal government now acknowledges that taxpayers stand to lose $31.5 billion on the program over the next
decade, and the losses are growing rapidly.
Meanwhile, four in 10 recent college graduates are in jobs that don't require a degree , according to the New
York Federal Reserve. And many American colleges are dropout factories: At more than a third of them, less
than half of the students who enroll earn a credential within eight years, according to the think tank Third Way.
The U.S. is shoveling more and more money into a highly inefficient system that, polls find, Americans are
increasingly dissatisfied with. College tuition has soared 1,375% since 1978, more than four times the rate of
overall inflation, Labor Department data show. The U.S. now spends more on higher education than any other
developed country (except Luxembourg)—about $30,000 a student, according to the OECD. Meanwhile,
college presidents are being handsomely rewarded for the success of their enterprises: Seventy of them,
including a dozen at public colleges, earned over $1 million in 2016-17, according to the Chronicle of Higher
Education.
How did we get here?
The student loan system was built in the 1960s on the overarching belief that higher education is a safe and
worthy investment for both society and the individual. At the time, the first children born after World War II—the
baby boomer generation—were beginning to graduate from high school and enter college. The American
economy was becoming more sophisticated and knowledge-based. Education had been a key factor behind
the nation's impressive economic growth and rising living standards, to say nothing of its standing as a global
superpower.