Photo by Daniel Thomas

With the student debt crisis spiraling out of control, some media outlets have called it a “national emergency.” Outpacing most other borrowings by consumers, Americans who owed federal student loans more than doubled between 2000 and 2020, “from 21 million to 45 million, and the total amount they owed more than quadrupled from $387 billion to $1.8 trillion,” according to a 2024 article in Brookings.

A notable demographic shift has also emerged, with older borrowers now outnumbering younger ones, holding more debt despite having taken out smaller loans many years earlier. According to my analysis of the 2024 second quarter figures from the Department of Education, there are now 2.1 million more people over the age of 35 (23.7 million) with student loans than under the age of 35 (21.6 million), and they owe 160 percent more on average ($43,680 versus $27,250).

Approximately 5.3 million borrowers who had taken federal student loans are “in default,” states an April 2025 PBS article.

Improving access to education is integral to ensuring the economic success of any nation, leading to substantial returns in terms of salaries and gross domestic product. “When more individuals hold high-value credentials, workforce participation increases, financial security becomes attainable for more families, and economic growth accelerates. But these benefits won’t materialize without action. Federal and state governments must prioritize education funding, align learning with workforce needs, and reaffirm education as a public good,” according to an opinion piece in the nonprofit news publication, The 74.

Unlike the U.S., many other countries are prioritizing investing in education to support economic growth. If America doesn’t rectify its policies, which have led to “declining confidence in the value of a degree,” the situation could become irreparable in the future.

The Vicious Cycle That Has Made Education Inaccessible

Student loans were introduced to make education more accessible for students from low-income backgrounds, which would eventually lead to better job opportunities. Far from achieving this goal, the flawed loan system has been monetized by politicians and companies over the years, keeping students in an endless cycle of debt.

“A generation ago, Congress privatized a student loan program intended to give more Americans access to higher education. In its place, lawmakers created another profit center for Wall Street and a system of college finance that has fed the nation’s cycle of inequality. Step by step, Congress has enacted one law after another to make student debt the worst kind of debt for Americans—and the best kind for banks and debt collectors,” states ABC15 Arizona.

The consequences of this financial burden are severe and worsening, leading to tragedy in some instances, like in the case of the Nelson family from Broken Arrow, Oklahoma. They filed for bankruptcy in 2020 as their debt grew, “most of which was unpaid student loans,” according to the New York Post. The family, including six children, was found dead in 2022 in what was termed a “murder-suicide,” owing mainly to their financial circumstances.

The Ballooning Student Loan Debt

The student debt exceeds the state budget in most states (particularly Southern states), based on the first quarter 2025 data I analyzed. The increasing debt has resulted from a significant increase in borrowing and the cost of education over the years. The lending system, by all rational metrics, is a catastrophic failure.

Unfortunately, the political dynamics that have taken hold of both Congress and the White House over the past couple of decades—from both parties—have only solidified against student loan borrowers, perpetuating this broken and dangerous loan program. It is crucial that the public understand the history of how we arrived at this point, the current political and other dynamics at play, and, most importantly, how we can move away from the ledge we, as a nation, now find ourselves on.

How Sallie Mae Monopolized the Lending Industry

The debtor’s revolt in Western Massachusetts, which took place in the 1780s and came to be called “Shays’ Rebellion,” was believed to have compelled the drafting and ratification of the U.S. Constitution, which called for uniform bankruptcy laws ahead of the power to raise an army, coin currency, and declare war in Article I, Section 8.

When President Lyndon Johnson came to power, he signed the Higher Education Act (HEA) into law in 1965. The HEA “created… guaranteed loan programs establishing that loans borrowed by students from private loan companies were now guaranteed by the federal government if students defaulted,” according to the Boston University website. During the signing ceremony, Johnson declared that the loans would be “free of interest,” pointing out that the act would ensure that “the path of knowledge is open to all… [who] have the determination to walk it.”

In 1972, a hybrid, public-private company, Student Loan Marketing Association, which was later called Sallie Mae, was established to serve as a repurchaser and guarantor for federal student loans made by private banks. The company had all the profit-making incentives of a private company, but also had the full backing of the U.S. Treasury, whose money it used for its operations. This created a monopoly over the nascent student loan industry, and the company became the de facto expert and driving force, along with Congress, on legislative matters.

“In the mid-1990s, skyrocketing demand for student loans prompted by escalating college tuitions, expanding eligibility for student loans, and a host of new types of lending combined to make the student loan industry infinitely more complex, larger, and more lucrative. And Sallie Mae emerged as the industry’s biggest player,” stated a 2007 report, “Leading Lady: Sallie Mae and the Origins of Today’s Student Loan Controversy.”

In 1976, bipartisan legislation—pushed by Sallie Mae and other related financial interests in Washington—was enacted by Congress, which made federal student loans non-dischargeable in bankruptcy for five years after the repayment period started, unless borrowers could show “undue hardship.” The reason given for this unprecedented removal of standard bankruptcy rights from student loans was that there was a crisis of graduates flocking to bankruptcy court in droves to expunge their debts.

According to a 2013 policy brief by the nonprofit Reason Foundation, however, “the narrative that students are routinely graduating from college with debt and immediately declaring bankruptcy after graduation was pushed by Sallie Mae and other student lending companies in the hopes that these measures would even further reduce the risk shouldered by lenders when issuing student loans.” The discharge rate of student loans in bankruptcy at that time turned out to be far less than 1 percent—lower than almost all other debts in bankruptcy court.

While a waiting period for bankruptcy discharge surely seemed inconsequential to most in Congress at the time, Sallie Mae was just getting started. In the ensuing years, this unique exception to discharge was extended to include loans made or insured by nonprofit companies. Then, the waiting period was extended to seven years in 1990.

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