How the US student loan debt crisis started — and how it could end
America’s students have a debt problem. A big one. More than 45 million Americans – more than the population of California – now owe a collective $1.7tn in student debt.
What to do about that debt has become a hot political issues as midterm elections approach.
The vast majority of the money is owed to the federal government, which has been backing or directly offering student loans for higher education since 1958. While student loans are not new in the United States, the amount of student debt has doubled over the last 16 years.
The Biden administration has recently hinted that some form of student debt forgiveness could be announced soon – specifically, canceling at least $10,000 in student debt for Americans earning less than $125,000 a year. With that threshold, most student loan borrowers will qualify for some debt forgiveness.
If the executive action is undertaken, it will be the first large debt cancellation by the federal government to address the student debt crisis. Understanding the impact of such a dramatic policy requires unpacking the student debt crisis, beginning with its origins.
In 1957 the Soviet Union successfully launching the first earth-orbiting satellite, Sputnik. With the cold war raging the federal government feared the US education system was failing to produce enough scientists and engineers to compete with the Soviets and, in 1958, started handing out student loans through the National Defense Education Act.
Nearly a decade later, the Higher Education Act of 1965 allowed more people to take out loans as the federal government promised to pay back banks for any loans that were not repaid.
“It all started from this choice, which I think was a terrible choice, to decide that as a policy matter we
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