How Student Loans Became America’s Financial Catastrophe
From The Observatory
The student loan debt crisis in the United States has grown into one of the biggest financial problems facing the country today. Originally, federal loans were created to help students from low-income families attend college and build better futures. But over the past 50 years, policy changes and corporate interests have turned the program into a system that traps millions in debt.
In 2000, 21 million Americans owed student loans. By 2020, that number had doubled to 45 million, and the total debt had exploded from $387 billion to $1.8 trillion. Many borrowers are older adults who took out small loans decades ago but still owe large amounts because of interest and fees. Today, over 5 million borrowers are in default, unable to make payments.
Much of this crisis stems from the role of Sallie Mae, a company created in 1972 to handle student loans. With strong political influence, Sallie Mae pushed Congress to strip away key borrower protections, including the right to discharge loans in bankruptcy. By the late 1990s, student loans had become almost impossible to escape, even in cases of financial hardship. At the same time, the rising cost of tuition forced more students to borrow larger amounts.
The result is a system that benefits lenders and debt collectors while punishing students and families. In some tragic cases, overwhelming debt has even contributed to family breakdowns and loss of life.
Other countries, such as Norway, Germany, and Finland, have chosen a different path, offering free tuition, paid apprenticeships, or lifelong retraining programs. These nations treat education as a public investment in their future workforce.
If the United States continues on its current path, public confidence in higher education will keep falling. Without major reform, the cycle of debt could permanently damage both individuals and the nation’s economy.
🔭 This summary was human-edited with AI-assist.
