Federal Financing of Higher Education at a Crossroads: The Evolution of the Student Loan Debt Crisis and the Reauthorization of the Higher Education Act of 1965

Currently, there are 44.2 million Americans holding student loan debt collectively totaling $1.5 trillion. This massive debt has a profound effect, not only on the lives of the debtors, but also on the national economy because it prevents the debtors from buying homes and cars and creating new businesses. This debt is also speculated to be a likely trigger for the next housing bubble because student loans, like the subprime mortgage loans underlying the 2008 financial crisis, are securitized and sold to investors. But many of those with student loans struggle to find jobs that will enable them to pay off their debt. In some cases, they leave school before graduating because they perceive their debt as too overwhelming. When that happens, their lack of a degree exacerbates their struggle to find decent jobs. Moreover, fear of undertaking substantial debt leads some individuals to forego higher education altogether, thereby often condemning them to a lifetime of low-paying jobs. This article traces the development of federal student loans and examines the numerous problems comprising the student loan debt crisis, among them the high cost of postsecondary education, the crisis-level amount of debt undertaken by students, the difficulties of repayment, and the fraud and abuse perpetrated by proprietary institutions and predatory lenders. It attributes these problems to Congress, which it argues has both acted, and failed to act, due to misjudgments, as well as, at least sometimes an indifference, sometimes bordering on an animus, to students in need. This article also critiques proposed legislation to reform federal funding of higher education and questions whether the mistakes of the past will soon be repeated in the pending reauthorization of the Higher Education Act of 1965