Alexander Zaitchik, writing in Salon:
A year ago, the student debt crisis was a quiet one. Default-triggered cascades of compounding interest and collection fees were matters of lonely shame and anxiety. Journalists writing on the issue networked through friends and family to find subjects willing to go on record. Then the debt-confession signs started popping up at OWS protests, and stories of debilitating student debt were everywhere. Numbers that had been a source of private depression became symbols of generational defiance. “I have $80,000 in student loan debt,” declared a typical sign. “How can I ever hope to repay that now?” Others demonstrated the vertiginous arithmetic of the classic default spiral: “Borrowed $26,000. Paid back to date $32,000. Still owe $45,000.”
There’s no shortage of statistics capable of illustrating America’s economic elephantiasis. Taxes, health care, wages — take your pick. But it’s the student debt numbers that most shock college graduates over 50. If you went to school in the 1960s or ’70s, it doesn’t seem possible that the class of 2012 is graduating with an average debt load of more than $25,000. The macro milestones tend to get more press — America’s $1 trillion in aggregate student debt now surpasses that owed on its credit cards — but it’s the 25 large that makes boomers whistle and start talking about the days when a semester at Berkeley cost the same as a trip to the laundromat.
The student loan era begins with the Higher Education Act of 1965. The educational cornerstone of LBJ’s Great Society, the bill fueled the postwar democratization of higher education by funding need-based grants and zero-interest student loans. The act was no civilian expansion of the GI Bill, but began to shift the burden of paying for education from the government to students. Richard Nixon sped up this shift in 1972 when he created the Student Loan Marketing Association, a government-sponsored entity best known by its maternal nickname, Sallie Mae. The outfit was tasked with encouraging banks and schools to issue more student loans, which for a fee Sallie Mae would purchase and service, backed by the U.S. Treasury.
As long as tuitions stayed in line with inflation, Sallie Mae grew without controversy alongside college enrollment. Well into the 1970s, the typical student could cover the costs of college with part-time work, government grants, and zero- or low-interest federal loans. In the event of economic calamity, those loans could be discharged in bankruptcy.
Like so much else in the U.S. economy, this changed in the 1980s.
The story goes downhill from there.