There aren’t many issues, plaguing the youth of America, than student loans. Specifically, the debts associated with them. Today, if an average person wants to get a level of education that is, in most cases, required for almost any real business position, they must first make the choice to go into a debt so massive that it may stay with them for the rest of their life. But it wasn’t always like this, was it? Let’s take a look at how the situation around student loans evolved over time.
fun fact: Student loans are an almost ancient concept. A system very similar to the one we have today was being used in Europe all the way back in the 12th century.
Cheap and easy beginnings of student loans
In the mid 1800s, almost all American colleges were either funded by the government, or by some other corporate entity. This allowed them to charge little to no actual tuition costs. There were, of course, some costs, mainly in the form of housing and additional fees, but those could usually be paid by the students themselves.
Future mandates, like the 1862 Morrill Act, allowed even more options for school funding, further reducing tuition costs. Thanks to these, some states actually had almost completely free colleges even throughout the 1970s. Also, thanks to those acts, many to that point marginalized groups, like African Americans, could finally attend higher education. Over all, the late 1800s to early 1900s period was great when it came to be a student.
Steady price increases
The number of american students started to increase, and not by a little. In 1870, there were around 67,000 newly enrolling student. By the end of 1910, that number has sky-rocketed to about 350,000. Colleges became something more than just a platform for higher education. They became the factories, creating a new generation of young Pioneers, who were dead-set on pushing America further than ever. In a single decade, the number of students almost doubled to about 600,000 new students.
This meant great opportunities for colleges. Several businessmen started advocating for an increase in college tuition costs. Since it was very beneficial for the students, why shouldn’t it also benefit the colleges? At first, this idea lead to basically nowhere. Tuition costs remained low, and the number of student, went further up. This greatly changed during the Great Depression, which lead to an increase of college costs, since they were no longer funded by the county.
World at War
The first really big change came at the end of the second world war, around 1944. The Servicemen’s Readjustment Act (also known as the “G.I. Bill”)was signed. This bill, in summary, introduces many financial benefits for servicemen – cheaper mortgages, better business loans, and cheaper tuition costs. Because of this bill, more than 2.5 million new student enrolled in the following decade. Of course, this also happened because the number of business opportunities in the USA has skyrocketed as well.
In the following decade, throughout the cold war, the USA did everything in its power to outpace Russia in every aspect it could. One of those aspects was education. Thanks to some more government bills, more focus was put onto education than ever in the history of USA. Because of this, the first real version of a government-backed loan system was created. Any student could borrow up to a $1,000 (up to $5,000 in their whole college attendance), which would then be repaid in the decade after graduation with 3% interest rate.
This act further boosted the number of newly enrolled students to about 8.5 million in 1970.
Sallie Mae and the modern student loans
Now we get to the more problematic topics. In 1965, the government took even more steps toward allowing as many student to attain higher education. This was achieved by the Guaranteed Student Loan (GSL) program, which backed privately given loans by government finances. If the student were to default on his debt, the government promised to pay it off.
This act was later reauthorized in 1972, forming the Student Loan Marketing Association (known as Sallie Mae). This government-supported enterprise became the leading force in student loans, privatizing in 2004.
This act was fairly criticized by people, because by making student loans more available, colleges could also increase the tuition costs. A big concern was the fact that these loans became available to everyone, regardless of their income. This could mean that a poor families, unaware of the risks, would take out these loans, which then trapped them in an endless spiral. This, combined with the push to make the loans more direct, lead to a massive increase in people taking these loans. It was also the main thing that, much later, created the student loan debt crisis we have today.
Although direct loans were being pushed, they only became popular after the financial crisis of 2008, which lead to a decrease of faith in the private lenders. Guaranteed loans were completely eliminated in 2010. Because of this, private lenders had to make their own loans, without relying on the federal government. This major shift lead to an increase of grant funding, while actual income payments fell by the wayside.
Student loans today
Today, the people of the USA own about $1.7 Trillion dollars in student loan debt. Reportedly, around 43 million people are still stuck with some kind of student loan debt. This means that, on average, each one of these people owes about $40,000 in debt. The worst part of it: around 10% reported that they were physically incapable of paying the debt off. Either they had a job, whose income barely paid the interest, or they were unemployed altogether.
The Biden administration promised to relieve many of the people still burdened by student loan debts. Around $475 billion dollars was promised after his presidential campaign. After around $22 billion dollars was relieved however, the project was shut down by the senate.
This means that a lot of people are still stuck with a load of crippling debt, which makes them unable to function in our society. And as the debates about student loans and student loan debts becomes more and more prevalent in modern american culture, we can only hope that it gets better.