There’s no question that Americans are being buried under a mountain of student loan debt, by some estimates affects more than 40 million Americans, and it is over one trillion, three hundred million dollars. Worse still, student loan debt increases by $2,726 every second! That’s an astounding, frightening amount of debt, but how did it come to exist in one of the world’s richest countries?

Well, if you know your Congressional history, it’s easy to pinpoint when this onslaught of student debt began. You can trace it back to Congress passing the Higher Education Amendments of 1992 (HEA-92). Prior to the enactment of this noxious piece of legislation, students could only borrow $23,000 to help pay for an undergraduate degree, and up to $57,000 to help pay the cost of a graduate (M.S., M.A, Ph.D., etc.) degree. In addition, it used to be much more difficult to obtain a student loan. Borrowers had to prove their creditworthiness, just like with a bank loan or other credit account. If students hadn’t yet established credit, or had bad credit, they would have to bring in a co-signer, typically a parent.

However, with the enactment of HEA-92, traditional loan underwriting rules went right out the window. For starters, it eliminated the requirement for student borrowers to have good credit, or a co-signer, which made student loans available to a wider slice of the population. The debt limit for an undergraduate degree was raised to $57,000, while the loan cap for a graduate degree ballooned to $138,500. The new student loan program was called the Direct Stafford Loan Program (DSLP), and it has led, in part to the current student loan crisis.

The Problem With Easy Credit For All Students

While wider access to higher education is a good idea in theory, a few problems with the new student loan system quickly became obvious. For instance, once education-al institutions realized how much money there was to be made with a wave of new students pouring in, they began trying to extract as much money as possible from the student loan system. Colleges and universities did this by going on recruiting campaigns to draw in as many students as they could into the student loan system.

As students flooded into institutions of higher learning, they also began steadily raising tuition and fees and other costs. Based on figures from the U.S. Labor Department, the College Tuition Price Index (CTPI) increased by 80% in the ten-year period between 09/2003 to 09/2013. This is more than twice the rate that Consumer Price Index rose during the same span of time. At the same time, textbook prices increased by 79.4%, which further increased educational costs.

Moody’s Analytics studied trends in educational costs from 1990 through 2010 and uncovered a precipitous rise (almost 300%!) in the costs of tuition and fees, once HEA-92 was legislated into existence. All of the evidence suggests that most educational institutions, whether public or private, began squeezing their student “customers” by artificially boosting fees, tuition, and textbook costs so they could pump up the student loan income that was streaming in like a veritable deluge.

One Big Factor In The Student Loan Crisis

Aside from the huge increases in everything associated with higher education, the huge demand for business degrees, both graduate and undergraduate was another driver in the aggregating mountain of student debt. Ever since the late ‘60s and early ‘70s, the business world felt a growing need for a more highly skilled talent pool. It soon became the norm that an MBA was perceived as a ticket to material success, and demand for newly minted MBAs soared. To this day, there’s a strong demand for candidates with MBA degrees, a trend that will probably continue into the future.

A recent study discovered that the 191,571 students who graduated from a college or university in the U.S. with some kind of business degree constituted 25.4% of all the master’s degrees issued in the world. Just for comparison, 178,062 people graduated with master’s degrees in education, which added up to around 23.6% of all advanced degrees. As noted earlier, the business world continues to generate a brisk demand for MBAs. In fact, the Graduate Management Admission Council (GMAC) learned that while companies in 2011 62% of companies were planning to hire MBAs, which grew to 74% in 2014, and currently around 84% of all companies are planning to add MBAs to their staffs.

In line with the burgeoning demand for MBAs, another driver of income for business schools is that businesses are clamoring for new hires with specialized degrees in various aspects of finance. There has also been a commensurate increase in demand for advanced degrees of all kinds. “The Path Forward: The Future of Graduate Education in the United States”, a report issued by the Commission on the Future of Graduate Education in the United States stated that the number of people pursuing graduate degrees increased from 13 million in 1987 to more than 21 million in 2010.

For-Profit Schools Are A Major Driver Of Student Loan Debt

With the changes in the student loan practices ushered in by HEA-92, for-profit educational institutions experienced exponential growth. The costs of attending a for-profit school increased six times from 1986 until the present. Many of these schools offer the specialized degrees, hands-on instruction, and technical training that the current business climate demands.

In the end the more than one trillion, three hundred million ($1,000,300,000,000) dollars in student loan debt was generated by the change in student lending regulations, the greed of educational institutions, and a vastly increased demand not only for business degrees but advanced degrees of all kinds. Unfortunately, going into the future, it appears, based on all available evidence, that getting any kind of degree will remain expensive. Unless Congress enacts some kind of debt forgiveness program in the near future, American college students will remain saddled with student loan debts that they may never be able to pay off in their lifetimes.

For students interested in learning how to manage their credit while in college, download our free e-book, The Student’s Guide to Credit, here.