Student Debt Bubble - part 2 - History of Student Debt

Article Index

Page 2 of 4

 HISTORY OF STUDENT DEBT IN THE UNITED STATES

 studentdebt timeline 1840

 The first student loans in the U.S. were offered exclusively to students at Harvard University in 1840; public student loans did not arise until the 20th century. In fact, the U.S. Department of Education (DOE), which was founded in 1867, did not administer federal student loans until the passage of Title IV of the Higher Education Act in 1965 (HEA).
studentdebt timeline 1944  In the two decades prior to the institution of federally-guaranteed student loans, the U.S. experienced a significant increase in college attendance, however, thanks in part to the passage of the GI Bill in 1944. Fulfilling the need for affordable higher education, the GI Bill subsidized or completely covered the cost of college education for nearly half of America’s returning World War II veterans. Since its inception, this program has remained popular over the years; nearly 32% of all male veterans have used it to attend college as of 2009.
 studentdebt timeline 1956 One year after the HEA was enacted, the precursor to the National Association of Student Financial Aid Administrators (NASFAA) was established. Today, this organization enlists more than 18,000 professionals at colleges and universities across the country to help students access higher education through financial aid.
 studentdebt timeline 1976 In 1972, the HEA was amended to ensure education programs whose students were receiving financial assistance and student loans did not discriminate based on gender. By 1976-77, all undergraduate students became eligible for Pell grants. Together, these two popular programs further increased college attendance rates by providing financial assistance to individuals who previously could not obtain it.
 studentdebt timeline 1986 However, not all student financial assistance has been beneficial. Signs of trouble with student borrowing began to appear by the late 1980s. In 1986, parents and students had incurred nearly $10 billion in federal student loans – then considered an outrageous amount. That same year, more than one quarter of student borrowers owed more than $10,000 in student loan debt; adjusting for inflation, this is equivalent to over $21,000 today.
studentdebt timeline 1990  Certainly by the 1990s, student loan debt began to skyrocket. In 1993, the average debt of a bachelor’s degree graduate was approximately $9,000; five years later, it was about $15,000. By 2003, it had jumped to approximately $17,500.
studentdebt timeline 2012  Today, the average outstanding student loan balance per debtor is roughly $30,000, though one recent study by Fidelity Investments put the figure as high as $35,200. Approximately 20% of U.S. households currently owe student loan debt, as do 40% of people younger than 35. This means an increase of nearly 200% of overall student loan debt (public and private) over the last 20 years. As of 2012, total student debt surpassed $1 trillion.