MICHEL MARTIN, HOST:

As students across the country head back to school, we've heard a lot about the health dilemmas they and their parents are facing, but it turns out there is another crisis students and families are facing that's been around for decades, affects millions of people for years after they leave school and somehow gets less attention. We are talking about student loan debt. Americans owe some $1.7 trillion in student loan debt, and that's not just a scary number. Our next guest, a journalist who's been tracking the issue for years, says it is a phenomenon that is shaping everything from decisions about buying homes to starting a business to when to get married.

In his new book, Wall Street Journal reporter Josh Mitchell tells the story of how programs meant to be a ticket to the middle class grew to be an anchor around the necks of millions of Americans. It's called "The Debt Trap: How Student Loans Became A National Catastrophe." And Josh Mitchell is with us now to tell us more. Josh, thanks so much for joining us.

JOSH MITCHELL: Yeah, sure. Thank you.

MARTIN: Catastrophe is a pretty strong word. Why do you say that?

MITCHELL: If you look at the numbers, there are huge numbers of people who are struggling with their debt. Let's just take a look at the number of people who have defaulted on their loans. There's 8 million people, something around that ballpark that have defaulted on student loans. That's not that far off from the number of people who lost their homes to foreclosure in the housing crisis. If you look at the number of seniors who have had their Social Security checks garnished in recent years, there's more than a million people that have had their Social Security checks garnished because they can't pay their student debt. And the government is garnishing their checks, reducing their Social Security checks to recover some of that debt. And in a lot of cases, parents are going to have this debt hanging over their heads, probably for the rest of their life.

MARTIN: So how did this happen? I mean, how did something that was meant to get people into the middle class becomes something that is actually this anchor, not just on individuals, but really on our idea of upward mobility? I mean, how did that happen?

MITCHELL: So there were several pivotal moments that I argue led to college becoming a commodity as opposed to a public good. One of them was when Lyndon Johnson successfully pushed Congress to create the student loan program that we have right now. In 1965, he relied on banks to make loans. And the reason why was because from an accounting perspective, if the government itself made loans at the time, it would just look really expensive and would cause the deficit to go up. And so to avoid the hit to taxpayers, at least on paper, he said, let's convince banks to make loans, and that'll make the program look really cheap - again, on paper.

And this is really when higher education became a big profit center. The student loan program was intended to help people pay for tuition. But what I argue is that by introducing banks into the process and then by creating what I call this Frankenstein named Sallie Mae to help the banks get money to lend to students by taking those steps, college really became intertwined with bankers, Wall Street. And even schools themselves had financial interests to get a lot of people into debt, and in many cases, into debt that they couldn't repay.

MARTIN: Well, you profile a number of people who have lived this story. I mean, some were the first in their families to go to college. Some people were recovering from, like, personal setbacks and saw education as a way to change their lives for the better. Nearly all had to deal with tens of thousands of dollars in debt, and they still are not out from under. And the other thing about it, these stories that - this just seemed to sort of escalate. It never seemed to get smaller. So, you know, in your reporting for the book, was there a particular person that stood out for you that kind of encapsulates a lot of what we're talking about here?

MITCHELL: Sure. The main character of my book is a woman who was a secretary in the early 1990s at a law firm in Pennsylvania. And she was in her late 20s. And she wanted to improve her lot in life. This was at a time when demand for college workers and wages for college workers were going up, while wages for blue-collar workers was going down. And so there was an economic imperative for people like her to go to college, and that's what she did. She went to the school across the street from the law firm that she was working at. She wanted to be a psychologist. And the state that she wanted to open a psychology practice in required her to get a Ph.D.

So 10 years later, after all of her schooling, she owes $120,000 in student debt. Now, 25% of that almost was just interest alone. One of the things that the government - Congress did in the 1990s is they started charging a lot more interest while students were in school and didn't have the ability to start making payments. And so think about this. For four years, or if you go to grad school for six years or eight years or in her case, 10 years, interest is accruing on these loans. And one of the reasons why Congress started doing that is because they were using that interest to try and, you know, make its budget look smaller. They were, in some cases, using the interest to reduce the federal deficit.

So you have a woman who's going to college and graduate school to try and live her dream of becoming a psychologist, but so much money that she was taking on in debt was going to schools, it was going to pay the banks, including Sallie Mae, that issued her the loans under the federal program. And it was being used by Congress for its own budget purposes. So this became in her case and in many other cases this wealth transfer where she's taking on all this debt, thinking it's good debt, but in reality, it's enriching a lot of these big institutions. And she comes out in 2001, and she could never get ahead of it. The monthly payment was so big, she had to enroll in a 30-year term. And she could never get ahead of her debt. She eventually had to file for bankruptcy. Even after she paid her original balance and then some, she still had to file for bankruptcy because she just could not afford it. This became backbreaking.

MARTIN: So what was this like writing this for you, if you don't mind my asking? Because it's just shocking that something that affects so many people's lives is so little a part of our public conversation. I just find that strange.

MITCHELL: Well, one of the most remarkable things I encountered with each person I spoke to was the level of shame that they felt in having so much debt. They felt that they had done everything they were told to do by policymakers, by college leaders, by economists - to go to college to improve your skills. And they sign the dotted line under this impression that they would get this well-paying job and that the debt would be an investment. And then all of a sudden, they come out and they owe so much money. And they become really embarrassed and ashamed of it when they can't pay it back.

So it was a really emotional experience to talk to these people and their families. You know, one of the things I haven't mentioned so far is that a lot of people I talked to, it's not just them with student debt, it's their parents. And this really flips the script. You know, it used to be that parents, you know, would pass wealth downward. And obviously, in a lot of cases, that's still the case. But increasingly what's happening is debt is being passed upward. Instead of passing wealth down to your children, now, debt is being passed up to parents because a lot of parents, including low-income parents, a lot of minority parents, are having to take on debt just to give their children a shot at going to college.

MARTIN: So before we let you go, you know, we've talked about here just the scale of the problem. And we've only just scratched the surface of, you know, what you lay out in your book. But do you have thoughts based on your reporting about what would make a difference?

MITCHELL: Sure. I think history can be a guide here. One of the things that I learned was before the government got into the student loan program, a lot of schools themselves, a lot of colleges themselves actually made loans to students. They were the lender. And they would use some of their own money or in some cases work with banks to extend loans to students. And default rates at some of these colleges were very low. And so you might ask why, you know, why are default rates and the federal programs so high, but why were they low back then? There's probably a number of reasons for that.

But I think one of the biggest reasons is that when schools have more of their own money on the line, they are less likely to extend a lot of debt to a student that will be too burdensome for that student to repay. In other words, if schools have more skin in the game, if they have more consequences for raising prices so high, that makes it impossible for students to repay their debt, schools will be less likely to do that. So one thought out there - and I think members of both parties broadly agree on this concept, or at least people who have talked about how to reform this program - they agree on the concept that schools need more accountability in this program if they are going to continue to have access to this huge source of money in order to prevent students from getting into so much debt.

MARTIN: That's Wall Street Journal reporter Josh Mitchell. His new book, "The Debt Trap: How Student Loans Became A National Catastrophe" is out now. Josh Mitchell, thank you so much for joining us.

MITCHELL: Sure. Thank you. Transcript provided by NPR, Copyright NPR.