Some mind-boggling stuff in Charles R. Morris' The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash. (Life Hiker - I think that you in particular might find this a compelling read.) Just this (paraphrased) to chew on for now:
Not only is America the only country where most students graduate from college with heavy debt loads, but the subsidized student loan business is lucrative. SLM, the biggest student lender by far, pays its executives quite well. Their CEO's pay in 2003 was $12.7 million and by 2005 his options were worth $189 million.
How is it that subsidized lenders have so much money? Because this administration is so stubbornly wed to the idea of free markets that it will subsidize business at double the rate it would take to fund its similar government programs.
The government has a direct loan program. The costs within this program for each $100 loaned to students are about $4.50. By contrast, the subsidy costs to private lenders like SLM are $11 per $100. More than double.
"appropriations for the direct program will limit its activity to just 23 percent of the total federal subsidy market, reserving the remaining 77 percent for the private lenders. If all loans were financed through the direct loan program, the savings would finance full tuition grants for another million students."
There is a huge difference between trusting in for-profit businesses more than you trust in government agencies on the one hand and flatly giving private businesses money from taxpayers. The Bush Administration seems to neither understand this difference or care.