In the past couple of decades, student-loan debt in the United States ballooned to $1.5 trillion. It is now the largest nonmortgage source of US household debt, ahead of credit-card or auto-loan debt. The average student-loan debt is $35,000. And those loans have the highest default rate of any form of household debt, according to the Federal Reserve.

This problem reflects decades of government policy, according to Brookings Institution’s Adam Looney and Chicago Booth’s Constantine Yannelis.

The researchers tapped into three decades of data from the US Department of the Treasury and the National Student Loan Data System, assembling a data set representing almost 12,000 institutions in the US that were eligible for student-loan programs between 1970 and 2014.

To access most student loans, students have to be enrolled in qualified educational institutions. Federal policy has alternately expanded and contracted institutional eligibility, contributing to the current student-loan situation, the analysis suggests.

In the 1980s and 2000s, education policy increased eligibility for loan programs and raised borrowing limits for older students. This drove a surge in new institutions, especially for-profit schools, the researchers argue. About 85 percent of the increase in student-loan defaults between 1980 and 1990 was driven by new schools entering loan programs, the researchers find.

Recommended Reading Who’s at Fault for Student-Loan Defaults?

For-profit colleges enroll 10 percent of US students but account for 50 percent of student-loan defaults. And low-income students are hit the hardest.

Who’s at Fault for Student-Loan Defaults?

Then a change in federal policy imposing restrictions on high-default schools in 1992 led a significant number of these institutions to leave the student-loan programs. This tightening of credit accounted for as much as 95 percent of the subsequent decrease in loan defaults, the researchers estimate.

“Between 1981 and 1992, credit gets expanded and then tightened, leading to a high exit rate among for-profit institutions from loan programs,” Yannelis says. “After 1992, the cycle repeats, however, with credit access loosening up again as pre-1992 reforms get rolled back.” By 2011, he says, borrowers at these high-default, for-profit schools accounted for almost half of all student-loan defaults in the US.

For-profit schools typically market themselves to nontraditional students, offering two- to four-year degree programs, some of them online, or diplomas in fields such as health administration, culinary arts, or beauty treatments. The students they attract tend to be people over the age of 25, often without a high-school degree, from minority backgrounds. They’re more likely to be women or single parents with families or a job to balance.

These borrowers face two problems after enrollment that increase their risk of default, Yannelis says. First, because for-profit schools usually charge more than nonprofit schools, they’re saddled with more debt. Secondly, they have a harder time finding a job once the loans need to be repaid.

Virtually all the peaks in student-loan defaults are driven by changes in federal policy that expand access to the high-risk, for-profit institutions, the researchers argue. Addressing this means working through the complex trade-off between enabling access to credit—and educational opportunities—and attenuating default risks for borrowers and taxpayers alike.

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