Each month, Jennifer Pae, forks over hundreds of dollars in payments on $40,000 in student loans she owes for her education at the University of California, San Diego. Pae, president of the United States Student Association (USSA) spoke to the World as she led a National Day of Action April 17 demanding that Congress reauthorize the Higher Education Act and also provide relief for millions of students struggling with crushing debts.

“We’re extremely concerned that students are relying more and more on student loans rather than receiving grants,” she said. “What we are seeing is the student loan industry spiraling out of control.”

Nearly two-thirds of the 15 million students in higher education, she said, graduate with student loan debts that average nearly $20,000.

Massive student loan debt, “is affecting people’s life choices. They are putting off having families, buying homes or cars due to their high debt burden,” she concluded.

But what’s crushing debt to millions is a cash cow for bank and university officials.

New York Attorney General Andrew Cuomo’s investigation of the $85 billion student loan industry has uncovered arrangements between student loan companies and universities that benefited the lenders at the expense of the students. Many colleges established “preferred lender lists” and received a certain percentage of the net value of loans from student loan companies. Universities ended up profiting from their students’ indebtedness. Some student loan companies gave gifts and trips to university employees.

SLM Corp., known as Sallie Mae, the largest provider of student loans, even provided staff for college financial offices. Cuomo said, “Our position is very simple. Loan decisions should be made in the best interest of the student.”

The New York Times revealed in its April 15 edition that Sallie Mae and the biggest banks in the student lending industry, Bank of America and Citibank, lavished millions in bribes on colleges and universities to convince them to drop out of the direct federal student loan program in favor of privatized student lenders. Indiana University, for example, was offered $3 million if it left the direct federal program established by Congress in 1994 to provide lower- interest loans. The Bush administration has energetically promoted this privatization scam.

Matteo Fontana, a general manager in the U.S. Department of Education’s Office of Federal Student Aid, is being investigated for his sale of 10,500 shares of CIT Group stock from which he made a huge profit in 2003. CIT Group is the parent company of Student Loan Xpress. Fontana worked for Sallie Mae before coming to the Department of Education.

Sallie Mae, which started out as a government-sponsored enterprise in 1972 but began privatizing its operations in 1997, announced April 17 that it will become fully private in a buyout financed by Bank of America and J.P. Morgan. Sallie Mae’s chairman, Albert Lord, reported income of $228 million before he stepped down in 2005. Thomas Fitzpatrick, the current chairman, is paid $150 million in salary, stocks and options.

Last week, Cuomo’s investigation resulted in several settlements. Sallie Mae agreed to adopt Cuomo’s new code of conduct, which prohibits revenue sharing between lenders and schools, curbs “preferred lists” and bans gifts and trips for university employees from lenders. Sallie Mae does business with 5,600 schools and serves almost 10 million borrowers. Citibank has agreed to a similar agreement. It does business with 3,000 schools.

A settlement was also reached with six schools — the University of Pennsylvania, New York University, Syracuse University, Fordham University, Long Island University and St. John’s University — to reimburse students a total of $3.27 million for inflated loan prices caused by “revenue sharing” (aka “profiteering”) agreements.

Luke Swarthout of the U.S. Public Interest Research Group called the agreements a “Band-Aid” approach and said the student loan industry will require congressional action.

USSA’s Pae said bills in Congress, introduced by Rep. George Miller (D-Calif.) and Sen. Edward M. Kennedy (D-Mass), that cut in half the interest rates on subsidized Stafford loans are a “step in the right direction.” But more is needed.

“Every year, about 400,000 qualified high school students are forced to abandon their plans for a college education because of the costs. We urge Congress to renew the Higher Education Act and make a college education more affordable and accessible to students,” she said.

Congress must reject the president’s budget due to its inadequate funding levels for critical programs in higher education, she said. Priority needs include increased funding for Pell Grants and other student financial aid.

College education affordability and loans also promise to be a presidential issue. Democratic presidential contender John Edwards said, “Students should borrow directly from the government. We need to fix the student loan program to take banks — which are just an expensive middleman — out of the process.”

Tim Wheeler contributed to this article.