This graphic from CollegeScholarships.org and Jess.net has a very good explanation of what is fundamentally wrong with the student loan program as it exists today and how it got there.

Click on the image to get the full sized version which is much easier to read.

In 2007, the Attorney General of New York State, Andrew Cuomo, led an investigation into lending practices and anti-competitive relationships between student lenders and universities. Specifically, many universities steered student borrowers to “preferred lenders” which resulted in those borrowers incurring higher interest rates. Some of these “preferred lenders” allegedly rewarded university financial aid staff with “kick backs.” ^[20][21]