Student loans are a necessity for most of those who go to college, but they were designed for a different era. (iStock)

Student loans, in just four decades, have gone from an option of last resort to a necessity for most people who want to go to college. Hardly a week passes by where we don’t read or hear about the student loan “crisis” in the U.S.

Americans now owe a record $1.3 trillion in student loans. Some 50 million people in the U.S. hold a student loan, slightly more than the number of people on Medicare and almost as many as those receiving Social Security benefits.

When government-backed student loans were first created in the 1960s, they were designed to provide a helping hand to students who were a few dollars short of paying their tuition bill. Student loans have since become a critical piece of paying for college, and more so.

Student loan debt has quadrupled since 2004. In the middle of the 1990s, when I graduated from college, it was commonplace for students, especially at public colleges, to graduate without any debt. But today, seven in 10 students leave college with student loan debt. On average, they owe about $30,000.

[Who will be able to afford college in a decade?]

Whether you think student loan debt has reached crisis proportions depends on how you slice the numbers, of course. Even so, there is ample evidence that for some students, higher education has become a very expensive proposition.

Take graduate students, for one. Less than 1 percent of undergraduates owe a six-figure debt when they graduate, but some 15 percent of graduate students owe at least $100,000 when they’re done with school. Indeed, 40 percent of the eye-popping trillion dollar debt figure cited above is owed by graduate students.

A second problem is low and stagnant wages among recent college graduates, particularly those at for-profit and community colleges. One recent study estimated that 75 percent of the increase in loan defaults between 2004 and 2011 can be attributed to borrowers at those two types of institutions. That’s because students at for-profit and community colleges earn very little in the job market for their investment in higher education — a median salary of $22,000, compared to the median salary of $49,000 for those leaving a four-year selective college.

A third problem is the speed at which borrowers are paying down their loans. Whether colleges can continue to participate in the federal loan system depends on the default rate of their graduates. But rarely are colleges thrown out of the federal system, and for borrowers, there are plenty of ways to avoid default without making a dent in your loan balance.

Last fall, the White House released its new College Scorecard, which for the first time showed the payment rates on loans. Unlike the default rates, this number included those who are paying interest only or have delayed payments, and as a result, haven’t even touched the principal on their loan. On average, 27 percent of borrowers are doing just the minimum to keep their loans out of default, and at some colleges that number is much higher (go to collegescorecard.ed.gov to see repayment rates by college).

[Another tough thing universities should do–reform graduate school]

How should we fix these problems? As Congress gets ready to renew the Higher Education Act there have been plenty of suggestions. Here are three small changes for a start:

1. Limit a student’s ability to borrow

Right now, colleges are allowed to cap a student’s loan eligibility only on a case-by-case basis. They can’t, for example, limit how much students may borrow by major, even though we know that earnings by major vary greatly. That encourages excessive borrowing and permits some students to “cash out” at low-cost institutions where they borrow well above the price of tuition.

2. Extend the timeframe for repayment

Even as the average loan amount has increased, the standard repayment term has remained at 10 years. And that 10-year clock begins six months after graduation, just when earnings are at their low point in the lifetime of new graduates. Susan Dynarski, a professor at the University of Michigan and an expert on student loans, told me that the U.S. has one of the shortest repayment time periods in the world. Students in Sweden, for example, pay their loans back over 25 years.

3. Make loan limits consistent by year in school

How much students are allowed to borrow from the federal government differs by their year in school. Juniors and seniors can borrow more than freshmen and sophomores. The original goal of the varying limits was to have students access grants instead of loans as they were getting started in school before shifting the burden to upperclassmen as an incentive to finish their degree. The problem is that the loan limits haven’t kept pace with the rise in college prices, forcing students to turn to more expensive private loans to fill in the gap or their parents to take on loans of their own. If freshmen were allowed to borrow more, some of them wouldn’t need private loans. And if excessive debt is a concern, their borrowing can be limited in other ways (see No. 1).

These changes alone won’t solve whatever crisis, real or perceived, exists with student loans in the U.S., but it will be a good start to bringing the federal student loan system created for a different era into the 21st Century.