Standing at $1.7 trillion, American college debt is greater than the entire economies of Canada, South Korea, Russia, Australia and Spain. If American college debt were a country, it would be the 10th wealthiest in the world, rapidly approaching Brazil, Italy, France, India and the United Kingdom.
In the face of ballooning college debt, President Biden and leading Democrats on Capitol Hill continue to renew calls for varying levels of college debt cancellation. Although admirable, debt relief alone will not end our present-day crisis. Solving the American college debt debacle requires substantial reforms to the system that produced this debt in the first place. In other words, we must treat not only the symptoms but their underlying causes.
Aside from eliminating predatory for-profit colleges, traditional nonprofit colleges and college lending corporations must also be held accountable. Today, colleges and universities operate under perverse incentives. For example, U.S. News & World Report metrics reveal that output factors, such as graduation rate performance and graduate indebtedness, account for less than 15% of a college’s rank. Meanwhile, input factors like faculty resources and financial resources account for more than 80%.
Exacerbated by the lack of restrictions in government aid and college lending, colleges widely operate with reckless disregard for costs passed on to students. Instead of price, colleges compete on perceived quality with factors like academic reputation and student selectivity that account for 40% of rankings alone. In doing so, colleges invest in lavish amenities, administrative bloat, and course offerings that are as practically useless in the job market as they are eye-catching to prospective teenage applicants.
To solve this crisis, colleges must have skin in the game. State and federal aid should be conditioned entirely upon postgraduation performance, as opposed to the less than 15% it accounts for today. Operating with an incentive for functionality, the more than 6,000 colleges in America would focus resources on student outcomes, leading to specialization and reduced costs.
While some universities would continue to satisfy social and economic liberal arts demand, most colleges would cut underperforming programs to bolster high-performing alternatives. Among the refitted offerings would be trade programs, encouraging students to enter fields that are desperately undersupplied.
America cannot afford to merely cancel some of its college debt without additional reforms. Although these proposals may provide a short-term reprieve, reforming higher education itself is the key to achieving long-term prosperity. For meaningful change, we must look beyond college debt forgiveness.
Kevin Connell is an attorney at Trevett Cristo, a Rochester-based law firm, and the author of “Degrees of Deception: America’s For-Profit Higher Education Fraud.”