Student debt isn’t just destroying your bank account. It’s also killing college

American student loan debt totals to $1.2 trillion and now outweighs American credit card debt. It’s a devastatingly difficult problem, and one that the government absolutely needs to examine more closely.

It was announced this week that students who started a “debt strike” against the struggling for-profit organization, Corinthian Colleges, will make their case to the Consumer Protection Bureau in Washington, D.C. Numbering 15 when they started, the strike now includes 86 people, who argue that Corinthian Colleges pressured them into taking on more debt, while failing to deliver the education that they promised. (You can follow them on Twitter @StrikeDebt.)

Working with an attorney to file a “defense to repayment” claim, the students ultimately hope to go all the way to the Department of Education and have their debt wiped out completely. While Education Secretary Arne Duncan will not meet with them himself, he will send a representative to the meeting, indicating that these students’ voices can no longer be ignored.

But to make a lasting impact, reform efforts can’t come from the government alone. The primary blame here ultimately rests in the hands of American colleges: If they want to keep their doors open, they must address the student loan crisis now.

In fairness, the federal government should be highly involved in this issue, though the results so far have been middling at best. A 2013 bill proposed by Sen. Elizabeth Warren (D-Mass.) would have refinanced the system in an effort to make colleges more responsible for federal loans, specifically in cases where graduated students can’t find employment. However, the legislation was shot down in Congress last September. 

Then there’s President Obama’s Pay as You Earn program, which puts a cap on monthly loan installments so that students won’t have to pay more than 10 percent of their discretionary income. But if you look at the fine print of this executive order, it becomes clear that “discretionary income” can fluctuate a lot over time and from person to person, meaning that the program will have mixed results for individuals with varying amounts of debt and varying levels of income.

Obama’s truly important education initiative is the proposal known as “America’s College Promise,” which aims at providing two free years of community college for every American who is “willing to work for it.” But this proposal is just as flawed: Ambitious as it is in scope and admirable as it is in mission, America’s College Promise still doesn’t answer what we’re going to do about the current amount of student loan debt in this country, nor does it provide a solution to that will make four-year colleges more affordable in the near future.

The trouble with this conversation is that all the heavy lifting seems to be going on outside of America’s colleges, instead of within. With the cost of higher education getting ever steeper, it’s all but guaranteed that if nothing changes, students are going to begin to abandon traditional colleges and universities in droves. America’s College Promise may be the first step, eventually making community colleges the norm rather than the alternative. But even now, there are plenty of trade schools which offer training far more specified and far less expensive than what a given student can get at a four-year university.

And then there’s online education. The Internet is changing the way all students learn, slowly but surely. Though a certain stigma remains around online degrees for the moment, there are signs that stigma is beginning to dissipate. With the growing number of MOOCs, aka Massive Open Online Courses available, education is becoming more of an open-playing field than it has been in years.

But that’s not the only reason traditional institutions should be worried. Obama recently announced plans to decrease the amount of federal funding that goes to for-profit colleges like University of Phoenix, whose shady success records and dubious use of financial-aid loopholes have recently made them a target for investigations and closures. For-profit colleges are, by definition, businesses. Every college or university has a brand they want to protect, and a revenue stream they want to ensure. Often, their business practices are no more transparent than that of the theoretically lesser for-profit schools which they look down on. 

If nothing changes, students are going to begin to abandon traditional colleges and universities in droves. 

“The question is what the universities are doing,” said Sen. Warren, discussing student loan policies. “There’s a lot that goes on in the financial side that is opaque to the rest of the world.”

While change on a federal level remains slow, other solutions have been proposed. Anya Kamenetz of the think tank Third Way has outlined a plan that would radically restructure the college experience, putting emphasis on personalized, guided instruction at smaller schools, while encouraging larger schools to spread their resources to commuter students all over the state. A more straightforward approach was taken by Karen Weise at Bloomberg, who breaks the process by which we can fix student loans into four parts: “tie payments to income,” “tie loan limits to courses of study,” “beef up pell grants,” and “flip the equation around,” (i.e., give federal aid to schools rather than students, so colleges can significantly reduce tuition costs).

That last solution could be problematic. To reiterate Sen. Warren’s point, we have almost no idea what most schools do with federal funds as it is. Worse still, the government puts every school on an equal playing field. “Right now, federal student aid subsidizes attendance at any accredited college at virtually any price,” writes Slate’s Reihan Salam. “The result is that students have no way of knowing which colleges offer the best bang for the buck, and colleges have little incentive to get better at actually serving their students.”

Fortunately, there is a way around this: Make federal subsidies for college merit-based. If schools can’t actively show that their students go on to find jobs, then pull their funding. This would be no problem for certain elite schools, who don’t need federal funding to exist, as merely having them on your resume is almost enough to get you employed anywhere. But for mid-range schools, the effect could be huge. No longer would schools award degrees without a care in the world, churning students out like a factory, before bringing the next batch in to repeat the process.

Interest on student loans should also be abolished completely. As Weise notes above, graduates shouldn’t have to pay more than their job allows them. But given how bad the economy is, some graduates can go years without finding steady employment, stuck in low-income jobs with little means of advancement. Interest makes sense if you don’t pay loans, even when you have the money to. But for those who have a harder time escaping their financial handicaps, paying interest doesn’t make any more sense than paying the same amount than those who make more money than you.  

Interest on student loans should also be abolished completely. 

Most importantly, if colleges are going to let students rack up thousands of dollars in debt without giving them the proper tools to find a job so that they can pay that debt back, then they must be punished for their negligence. “Colleges would suddenly have an excellent reason to guide students to majors that would help them gain marketable skills,” as Salam explains. “The usual objection to this notion of giving colleges more ‘skin in the game’ is that colleges would become extremely selective to minimize the risk of default, and this in turn would deny large numbers of students the opportunity to get an education in the first place. The reality is that the vast majority of America’s higher education institutions are nonselective, and colleges that refuse to even try to educate students who need competent guidance would quickly find themselves out of business.”

Letting less students into college sounds horribly exclusionary if you believe that education is a basic human right. In fact, some would go so far as to say that all education should be free. But until more colleges can demonstrate that their graduates can actually do something useful with their degree, less admittance is better than massive debt. 

Besides, most schools are already exclusionary in other horrible ways. Research from the National Center for Education Statistics indicates that individuals with a college degree are still more likely to be employed than those without one. However, if you have to drop out of school because you can’t pay the exorbitant tuition, you get rewarded with the same old debt, and no degree. This has fostered a kind of rampant inequality across American campuses. Even with the advent of financial aid, students who have more money are better equipped to deal with the pressures of pursuing an education, knowing there is a safety net there to catch them if they fall behind or screw up.

Some graduates can go years without finding steady employment, stuck in low-income jobs with little means of advancement.

What’s really sad is that the traditional American college experience is dying because of student loans. “That all of this fun is somehow as essential as the education itself—is somehow part of a benevolent and ultimately edifying process of ‘growing up’—is one of the main reasons so many parents who are themselves in rocky financial shape will make economically ruinous decisions to support a four-year-residential-college experience for their children,” states Caitlin Flanagan at the Atlantic. Flanagan isn’t wrong that our idea of what college should be is hurting families in the long run, but colleges also have to take responsibility for selling families that failed dream.

In the Internet age, at least awareness of the problem is growing. Andrew Rossi, director of the higher education documentary The Ivory Tower, said after his film came out: “I do feel heartened that this conversation about higher education—about its value and importance, but also its unsustainable business model—is becoming a bigger part of what parents and prospective students are thinking about.” Meanwhile, others like tech billionaire Peter Thiel have offered students money to actually leave college, proving that at least in Silicon Valley, a four-year degree isn’t everything.

While college will always enjoy a certain appeal, the university experience is becoming a luxury item that only the richest Americans can afford. It would be nice to live in a country where we treat not only formal education, but higher learning for the people who want it as a basic human right. But if it’s going to continue to even be a basic possibility, then schools have to enact reform. You can’t keep a college open if no one wants to attend it, and no one is going to want to attend if the cost of an average education is bankruptcy or financial ruin that even death itself might not get you out of. As it stands, the decision of whether to attend college or not is may be the most perilous issue facing American youth. That’s how high the stakes are.

When the students who are going off to college today grow up and have children of their own, they’ll probably tell them: “Don’t go to college, it’s a waste of money.” After all, how will this generation afford to send their kids to college if they’re still paying off student loans of their own? 

Photo via DonkeyHotey/Flickr (CC BY 2.0)

Chris Osterndorf

Chris Osterndorf

Chris Osterndorf is an entertainment reporter and movie critic based in Los Angeles. He holds a degree in cinema from Chicago’s DePaul University. His work has appeared on the Daily Dot, Mic, the Script Lab, Salon, the Week, xoJane, and more.