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Student Loans: Where Do We Go From Here?


Photo Credit: AP


Since President Joe Biden announced his plan to reduce college student loan debt, much has been written about the adequacy of the plan, it’s political ramifications, and its legality. With a few exceptions, little has been said about how to address root causes of the student loan problem so that it doesn’t continue into the future. In this blog, we offer our thoughts on the root causes and what needs to be done to address them.


  • Until the 1970’s, the states funded a substantial portion of the cost if higher education—greater than 50% for both operating and capital costs. The policy assumption was that higher education was a valuable public good, providing the state with the talent it needed to compete in a growing national economy. But with the coordinated taxpayer revolts in the 70’s, this policy assumption shifted radically to the idea that students were getting significant value from their college educations and should bear most of that cost. What followed was a steady defunding of higher education. The state share declined to less than 20% in most states. We believe that the states need to reconsider their decision to reduce support for higher education and return to the table—this time funding up to 50% through strong incentives for reductions in the costs of operation and for providing the educational experiences their learners need to function in the radically changing economy of the 2030’s.

  • Regardless of whether the states come to the table, virtually every college and university must reckon with its need to transform to meet the needs of the learners it serves throughout their lives. While the “coming of age” undergraduate experience will still be an important part of their program mix, targeted offerings of varying length and credit value, will increasingly become a part of what they do. Institutions can begin their work with the systematic and relentless execution of the suite of widely accepted measures to increase the effectiveness of traditional undergraduate programs. These include expanded dual credit high school programs, improved transfer of community college credits, curriculum simplification, partnerships with learning providers who can enrich offerings, and active learner advising and intervention. The goal of these efforts should be to greatly improve student retention and graduation rates, reduce costs by at least one third, and graduate many – if not most - students in three years to baccalaureate. For institutions with greater ambitions, work should also begin on the development of programs for populations they do not currently serve, particularly adults who will need learning experiences throughout life in the form of highly accessible degree programs, short courses, certificates and badges. Without going into detail here, this transformation will require a reengineering of the role of faculty in instructional development, delivery and assessment and much greater use of technology and artificial intelligence to increase the effectiveness, accessibility and flexibility of the learning experience. It probably goes without saying that these efforts will require a significant change in mindset for all involved, but the rewards in terms of expansion of markets served and new and increased sources of revenue will be great.

  • The federal government should go beyond its current role of providing student financial aid and enforcing federal laws and regulations relating to higher education. As it has done historically, it should use its bully pulpit to support higher education and the states in carrying out what would be a major reset of American higher education to ensure that the sector plays its rightful role in the rapidly emerging learning and work ecosystem of 2030. We recommend a major convening of system leaders to come to consensus on the transformations needed in the system. In addition, programs should be identified to develop transformation models and provide incentives for their implementation broadly and systemically. It also needs to revamp its mix of student aid programs so that they include more grant- in-aid support and less loan-based aid offered on more favorable terms. There should also be incentives for institutions whose students are receiving this aid to aggressively pursue greater efficiency and effectiveness, ideally in line with the agenda outlined above.

Our book—Transforming in Turbulent Times—provides highly useful background on the turbulent environment in which American higher is operating today, what it must do to remain relevant in the years ahead, and how institutional leaders can successfully transform their colleges and universities to meet these challenges.