What will the world be like five years from now?

Maybe the country will have a prosperous economy. Inflation might be down to acceptable levels. The roads could be filled with quiet electric vehicles.

Here’s another possibility: The level of outstanding federal student debt may have returned to its current level of $1.6 trillion even if the Biden administration’s student debt relief plan survives the multiple court challenges it’s facing. According to the Committee for a Responsible Federal Budget, that’s not just a possibility, it’s likely to happen. In a fall 2022 report, the organization said Biden’s debt cancellation plan “would temporarily wipe out nearly a third of the student debt portfolio, but the sum of student debt will return to its current level in five and a half years, by 2028.”

And it might happen even faster than that. That projection is based on an analysis that assumes no change in borrower behavior. But Biden’s actions—canceling up to $20,000 in debt for more than 40 million borrowers (with 16 million people already approved for some level of debt relief by the U.S. Department of Education) and expanding the generosity of the Income Driven Repayment program—may end up accelerating borrowing. For example, Brookings Institution’s Adam Looney observes that prior to Biden’s actions, students were expected to pay back more than they borrowed (because of interest). With these changes, they’re now expected to pay back only half of what they borrow, meaning they’re receiving a significant discount that could encourage them to borrow more.

At Jobs for the Future (JFF), we believe the actions taken by the Biden administration are good first steps toward lifting the enormous student debt burden weighing on tens of millions of borrowers, and we hope that these actions survive court challenges. But we fear that these moves will precipitate another debt crisis if policymakers don’t take further action.

How We Got Here

To understand how to prevent the next debt crisis, we need to understand how we ended up with a $1.6 trillion federal student loan burden in the first place.

The country’s current student debt situation is a result of mistakes on the part of at least three parties that play direct or indirect roles in the way our postsecondary education system operates: the federal government and state governments, institutions of higher education themselves, and employers.

Across multiple presidential administrations and political affiliations, the government has failed to hold colleges accountable for ensuring that their graduates succeed in the labor market and that they release transparent information about the quality of their programs and the wages their graduates earn. Moreover, far too few states have adopted policies that cap college tuition at public institutions. Meanwhile, colleges and universities have raised tuition to unbelievable heights, and many haven’t adapted their practices to support students all the way through completion—and that’s particularly true for first-generation college attendees and students of color, students who work, and those who are parents or have other caregiving responsibilities. And for their part, employers have relied too heavily on the bachelor’s degree as the preeminent sign of a job applicant’s skills and capabilities, leaving people who want good jobs with basically no choice but to pursue a four-year degree, rather than considering less-expensive alternatives like short-term training and nondegree credential programs.

We believe that if the federal government takes no further action to improve higher education’s alignment with the labor market, the way college tuition is financed, and the accountability of stakeholders, the country will quickly be back in the exact, or maybe even worse, type of student loan debt crisis we’re currently in. It’s time to fundamentally reform how we finance and structure postsecondary education and hold schools accountable for the success of all students.

Here are six JFF policy proposals designed to do just that:

1. Expand nondegree pathways to careers. One important step toward achieving that goal would be to expand Pell Grants to cover high-quality short-term training programs, as proposed in the bipartisan Jumpstart Our Businesses by Supporting Students (JOBS) Act. Expanding Pell would make it easier, quicker, and less expensive, for learners to prepare for careers—and engage in lifelong learning to advance in their careers—by giving them access to more postsecondary training and education options. Policymakers should also promote measures that expand access to and funding for a broader range of skills development opportunities, such as career pathways initiatives and apprenticeships and other work-based learning programs. And they should take steps to encourage partnerships between higher education institutions, business groups, and individual employers.
2. Hold institutions accountable for student success. Passing the bipartisan College Transparency Act, which would create a robust federal student-level data network system that tracks institutional and program outcomes by removing the ban on student-level data collection, would help students better understand which programs are likely to lead to economic advancement. Reinstating the Gainful Employment Rule, which requires for-profit and career training programs eligible for federal loans to achieve certain student outcomes, would ensure that more students are able to find work and pay back their student debt.
3. Improve and expand the options for paying for postsecondary education. Policymakers should encourage the development of new approaches to financing, such as income share agreements (ISA) and outcome-based loans, that tie how much colleges and universities are paid to their graduates’ economic outcomes. This includes establishing clear and thoughtful regulatory guardrails for outcome-based financing instruments and expanding research efforts to better understand how these approaches affect students, equity, and institutional behavior. For example, policymakers should give serious consideration to the bipartisan ISA Student Protection Act of 2022, introduced in the Senate last summer, which would ensure that students who finance their educations with ISAs are protected by clarifying how existing federal consumer protection laws apply to ISAs and by creating new protections specific to ISAs.
4. Strengthen connections between high school, postsecondary education and training, and careers. States should be encouraged to increase equitable access to early postsecondary educational opportunities and early career exposure programs. Federal policymakers can do that by increasing support for both aligned pathways that start as early as grade 11 and college in high school experiences, such as dual enrollment, work-based learning opportunities, and structured supports. JFF’s Big Blur report offers a bold vision for this type of action, outlining innovative new approaches to connecting high school, postsecondary education, and workforce development experiences. To transform the connections across these systems, policymakers should consider introducing incentives for new financing and accountability models; alignment between K-12 systems, higher education, and workforce programs; unified governance for grades 11-14; and strengthening of staffing models and educator pipelines.
5. Strengthen student supports. Policies should include adequate funding for programs that enable students juggling multiple responsibilities to focus on their studies by providing services such as child care, transportation, housing, food, mental health, and technology assistance. For example, policymakers should increase funding for the Child Care Access Means Parents in School program, enact a permanent emergency aid grant program, as proposed in the Emergency Grant Aid for College Students Act, support other programs with proven track records of helping students complete college, and invest in modern culturally-competent career navigation supports.
6. Spur innovation and test alternative and accelerated education and training delivery models. Policymakers can help better meet the needs of today’s students by supporting efforts to nurture and scale groundbreaking programs that incorporate acceleration strategies, competency-based learning, stackable and portable credentials, and multiple on-ramps and off-ramps to careers.

The student debt crisis is a symptom of a dysfunctional postsecondary education system that desperately needs reform. Whether or not President Biden’s debt cancelation plan survives the challenges it faces, the country could end up in another debt crisis very soon if we don’t adopt policies that address the root causes of that dysfunction and improve the relevance of higher education, find more effective ways to finance it, and hold institutions accountable for the quality of the education and training they provide.

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