Mortarboard and Mortar Debt: The Beautiful Scam of American Higher Education

Let's start with a number: $1.77 trillion. That is the current outstanding balance of student loan debt in the United States, carried by approximately 43 million borrowers. To put that in perspective, it is larger than the GDP of all but a handful of countries on earth. It is larger than all credit card debt in America. It is, by any reasonable measure, an economic catastrophe — and it was entirely, deliberately, and systematically constructed by institutions that enjoy nonprofit status and talk constantly about the transformative power of education.

The word for what has happened is not a crisis. A crisis implies something unexpected. This was a business model.

The Tuition Ratchet

Between 1980 and 2023, the average cost of a four-year college education — tuition, fees, and room and board — increased by more than 1,200 percent. Adjusted for inflation, that's roughly three times the rate of overall price increases across the economy. Healthcare, which we rightly treat as a national emergency of affordability, looks almost restrained by comparison.

How does this happen? Not through any single dramatic decision, but through a mechanism so elegant in its self-perpetuation that it deserves genuine, horrified admiration. The mechanism works like this: federal student loan programs expand access to credit, making it easier for students to borrow more. Universities, aware that students can borrow more, raise tuition. Rising tuition requires students to borrow more. The federal government, committed to the principle that everyone deserves access to higher education, expands loan availability further. And around we go.

Economists call this the Bennett Hypothesis, after Reagan-era education secretary William Bennett, who identified it in 1987. It has been debated, qualified, and refined ever since — but the core observation, that easy credit enables tuition inflation, has proven remarkably durable. What Bennett didn't fully anticipate was how enthusiastically universities would lean into the dynamic once they understood it.

Administrative Bloat as a Growth Strategy

Where does the tuition money go? Not primarily to instruction, which is the obvious and infuriating answer. Since 1990, administrative positions at American universities have grown at roughly ten times the rate of faculty positions. There are now more university administrators in the United States than there are faculty members — a fact that should be printed on every tuition bill as a disclosure requirement.

The modern American university employs Associate Vice Provosts for Student Success Initiatives, Directors of Inclusive Excellence Engagement, Assistant Deans of Strategic Enrollment Management, and approximately four hundred other job titles that did not exist when your parents were in school. Each of these positions comes with a salary, benefits, an office, a support staff, and a budget — all of it funded, ultimately, by tuition paid by students who borrowed money to be there.

This is not to say that all administrative functions are useless. Some of them are genuinely valuable. But the scale of the expansion is not explained by necessity. It is explained by the availability of money — specifically, the near-unlimited availability of federally backed loan money flowing through eighteen-year-olds who have been told since childhood that college is non-negotiable.

The Endowment Paradox

Here is a detail that tends to produce a specific kind of rage in people who hear it for the first time: Harvard University's endowment is currently valued at approximately $50 billion. Yale's is around $41 billion. Princeton's sits at roughly $34 billion. Stanford, MIT, Penn — the list of universities sitting on multi-billion-dollar investment portfolios while their students graduate with six-figure debt is long and deeply instructive.

These endowments generate annual returns that, in many cases, could fully fund the education of every enrolled student without touching the principal. They do not do this. They use a portion of endowment income to fund financial aid, which is genuinely helpful to some students, while continuing to raise sticker prices that drive the borrowing behavior of the students who don't qualify for that aid.

The endowment is not a resource held in trust for students. It is an institutional asset managed for institutional purposes, including prestige, research capacity, and the maintenance of a physical campus that functions as a marketing tool for continued enrollment. The students are, in a meaningful sense, the product — the mechanism through which tuition dollars flow in and endowment value compounds.

The Private Lender Partnership

Federal student loans are bad enough — fixed-rate debt with income-driven repayment options that nonetheless leave millions of borrowers in decades-long purgatory. Private student loans are something else entirely.

Private lenders — Sallie Mae, Navient (spun off from Sallie Mae, which tells you something), Discover, and a rotating cast of smaller players — offer student loans with variable interest rates, limited repayment flexibility, and terms that would be recognizable to anyone who has studied predatory lending in other contexts. They market these products aggressively on college campuses, through university financial aid offices, and via a certification process in which the school itself validates the loan — creating an implicit endorsement from an institution the student trusts.

The relationship between universities and private lenders has, at various points, crossed from implicit endorsement into explicit corruption. Multiple investigations over the past two decades have uncovered revenue-sharing arrangements, preferred lender lists that steered students toward higher-cost products, and financial aid officers who received personal benefits from lenders whose products they recommended. The scandals produced regulatory responses. The structural relationship between universities and the lending industry continued.

The Credential Inflation Trap

All of this debt might be defensible — barely, squintingly — if the credential at the end of it reliably produced the economic outcomes it promises. It increasingly does not.

Credential inflation is real and accelerating. Jobs that required a high school diploma in 1980 now require a bachelor's degree. Jobs that required a bachelor's degree now frequently require a master's. The credential has become a screening mechanism rather than a skills certification, and the cost of obtaining it has grown while its marginal economic value has declined. The result is a generation of workers who are overqualified by credential, underemployed by circumstance, and underwater by debt — carrying the financial weight of an investment that the market has decided is worth less than the price they paid.

The universities know this. The lenders certainly know this. The knowledge does not appear to have affected anyone's pricing strategy.

What Accountability Looks Like

There are genuine reforms worth fighting for: expanded income-driven repayment, meaningful debt cancellation, restoration of bankruptcy protections for student loans (which were stripped away in a bipartisan legislative gift to the lending industry in 2005), and serious regulatory scrutiny of the university-lender relationship.

But the deeper problem is structural. As long as federal loan programs function as a demand subsidy that flows directly to institutions with no accountability for outcomes, the ratchet turns. Tuition rises. Debt grows. Administrators multiply. Endowments compound.

And somewhere, an eighteen-year-old who has been told their entire life that this is the only path to a decent future is signing a promissory note for $47,000 — for one year — at an institution whose endowment earned more in interest last Tuesday than that student will make in their first five years of employment.

The degree is real. The debt is real. The promise that justified both of them is the only thing that was ever fictional.