So what is to be done?
1)
Restore bankruptcy protections for all private lending. I can see an argument either way for Federal loans since that risk is imposed on the public. But if private banks want to lend to students or parents, they should fully internalize the risk.
2)
Prohibit co-signed private loans. Right now, many of these loans are the functional equivalent of what liar mortgages were during the housing bubble: they're a financial instrument to load up people who aren't creditworthy with debt. There's a built-in co-signer release after a certain number of on-time payments, so that the debt shifts - without income verification or a credit check - 100% into the student's name. What these co-signed loans functionally do is get debt into the name of a person without any assessment of their creditworthiness. Banks aren't concerned, because this debt is non-dischargeable (see above), so they run little or no risk of having to write it off even if it's not punctually repaid.
3)
Stop sending Federal student loan money to for-profits. Their outcomes are abysmal, and they serve no niche that isn't better and more cheaply filled by community colleges. A for-profit model is a bad idea for higher ed. We've tried it, and there's nothing good about it.
4)
Aggressively enforce the gainful employment rule. If your students can't get jobs and pay back their loans, you shouldn't be getting Federal student loan money.
5)
Reduce Federally mandated administrative overhead:- a) Reign in the accreditation process to reduce costs. Focus on back-end outcomes (see the gainful employment rule above) rather than process-oriented assessments that are super labor intensive.
b) Clarify and reduce institutional responsibility arising from Title IX. Change the rules and guidance to direct institutions to refer all potentially-criminal conduct to law enforcement, and clearly spell out institutional responsibility for non-criminal behavior.
6)
Do not allow the co-mingling of tuition with other money or expenses. Require that funds charged as tuition be used for no other purpose than faculty salaries, the library, and direct classroom facility expenses. This will clarify for the students and the public exactly how much of their money is going to the classroom.
7)
Forgive some small amount of existing Federal debt across the board. Most of the loans in default are small, less than $10k. It doesn't make sense to chase debtors around over small balances.
8)
Reduce Federal interest rates by a significant amount. We can debate what the proper rate should be, but it seems that fairness would say we should use recent generations as a benchmark. Maybe it's the rate of inflation, or the prime rate, or the overnight funds rate, or set as a function of the total program costs. Regardless, it doesn't seem like Federal student loans should be a the money maker they are now.
9)
Cap private interests rates at the Federal rate, or the Fed rate plus a few points. Writing loans at 12% doesn't benefit anyone but the banks.
10)
Give student loan payments a partial tax deduction without limit to put them on par with a 529 plan. It violates basic principles of fairness that parents who save for their children's education through a 529 get better tax treatment than a student trying to pay off loans for their own educations.
So that's ten ways to tackle the problem. Maybe they wouldn't be enough, but I think they'd go a long way toward addressing it.