I wrote recently about how some businesses make more money when their customers fail, how consumer lending quietly evolved into a model where the ideal borrower isn't the one who succeeds but the one who struggles just enough to keep paying. Student debt is the same story with the volume turned all the way up, except here the borrower is seventeen years old, the loan can follow them to the grave, and almost no one in the transaction has any incentive to tell them the truth about what they're signing.

Start with the number that should have set off alarms decades ago. Since 1980, the cost of college has risen far faster than inflation, outpacing the consumer price index by a wide margin and leaving wage growth in the dust. When any product's price detaches from both inflation and the earnings of the people buying it, that's usually a signal that something has broken the normal relationship between cost and value. In most industries, that gap closes. A competitor undercuts you, or customers stop buying, or the thing simply gets cheaper to produce over time. In higher education, none of that happened. Prices just kept climbing, year after year, through recessions and booms alike.

The Product Didn't Improve

Here's what makes the price explosion strange. The core product barely changed. A lecture hall in 2025 works more or less the way a lecture hall worked in 1975: an expert stands at the front, students take notes, exams get graded, credit hours accumulate until a degree falls out the other end. The delivery mechanism is essentially the same one universities used a century ago, which is remarkable when you consider that almost every other information-intensive field was transformed by technology in the same span.

What did change was everything around the education. Administrative headcount ballooned, often growing faster than faculty or enrollment, as universities added layers of staff that had little to do with teaching. Campuses entered an amenities arms race, competing on climbing walls, lazy rivers, luxury dorms, and dining halls that would embarrass a mid-tier resort. None of that made the actual instruction better. It made the brochure better, which turned out to be what mattered, because the people choosing colleges were eighteen and the people paying were often betting on prestige rather than pedagogy.

Other industries innovated under cost pressure. When margins get squeezed, companies find ways to deliver more for less, because if they don't, someone else will. Education felt no such pressure, and the reason why sits at the center of this whole story.

The Most Asymmetric Loan in Finance

There is no other loan quite like a student loan, and once you understand its structure you stop wondering why the system behaves the way it does. Federal student debt is effectively non-dischargeable in bankruptcy, protected by a standard so difficult to meet that most borrowers never even try. You can walk away from a mortgage, a car loan, credit card debt, even debts from a failed business. The bank takes the loss it agreed to risk when it lent the money. Student debt alone follows you with almost no exit, garnishing wages and Social Security decades later if you never manage to pay it off.

Now layer on how these loans get issued. They go to teenagers, seventeen to twenty-two, at precisely the age when almost no one can realistically evaluate a decade of future earnings against a six-figure obligation. There is no underwriting based on likely return. A loan for a petroleum engineering degree and a loan for a degree with almost no labor-market demand are priced identically, as if the outcomes were the same. No lender sits down and asks whether this particular course of study, at this particular school, is likely to generate enough income to service the debt. The money flows regardless, because the lender is largely the federal government and the risk doesn't sit where the decision gets made.

That combination is genuinely unusual in finance: infinite demand meeting infinite pricing power, backed by a loan that can't be escaped and isn't priced to risk. Put those pieces together and the price explosion stops looking mysterious. It looks inevitable.

Nobody Who Decides Bears the Risk

This is the heart of it, and it echoes the incentive inversion I keep coming back to. Show me the incentive and I'll show you the outcome. Follow the money through a student loan and watch where the risk lands. The university gets paid upfront, in full, the moment tuition clears. Whether the student graduates, drops out, thrives, or ends up underemployed and buried, the school has already been paid and bears no consequence. The lender, backed by government guarantees, is insulated from the default risk that would normally discipline reckless lending. And the student, the one person in the arrangement with the least information and the least life experience, absorbs all of it, for life.

A university can charge six figures for a program with essentially no placement record and face no obligation to disclose that record, no penalty when its graduates can't find work in the field, no requirement to refund a cent. Imagine any other product sold this way. Imagine a contractor who got paid in full before breaking ground, whose payment was guaranteed by the government, and who bore no liability if the house collapsed. You would expect a lot of collapsed houses, and you'd be right to.

When the party making the promise carries none of the risk of the promise failing, the promise gets cheap. That's not a moral claim about educators, most of whom genuinely care about their students. It's a structural claim about where the incentives point, and they point away from accountability.

Degrees as Leveraged Bets

What we've actually built is a market in leveraged financial instruments that we've dressed up in the language of enlightenment. A degree is a bet on future earnings, purchased with borrowed money, at a price set with no reference to the expected return, sold with no disclosure of the historical odds. In any other context we'd call that a derivative with opaque pricing and no downside protection, and we'd regulate it heavily. Because we call it education, we exempt it from the scrutiny we'd apply to any other five- or six-figure financial decision.

The tragedy is who this structure selects for. A system that sells irreversible debt to teenagers doesn't select for intelligence or curiosity or work ethic. It selects for risk tolerance and financial insulation. The student from a wealthy family can take the expensive gamble on an uncertain major because a safety net catches them if it doesn't work out. The student from a poor family, taking on the same debt, is making a far more dangerous bet, because failure means a lifetime of garnished wages with no bankruptcy exit. The same loan means two completely different levels of risk depending on where you started, which means the system quietly punishes exactly the exploration and ambition it claims to reward.

What Accountability Would Actually Look Like

None of this is unfixable, and the fixes aren't even radical. They mostly involve making risk flow back to the institutions that create it. Partial dischargeability would restore the basic bankruptcy protection every other borrower has, forcing lenders to care whether a loan can realistically be repaid. Major-level ROI disclosure would require schools to publish real earnings and placement data by program, so a seventeen-year-old could see the actual odds before signing. Institutional risk retention, where schools keep some financial exposure to their graduates' outcomes, would align the incentive that's currently missing: suddenly a university would have a reason to care whether its degrees lead anywhere. Outcome-based pricing would let the cost of a program reflect its likely return rather than the school's prestige.

Every one of these moves the risk closer to the people making the decisions. And that's precisely why they're so hard to pass. The current arrangement is wildly profitable for the institutions that benefit from it, and profitable arrangements defend themselves.

The deeper truth is the uncomfortable one. A system that sells non-dischargeable, six-figure debt to teenagers, prices it with no regard for outcomes, and holds the seller accountable for nothing is not a system that's broken. Broken implies it's failing at its purpose. This one works beautifully at what it actually does, which is transfer money upfront to institutions while transferring lifelong risk onto the young and the poor. It's operating exactly as designed. The only people who mistake it for broken are the ones paying for it, and by the time they understand the terms, the fine print has already closed behind them.