Nearly 10 million Americans are defaulting on student loans — and the crisis is crushing the American dream for an entire generation of college graduates.
The average graduate now carries $40,000 in federal student debt. Monthly payments hit $500 at current interest rates. For a grad earning the 2026 average starting salary of $49,500, that means 15 percent of take-home pay goes straight to loan servicing before rent, car payments, or groceries.
The left wants blanket debt cancellation. The right says borrowers signed the paperwork. Neither answer solves the underlying rot — or stops the next generation from drowning in the same trap.
A serious conservative solution spreads accountability across all the parties who created this mess: the colleges that jacked up tuition while hiding behind easy credit, the banks that underwrote loans with no regard for repayment risk, and the borrowers who need consequences — but also a realistic path forward.
$1.72 trillion in federal student loan debt outstanding. 42.6 million borrowers. One-fifth of loans in default.
Here are five reforms that fix the crisis without punishing taxpayers:
1. Cap loan interest rates at 2 percent.
Current federal loan rates sit at 6.52 percent. Dropping rates to 2 percent makes repayment realistic and gets defaulted borrowers paying again. It’s distasteful to subsidize irresponsible borrowing — but the scale of the crisis demands action that restarts the loan pipeline.
2. Allow bankruptcy discharge — but rescind the degree.
If you rob a bank, you don’t keep the money. If you default on a car loan, the lender repossesses the vehicle. Student loans should work the same way: discharge the debt in bankruptcy, but the college revokes the degree and every credit hour financed by that discharged debt. The collateral in a student loan is the credential. No payment means no credential.
Right now, discharging student debt in bankruptcy is nearly impossible. The Brunner standard requires borrowers to prove they can’t maintain a minimal standard of living for a significant portion of the repayment period — a bar so high it keeps debtors trapped for decades. Open the bankruptcy door, but attach real consequences.
3. Make colleges reimburse lenders from endowments.
Universities pushed students into loans through financial aid offices that institutionalized borrowing without teaching kids what a $500 monthly payment for 10 years actually means. Colleges profited; borrowers suffered. Time to claw some of that back.
Nearly 160 U.S. universities hold endowments over $1 billion. Total endowment assets nationwide: $944 billion. Allow lenders to seek reimbursement from college endowments for discharged loans. Schools that want to avoid the hit can buy back the debt at a discount and forgive it themselves — but they need skin in the game.
4. Bar banks that underwrite high-default loans.
Initiate a 10-year clawback on underwriting fees for banks whose loan portfolios show abnormally high default rates. Make default performance public. Banks will suddenly care about credit quality and stop rubber-stamping loans to unqualified borrowers.
It needs to be OK to say no to a borrower who can’t repay.
5. Limit loan amounts based on earning potential.
A women’s studies major earning $50,000 can’t service the same debt as a physician earning $300,000. No banker would approve a $400,000 loan for a Toyota Camry — but they will for a Lamborghini, because the collateral supports the note.
The same underwriting logic must apply to degrees. Establish borrowing caps tied to the realistic earnings of each major. A grad degree in theater shouldn’t qualify for the same debt load as an engineering degree. And limit borrowing for 100- and 200-level classes that students can complete cheaply at community colleges.
The bankruptcy discharge affidavit currently runs 15 pages — a bureaucratic wall designed to block relief. Simplify it. Open the door. But attach consequences that protect taxpayers and restore accountability.
More than one million borrowers carry loan balances over $200,000. Thirty-three percent of all physicians fall into that category. The top 7 percent of borrowers account for a third of all student loan debt. This isn’t a borrower problem or a college problem or a bank problem — it’s all three, and the solution must reflect that.
College costs have risen 42 percent faster than inflation. Administration bloat, amenity wars, and easy credit turned higher education into a debt factory. Conservatives can’t just tell drowning graduates to swim harder — not when the system itself is rigged.
The goal: spread responsibility fairly, impose real consequences, and stop the conditions that created the crisis from repeating. Patriots want the American dream restored for college grads — and it starts with solutions that don’t raid the treasury.
