As an advocate for people struggling to repay their college loans, Claudio Martinez followed every step of the process that culminated with President Joe Biden declaring that a part of that massive debt would be forgiven.

But there was one thing Martinez didn’t hear during the lead-up to Biden’s decision, under which taxpayers will assume an estimated $300 billion worth of student loan debt, or the debate that followed: higher ed's responsibility for the poor return that many borrowers got for their investment.

“What I don't see is a mention of who made money in the last 20 years out of this system,” said Martinez, executive director of Zero Debt Massachusetts, a grassroots organization of students, families and activists in that state.

Colleges and universities have largely escaped scrutiny over why so many Americans have so much debt from educations that often took longer and cost more than expected, led to jobs that didn’t pay enough to cover their loans or never finished a degree at all.

“You as a college or university should have a responsibility for that debt,” Martinez said.

That should include spending money to help pay off the debt of students who the institutions fail, he said, and “not on multimillion-dollar salaries for their presidents [or] fancy gyms.”

Republicans and Democrats alike have over the last seven years called for colleges and universities to assume some accountability — called risk-sharing, or “skin in the game” — for students who default on loans they take out to pay for tuition.

These include Sen. Elizabeth Warren, D-Mass., one of the most vocal advocates for forgiving student loan debt, who in 2015 and 2017 co-sponsored bills with fellow Democrats that would have forced colleges and universities to pay a share of the outstanding debt if 15% or more of their students defaulted on their loans.

Sen. Elizabeth Warren speaks during a press conference on Capitol Hill
Sen. Elizabeth Warren (D-MA) speaks during a press conference on Capitol Hill July 23, 2019 in Washington, DC. Warren spoke with Rep. Jim Clyburn (R) (D-SC) on legislation to cancel student loan debt for millions of Americans.
Win McNamee Getty Images

“If we want colleges to pay attention to rising costs and failing students, then they need to bear some of that cost, too,” Warren said in 2015. “Colleges reap all the benefits of student loan funds while students and taxpayers bear all the risk.”

Then-Sen. Lamar Alexander, R-Tenn., also generally supported risk-sharing, which was recommended in a white paper by the Senate Health, Education, Labor and Pensions (or HELP) Committee that he chaired. “Taxpayers and other federal actors do have a reasonable expectation that institutions of higher education maintain a greater stake in, or are better aligned with, their students’ success, debt and ability to repay,” it said.

Those proposals never came to be. And the Trump administration largely thwarted attempts to further regulate for-profit colleges and universities in particular, which enroll fewer than 7% of students but account for more than 11% of those who default on their loans within three years.

Some Republicans in Congress who have criticized the Biden loan forgiveness plan — including House Education and Labor Committee Republican leader Virginia Foxx of North Carolina — pushed back against a separate effort in 2017 to ensure that graduates earn enough to repay what they borrowed.

Under that so-called “gainful employment” proposal, students in programs with debt-to-income ratios above a certain threshold wouldn’t be allowed to continue using federal loans to pay for them.

For-profit colleges sued to stop the gainful employment rule, saying that measuring whether or not graduates’ salaries could be enough to make the payments on their loans was imperfect and potentially inaccurate. These legal challenges, along with lobbying and changes in administrations since 2010 have helped colleges and universities fend off the idea.

“When you’re trying to propose a change to the status quo, it’s very easy for the status quo — in this case, the higher education lobby — to point out every flaw,” said Kelly McManus, director of higher education at the think tank Arnold Ventures. “That keeps policymakers from coming to the table and figuring out a meaningful kind of accountability.” (Arnold Ventures is among the funders of The Hechinger Report, which co-produced this story.)

As it stands now, universities and colleges face no accountability when their students don’t repay their loans, unless 30% or more default over three consecutive years. If that happens, the schools can lose eligibility for future students to get federal loans.

"We should be asking more of these institutions, both to protect the students and also to protect taxpayer resources."
Beth Akers, economist and senior fellow at the American Enterprise Institute

Sixty-nine out of 4,754 currently operating higher education institutions, or a little over 1%, have had 30% or more of their students default on their loans for three years in a row, according to the most recent available data from the U.S. Department of Education.

But thanks to a long appeals process, only 11 schools were removed from the federal student loan program under the rule between 1999 and 2015, an investigation by the HELP Committee found. And of 15 schools subject to sanction in 2016, the last year for which the appeals process is complete, all but three evaded it.

“The bar is way too low,” said Beth Akers, an economist who specializes in higher education finance and a senior fellow at the conservative American Enterprise Institute. “We should be asking more of these institutions, both to protect the students and also to protect taxpayer resources.”

If the loan-default cutoff was reduced to 15%, as Warren and her colleagues previously proposed, 1,060 higher education institutions — or more than one in five — would be at risk of their future students losing eligibility for federal loans.

Republican Sen. Rick Scott of Florida in August introduced a bill under which colleges and universities would have to cover 1% of the balances of any of their students who defaulted on their loans for three years after the loans came due, gradually increasing to 10% if the debt remained unpaid. It never gained political traction.

Colleges and universities regularly fall short of the most basic promise they make in exchange for the money they collect: that students will actually graduate.

Fewer than half of students graduate with a bachelor’s degree within the four years that almost all of them expect to, the Education Department says. More than a third take six years or more, piling up even more debt and forgoing income they would have earned during that time. One in four drops out between the first and second year, according to the National Student Clearinghouse.

“This can’t continue the way it’s been going. We can’t be sending billions of dollars to schools whose students are more likely to be in default than to graduate,” McManus said.

Nearly 40 million Americans have paid for college without ever finishing degrees, the Clearinghouse reports.

“I'm not quite sure why we have not seen a backlash against institutions,” Akers said. “We sort of trust that they are really doing their mission, which is to serve public good and to help their students. I think that's too generous, to be honest. I mean, I think these are institutions that may mean well, but don’t always do well.”

Even many students who end up with degrees don’t earn enough to pay back what they borrowed. That’s the requirement that in some form or another would be factored into determining whether or not a program offered gainful employment.

"If you as a university offers somebody admission and you don't think they have a chance of success, that's predatory behavior."
Kelly McManus, director of higher education at the think tank Arnold Ventures

Graduates of 1,234 university and college programs nationwide aren’t earning even half of what they owe, the conservative Texas Public Policy Foundation calculates. Nearly 6,000 programs offerno financial return at all, according to the left-leaning think Tank Third Way, based on how long it takes graduates to earn back the money that they spent on them. More than a quarter of bachelor’s degree programs leave students financially worse off than if they’d never enrolled, the nonpartisan Foundation for Research on Equal Opportunity has found.

“At the very least, let’s stop making loans at schools where they have a track record of not getting their graduates into jobs or not getting their students across the finish line to graduate or not getting their students enough earnings after they finish to be able to pay back their loans,” Akers said.

College and university representatives said forcing institutions to share the risk of student loans would disproportionately hurt the schools that serve the most vulnerable students and have other unintended consequences, including forcing prices higher.

“Many schools will simply pass the cost of the risk-sharing on to the borrower,” said Terry Hartle, senior vice president for government relations and public affairs at the American Council on Education, an association of 1,700 colleges and universities. “It’s a basic law of economics that externally imposed increases in the cost of doing business get passed on to consumers, and that is what will happen here at an awful lot of places.”

Risk-sharing could also discourage colleges of all kinds from accepting marginal students who might default on their loans, Hartle said.

The implication of this argument is that institutions are admitting people who they know might fail, McManus responded. “If you as a university offers somebody admission and you don’t think they have a chance of success, that’s predatory behavior,” she said. Added Akers: It “might actually be in their favor” for those students to be turned down by colleges with track records of not serving them well anyway.

Akers wrote in a paper she coauthored for Brookings that while many other products and services people buy are backed by guarantees, in higher education the financial risk of failure is borne not by colleges and universities but almost entirely by consumers and the government.

Hartle cautioned that people shouldn’t be hasty in making colleges assume a greater risk.

“What you’ve got right now are a lot of people saying this is terrible, there’s got to be a solution,” he said of student loan debt. “And they’re throwing out random ideas that may be valuable and that may be crazy. But this is not the way public policy should be made. The fact of the matter is, there are no easy solutions to a complicated problem.”

McManus said she hopes the huge cost of the loan forgiveness measure will force thoughtful attention to the underlying problems.

The system needs to be reformed, she said, “so that a student has confidence when they take out debt that they will get the education that they’re paying for.”

This story was co-produced by The Hechinger Report, a nonprofit, independent news organization. Produced with assistance from the Public Media Journalists Association Editor Corps funded by the Corporation for Public Broadcasting, a private corporation funded by the American people.