01/23/2013 06:16 pm ET Updated Mar 25, 2013

Prestige Pressure Piles on Student Loan Debt

Welcome to my college showroom. I can sell you a private model, with a four-year sticker price of $220,000, or a public school model for a quarter of the price. You want the private school? Done. Your child may need a car to get to school. Down the street, you'll find dealerships for Mercedes and Kias. The Kia? Two blocks down.

Why are we willing to overlook the price of college, but watch our pennies when we buy a car? It's true that since the recession our children have applied to state schools in record numbers. But it's also true that many of those children end up in expensive private schools, if they can get in.

One answer is that prestige matters, and we want it. We believe that private colleges offer the ticket to a better life. This belief is borne out in some professions and certain areas of the country, especially at the very top rung of prestige colleges. But a closer look at the rankings of 30-year net returns on college degree investments demonstrates a more expensive degree does not ensure a higher income after graduation. This means our pursuit of prestige schools vs. cheaper "value" schools does not yield sufficient lifetime benefits to justify the cost. But prestige is all wrapped up in our dreams, biases and traditions, none of which yield to reason.

Back to the college showroom: try guiding a family away from Yale and toward the University of Connecticut, which just finished a $1 billion campus upgrade and rings in at a fraction of Yale's cost. Good luck with that.

The second answer? We can buy prestige. With government loans so widely available, no price is too high. Students who have never earned any money in their lives can borrow thousands of dollars, with no income statement and no credit check required. It is much easier to borrow $100,000 for a private college education than to borrow $5,000 for a Kia, whose credit company demands a full credit check. This situation has created a casino. We all run to the cage window and borrow the full limit of chips to get our children into private prestige universities. Sensing our eagerness, the croupiers jack the price. Everyone knows the government owns the casino and will cover all bets.

First problem: five million federal loans and 850,000 private loans are in default. Together, this adds up to about $67 billion in defaulted student loans. Admittedly, a disproportionate number belong to for-profit institutions. But who hasn't met a young person who graduated from a traditional college with huge debt? Just recently, I talked to a 23-year-old woman who graduated from Emerson College with $100,000 in student loans, which she was trying to service on a $30,000 salary. Do the math. She will be indebted for life.

Second problem: Now that student loans have allowed for sky high tuitions, few can go to private colleges without borrowing. Get rid of borrowing and you throw out college access, diversity and the American dream.

But there is another way. A bright, entrepreneurial student chooses a community college. He graduates with an Associate Degree and heads to a great state university, where, after two years, he graduates. Total cost: $40,000, much of which was covered by need-based scholarships. No loans. At work, he watches his colleagues groan under the burden of loans and stagnant incomes.

This is only a fairy tale, so long as we remain wedded to debt-fueled prestige. Nothing will change until we reach a tipping point, perhaps when college costs reach $100,000 per year, so high that Pell grants and other scholarships can only cover a fraction of the total -- when even the government cannot print enough money to cover the debt. In other words, we have about three to five years.

Or, we can start dialing back the cost of our colleges right now. It's our college cliff. Everything should come under close scrutiny: gourmet cafeterias, climbing walls, pristine quads, dorms in prime locations, administrators on top of more administrators and tenured faculty. But that, too, would be a fairy tale. No college is planning to cut costs like this. They don't need to, as long as they can offer prestige and loans. What is not a fairy tale is that loans without approval standards lead to a bubble of over-lending. And, as we've witnessed, bubbles burst.

Visit Families United in Educational Leadership (FUEL):