To the editor:

I want to ask you, and the entire higher education community, to look ahead and start thinking more creatively–and with much greater urgency–about how to contain the spiraling costs of college and reduce the burden of student debt on our nation’s students.

The Administration has taken a number of important steps to reduce the net price that students and families have to pay to attend college and the amount of student debt that individuals take on. Over the last decade, the net price of college has risen nearly six percent a year, after inflation. Yet in the last three years–thanks largely to a dramatic expansion in federal aid and tax credits–net tuition and fees paid by students at two-year institutions and non-profit four-year institutions have actually declined in real terms.

That progress is an encouraging sign. But I believe that we, as a department, can do much more to help contain the price tag of college and reduce individual student debt. And I believe that postsecondary institutions and states also have yet to truly tackle the cost containment challenge in a comprehensive and sustainable fashion.

This is not just a job for any single stakeholder–though you must be part of the solution. The truth is that this is a collective challenge, and a test of our commitment to the American ideal of education as the great equalizer. As President Obama says, “In the United States of America, no one should go broke because they chose to go to college.”

I’m aware that there are no simple solutions, no silver bullets here. But the difficulty of reducing the price of college and student debt cannot become a discussion-ending excuse for inaction.

Containing the cost of college and student debt will always be some of the most controversial and thankless work in all of higher education. There are no ribbon-cutting ceremonies and named chairs for college leaders who increase productivity and efficiency on their campus. There is no award banquet for the college president who does more with less.

Now, there are some who will tell you that controlling college prices and student debt is higher education’s Mission Impossible. They point to the so-called Iron Triangle of Higher Education. Nearly every college president and governing board seeks to simultaneously improve quality, increase access, and yet constrain costs.

It’s true that these three sides of the iron triangle—quality, access, and cost—sometimes seem like mutually conflicting choices. Elevating quality can raise costs. Expanding access can also raise costs because additional services and assistance to students may be necessary. And reducing costs might impair both quality and access.

Yet I don’t believe that this challenge is higher education’s Mission Impossible.  I want to encourage you to take back to your campuses the idea that productivity and accountability are reform tools that can help postsecondary institutions break out of the trap of the iron triangle. With higher productivity and better accountability, institutions of higher education can boost quality and access and constrain costs, all at the same time.

In the era of the knowledge economy, the urgency of controlling college costs is not at odds with the urgency of increasing college attainment. Both goals are necessary if society is to do all it can to help more Americans succeed and thrive in the global job market.

The contours of today’s cost and price challenge are no secret. Three in four Americans now say that college is too expensive for most people to afford. That belief is even stronger among young adults–three-fourths of whom believe that graduates today have more debt that they can manage.

Those concerns reflect a changing economy in which college has become ever more important–and ever more expensive. From 1995 to 2007, the net price of college for full-time undergraduates–after adjusting for inflation–rose 48 percent at for-profit schools, 26 percent at public two-year institutions, and 20 percent at public four-year institutions.

As you know, state spending on higher education is one of the biggest drivers of tuition growth at public institutions. When states confront major budget shortfalls, as they are today, they typically cut public higher education funding to meet the state’s balanced budget requirements. Public IHEs, which three in four college students attend, then hike their tuitions to make up for the reduction in state funding.

As a result of tuition growth, college seniors with student loans now graduate with an average of more than $25,000 in debt.

Despite this increase in student debt, no one questions that student loans are an important tool and a vital investment for students and the nation. Students with bachelor’s degrees, for example, are now projected, on average, to earn about one million dollars more over their lifetime than students with only a high school diploma.

Yet, there is also little doubt that for too many students and families, the cost of college is a serious and growing problem.

These financial pressures, including the burden of defaulting, are not just numbers on a notice or a bill. They have lasting implications in the lives of our young adults. And, left unchecked, they pose a grave challenge to the promise of equal opportunity in America.

Think of the single mom who has trouble buying the car she needs to go to work or to take the kids to school. Think of the young man who is out-of-work, and draining his meager savings to pay off his college bills, while living with his parents.  And for students who default on their loans, the consequences are even more painful. A default may mean they cannot buy a home, rent an apartment, and, in some cases, even get a job.

While Income Based Repayment and our Pay as You Earn proposal will help make student loan debt more manageable and provide an alternative to loan default, high levels of debt with long repayment periods can still sharply limit opportunities years after graduating.

Reducing student debt is not an abstract cause for President Obama and the First Lady. Neither of them were children of privilege. By the time they graduated from law school and married, they had $120,000 of debt between them. As the president says, “we combined–and got poorer together.”

It took them almost a decade to pay off all their student debt.  In fact, they paid more a month for their student loans than for their mortgage. And the President says he has never forgotten the craziness of paying off multiple loans with different terms to five different loan agencies each month. He knows there has to be a better way. And that’s why he recently announced steps to consolidate loans for split borrowers.

The President also knows that if it wasn’t for the tremendous progress we’ve made in expanding access and making college more affordable, our cost and debt problems today would be even worse. A decade ago, the federal government provided a third of undergraduate grant aid. Today, we provide half of all undergraduate grant aid.

In the last three years alone, the number of Pell Grant recipients enrolled in college has jumped by almost half, from 6.2 million to roughly nine million. In the same time frame, the value of total grant aid and federal loans per student increased by about 30 percent in inflation-adjust dollars.

The underappreciated changes to the American Opportunity Tax Credit made in 2009 also led to a huge jump in tax credit and tuition deductions of more than 80 percent per qualified student. And we have seen a remarkable increase in FASFA applications, which have shot up almost 50 percent since 2008, thanks in part to our simplification of the FASFA.

All told, federal support for increased college access has expanded more in the last three years than at any period since the years following the passage of the GI bill.

I know many of you are worried about the budget situation in Washington in the aftermath of the Supercommittee’s inability to reach a budget agreement.

It’s still too early to know whether this will actually result in automatic sequestrations in 2013 or not, or whether sequestration would affect higher education budgets. But do know that I am absolutely committed to working as hard as possible to obtain the funding needed to sustain the Pell Grant program.

As I mentioned earlier, and as Jim Manning discussed, I can’t applaud enough your accomplishments in expanding college access and affordability.

Yet the question remains: Why has this tremendous expansion in student aid not been matched by equally dramatic progress in containing college costs and student debt?

Part of the explanation has to be that the higher education system provides few, long-term incentives to control student costs and debt.  In tight times, states have little incentive to insist on efficiency because they know public colleges and universities can ultimately charge higher tuition and fees to make up for reduced state funding.

Too many universities today actually have a perverse incentive to invest in expensive non-academic perks to drive rankings and attract students, like building gilded athletic centers and residential dorms. The New York Times calls the phenomenon “Jacuzzi U.” Forbes magazine asked recently, only half-jokingly, “Can a university be great without a rock-climbing wall?”

In the face of an economic downturn, many universities have traditionally battened down the hatches, freezing hiring or putting new facilities on hold. But as Ben Wildavsky and his colleagues point out in their book Rethinking Higher Education, most postsecondary institutions have largely failed to undertake a “fundamental rethinking of faculty roles, use of technology, and student-learning measures …[which] should be the hallmark of serious campus reform efforts.”

I would be the first to admit that reimagining how higher education organizes and delivers instruction, and assesses learning, is a large challenge.

It is not easy to reduce the mission creep that drives many college leaders to maintain the institutional status quo, no matter how outdated it may be. President Woodrow Wilson, who also served as the president of Princeton University, once reportedly joked that “changing a curriculum is like moving a graveyard—you never know how many friends the dead have until you try to move them.”

So, in the time I have left, I’d like to talk for a few minutes about steps that the federal government, states, communities, and institutions of higher education can take to contain college costs and student debt–while still expanding access and improving quality.

At the federal level, we’re seeking to follow three simple principles.

First, we want to help Americans better manage student loan debt, capping monthly payments to what people can afford. We call it our “Pay as you Earn” proposal because it builds on our existing income-based repayment plan.

Second, we want to ensure that students “Know Before They Owe” the financial implications of a loan by increasing the transparency of loan costs and grant requirements.

And finally, by gathering information on whether for-profit and other colleges are preparing students for gainful employment, we want to encourage students to pursue a college education and achieve success in the job market, without being saddled with unmanageable debt on a federal student loan.

Some of this is little more than common-sense. By contrast, prospective students today often receive jargon-laden financial aid award letters that make it hard to compare financial aid offers side-by-side. Information about the total debt, interest, and monthly payments of student loans can be unclear–or not included at all.

That’s why our department has teamed up with the Consumer Financial Protection Bureau to create a financial aid shopping sheet, or model disclosure form. Colleges can use it to help students understand and compare the type and amount of aid in different aid packages.

College prices should be far more transparent than they are today–both to help students make smart decisions and to help them avoid getting loaded down with unsustainable debt.

That’s one reason why Congress has required—and the Department has started posting—annual tuition watch lists that show which colleges have the highest and lowest tuition and net prices. And it’s why colleges are now required to post net price calculators on their website—to help students figure out the real costs of college, after taking account of aid, and to avoid confusion over misleading sticker prices.

It similarly makes sense to reduce monthly payments to what students can afford, given the difficulties that large amounts of debt can create for students and their families.

The administration’s new repayment proposal, called the Pay as you Earn plan, builds on the IBR changes. It will give about 1.6 million students the ability to cap their loan payments at 10 percent of their discretionary income beginning next year. And it would forgive the balance of their debt after 20 years of payments, instead of after 25 years.

In practical terms, those 1.6 million Americans could see their loan payments go down by hundreds of dollars a month. And for those borrowers who enter lower-paying but critical public service careers–including teachers–remaining loan balances will be forgiven after 10 years of repayment.

In the higher education community, visionary leaders are also taking steps to control college costs and net price. They are radically redesigning courses, and making smarter use of technology and curriculum to cut costs, while accelerating learning.

Dozens of colleges and universities have either cut or frozen tuition, or provide a four-year graduation guarantee, where the college agrees to cover the cost of the extra time it takes a full-time student to graduate.

The University of Oregon in Eugene launched PathwayOregon in 2008. It guarantees that qualified Oregonians from low-income families can attend the university tuition-free. Next year, Duquesne University in Pittsburgh is offering a 50 percent discount on tuition and fees for all freshmen who enroll in the school of education.

At the University of Charleston in West Virginia, university president Edwin Welch is looking to accelerate the time to a degree while still containing costs. Already, more than a fourth of students who come to school as freshmen and stay through graduation complete their degrees in fewer than four years. Next year, tuition for incoming freshman and transfer students will be cut 22 percent.

In Florida, all public colleges are now required to provide a fixed four-year tuition rate for up to 30 credits per year. And in Ohio, Ohio State University froze tuition for state residents from 2007 to 2009.

Even more ambitious are efforts to boost productivity and learning by redesigning courses and reimagining the use of technology in the classroom.

That kind of innovation requires looking beyond traditional institutional silos–and the ability to anticipate the educational needs of the future.

As Henry Ford once said, “if I’d asked customers what they wanted, they would have told me a faster horse.” To truly contain the cost of college while expanding success, higher education doesn’t need a faster horse—it needs the educational Ferrari of the future.

To give one example, the century-old practice of awarding degrees based on seat time in a classroom, rather than on demonstrated competence, is now at odds with a world in which the Internet offers perpetual opportunities for learning.

That is the theory of Western Governors University, founded by governors in 19 western states in 1999. WGU is an affordable online, non-profit institution that measures the success of its 29,000 students–most of them working adults–not by credit hours but by demonstrated mastery of a subject, whether it is information technology, nursing, a field of business, and preparation to teach.

Or consider the possibilities for course and curriculum redesign, including the tremendous potential of high-quality, open educational resources.

The National Center for Academic Transformation has evaluated and pioneered the redesign of high-enrollment courses at more than 100 institutions. Its first round of course redesigns at 30 institutions reduced the cost of courses by almost 40 percent compared to traditional courses—while improving student learning and retention.

Working with faculty, NCAT helped to redesign whole courses, not single classes. And they introduced innovative uses of instructional software and Web-based learning resources to assure that students mastered specific learning goals.

NCAT’s transformational initiatives are very much in keeping with the Department’s open educational resources initiative. With the Department of Labor, we are supporting displaced workers by providing community colleges with funding to develop up to two billion dollars of high-quality, online instructional materials available to anyone in the world for free.

Open educational resources are just beginning to spread. South Korea, the world leader in college attainment, is planning to digitize its textbooks by 2015. Here at home, the Washington State Board for Community and Technical Colleges has launched an Open Course Library that provides curricular resources for the state’s 42 courses with the highest enrollment.

In the long run, open educational resources have the potential to be the biggest equalizer of access to cutting-edge knowledge and information since the creation of the public library. And they have the potential to not only accelerate and personalize learning, but to reduce costs at the same time.

In fact, in Carnegie Mellon’s rigorously evaluated online statistics course, students learned a full semester’s worth of material in half as much time–and performed as well or better than students learning from traditional instruction.

At four-year colleges, students today spend about $1,100 a year on textbooks—just think of the cost savings if all or most of their textbooks were free.

States are also beginning to take on the challenge of accelerating attainment and containing costs as a statewide mission. Nationwide, 26 states have set goals for the educational attainment of the adult population. And a number of state strategic plans include language about containing college costs. We’ve released a college completion toolkit that lays out steps States can take to improve their college attainment rates and reduce costs.

I was recently in Oregon, where they have set a goal that 40 percent of Oregonians will have a bachelor’s degree or higher by 2025, and another 40 percent will have an associates’ degree or certificate. To be on par with the nations with the highest attainment rate, Oregon projects that its public institutions will need to increase its annual production of associate and bachelor’s degrees by 66 percent.

In Colorado, all institutions of higher education must publish individual performance contracts that support the state’s strategic plan, and funding is based on achieving those goals.

I think the goals for improving graduation rates at individual institutions are too modest in Colorado. But institutions like the University of Colorado at Boulder have set—and met—the goal that low-income resident, first-time, full-time students, will receive grant and work study financial aid to cover 100 percent of tuition, fees, and books and be debt-free.

The truth is that every State and institution of higher education should be spelling out ambitious but achievable goals to substantially boost completion and control the growth in college costs.

Earlier this month, I was in Louisville, Kentucky. They have formed a great community-wide coalition called 55,000 Degrees that includes the mayor, leading business figures, and educators. They have set an explicit goal of producing an additional 55,000 college degrees in Jefferson County by 2020. That would consist of 40,000 additional bachelor’s degrees and 15,000 associate’s degrees.

Those aren’t random goals—they represent the number of additional degree holders that Louisville projects it needs to stay economically competitive with peer cities in the region. And they are not just articulating a toothless goal. Already, the city’s public-private partnership has created a consortium of local employers who are making commitments to help their employees pursue higher education.

I can’t close without pointing out that financial aid administrators also have a vital role to play in controlling college costs and student debt. Student aid can no longer be only or primarily about increasing access to postsecondary education.

Our students and our institutions of higher education need financial aid administrators to innovate and lead the way in making postsecondary education more productive.

Let me give an example. About one in seven students who earn a degree today take more credits than they need to graduate. And those excess credits lengthen the time to graduation, driving up dropout rates and the costs of college for both institutions and students.

Officials in West Virginia came up with an ingenious idea to reduce the problem of excess credits when they designed their state’s version of the HOPE scholarship program. They found that in other states with similar performance-based scholarships, students weren’t required to take a big enough course-load to graduate in four years.

So, they altered the performance requirements for student aid. In West Virginia’s program, students are required to take enough courses each semester to graduate on time. A follow-up analysis of the program found it raised on-time graduation rates by almost seven percentage points.

Other colleges and universities are similarly innovating by experimenting with performance-based scholarships and emergency aid to keep students from dropping out with unmanageable debt and no degree.

In the end, we need to start a national conversation of what makes sense to improve completion rates while controlling costs. And we need the expertise and creativity of financial aid administrators to help drive that discussion.

To help move that conversation, the Obama administration is pursuing several initiatives.

We are proposing to replace the current Perkins loan program, scheduled to expire in 2014, with a new and improved program that would provide federal support for campus-based, low-cost student loans to many more institutions. Funding would be allocated to colleges based not only on the financial needs of students, but also on the performance of institutions in graduating Pell Grant recipients.

Our proposed College Completion Incentive Grants would reward states and institutions for undertaking systematic reforms that increase the number of students who complete college and that close achievement gaps.

And finally, our First in the World Fund would support institutional programs that use innovative practices to accelerate learning, boost completion rates, and hold down tuition.

I have discussed all of these examples of innovation at some length because farsighted leaders in higher education and the states are helping to point the way to challenging the status quo. They are demonstrating how to do more with less.

These visionary leaders are committed to transformational change, not tinkering. They are committed to sweeping innovation, not reforming isolated silos. They know that fundamental change takes courage–and elbows everyone beyond their comfort zone.

The catch is that these promising innovations for controlling costs are still the exception today. I want them to be the norm.

Our students deserve no less. And working collectively–with your commitment and your creativity–I believe we can succeed in containing the growth of college costs and student debt.

Working together—the department, States, and institutions across the country—can help achieve the President’s goal, that by 2020, America will once again lead the world in college attainment.

Thank you so much for all that you do to keep the dream of a college education within the reach of every American.

— Arne Duncan

U.S. Secretary of Education