The American higher education system is the envy of the world, or so the cliché goes. The sons and daughters of foreign potentates flock to our shores, while kids raised on apple pie and Sesame Street claw each others’ eyes out for the chance to attend a top university. With more than 18 million current undergraduates—who pay average annual tuition of $32,000 each—the market for higher education seems to be going gangbusters.

Expanding post-secondary education is a government priority, too. In his 2009 State of the Union address, President Barack Obama declared that “every American will need to get more than a high school diploma.” He sounded a similar note three years later, saying that “higher education can’t be a luxury, it is an economic imperative that every family in America should be able to afford.”

But despite—or because of—this attention, there is trouble in paradise. Enrollment may be skyrocketing, but so are student debt levels and default rates. Tuition costs are increasing many times faster than income, or than prices in any other sector. This is in large part thanks to the gusher of federal money pouring into American colleges in the form of Pell Grants, subsidized loans, and research dollars, totaling nearly $200 billion a year. While the dream is to make college accessible to all, the reality is that subsidies contribute to skyrocketing prices, making college an increasingly expensive and risky undertaking.

Students arrive on campus underqualified, courtesy of an American public school system that has flatlined in quality while tripling its per-student cost. They do less academic work yet receive better grades than their parents did. And their post-college job prospects are dim, with unemployment rates for recent grads hovering at 12 percent.

These wounds are largely self-inflicted, and thus eminently correctable. A problem largely created by government’s distorting money and politics would improve rapidly with its withdrawal. Yet the lasting fix may come from outside competitors, in the form of for-profit schools, massively open online courses, and other specialty schools more responsive to students’ 21st century needs and lifestyles than ivy-covered institutions founded in the 17th.

Students will soon face a more complicated landscape with better, cheaper options for meeting their objectives, whether they are seeking a credential, a skill set, or just a social network. What follows is a critical look at the factors that are sending the once-vaunted American higher education system into decline. If we are to fix the problem, after all, a little knowledge is in order. 

Click here to read Glenn Reynolds, Richard Vedder, Naomi Schaefer Riley, Nick Gillespie, and others offer plans on how to survive the inevitable popping of the higher education bubble.