Sanwal Proposes Market Reforms to Tackle $1.73 Trillion U.S. Student Loan Crisis

Anand Sanwal, founder of market intelligence firm CB Insights, has unveiled a comprehensive proposal aimed at reforming the U.S. student loan market, which he characterizes as a "$1.73 trillion market." His plan directly addresses systemic issues he identifies, such as young graduates facing limited job prospects and lifelong debt. Sanwal's reforms seek to introduce significant accountability and market discipline to higher education institutions.

The total U.S. student loan debt reached approximately $1.797 trillion by the first quarter of 2025, impacting nearly 43 million Americans. This substantial burden contributes to a landscape where many young people graduate into challenging economic realities. Sanwal noted that a key reason for the rising interest in socialism among the youth is their entry into a job market with limited prospects, coupled with overwhelming debt.

Sanwal argues that the current system allows institutions to operate with "zero accountability" for graduate outcomes. He highlights a critical imbalance:

"Sellers (colleges) face zero consequences for failure, Buyers (students) can't discharge debt through bankruptcy, Taxpayers foot the bill for defaults." This structure, he contends, enables universities to continue offering programs that may not provide adequate value to students.

To rectify these issues, Sanwal proposes two fundamental market reforms. First, he advocates for making student loans dischargeable in bankruptcy, aligning them with other forms of consumer debt. Second, he suggests requiring universities to "underwrite 80% of student loans and eat losses," thereby directly linking institutional financial health to student success.

Sanwal predicts these changes would immediately:

"Force colleges to care about graduate outcomes Kill predatory programs that create no value Drive down tuition costs naturally Protect low-income students from exploitation Create real accountability without complex regulations" These measures aim to shift the burden of risk and responsibility back to the educational providers.

Drawing a parallel to other industries, Sanwal asserts, "When cars are defective, manufacturers pay for repairs or recall them. But when degrees don't deliver, universities walk away." He questions why universities are permitted to sell "$200,000 'lemons' that don't work," urging for market discipline in higher education. Sanwal indicated he would provide a full analysis of his proposal in a subsequent post.