The cost of college is a significant burden on Americans today.

College student loan debt now surpasses $1 trillion, more than Americans owe on their credit cards and cars. The average college senior owes more than $25,000. Given that the unemployment rate among recent college graduates is at a record high of 9.1 percent, many new grads will have a tough time paying that back. Unsurprisingly, student loan default rates have been rising, from 7 percent in 2009 to nearly 9 percent in 2010. This translates into more than 320,000 defaults out of nearly 4 million student borrowers.

All this is bad news for both individual students and the national economy. Sadly, recent laws to make college affordable — including the establishment of the U.S. government as the sole student loan provider and the 3.4 percent interest rate freeze — ignore the real causes of rising college costs. In fact, because they allow colleges to capture these additional subsidies (rather than pass them on to students), these laws may actually make the problem worse.

Tuition generally increases at about twice the rate of inflation, yet most of this extra money doesn't trickle down to students. A recent analysis by Jay P. Greene indicates that over a 15 year period, postsecondary administration grew more than twice as much as instructional staff. This is significant, since dozens of mid-level and senior-level administrative positions command six-figure salaries, compared to the relative handful of faculty positions that do.

All this extra money being poured into colleges isn't leading to better outcomes for students. Six-year college completion rates at public four-year institutions have remained just below 55 percent for a decade. The four-year rate has been stuck around 30 percent.

Americans need a new strategy for making college less costly and more valuable for students. Instead of chasing costs upward with rising federal subsidies, policymakers should focus on reforms that will give potential students more information about the real benefits and costs of pursuing a degree. They should require educational institutions to become more efficient at providing students the skills they need for careers after college. Five common-sense reforms would help.

» All postsecondary institutions participating in federal financial aid programs are now required to post a net price calculator on their websites to help students and families determine how much they will have to pay to earn a degree based on their unique circumstances. This should be augmented with information about what outcomes students can expect for their investment, including post-degree employment rates and average earnings.

» State and federal policy makers should fund colleges based on how many students actually complete their degrees, not based on how many students they enroll.

» Policy makers should demand competency-based degree programs from the institutions that participate in federal financial aid or receive state funding. Unlike traditional degree programs based on credit hours andseat time, competency-based programs allow students to progress at their own pace, taking as much time as needed to demonstrate specific knowledge- and skills-based proficiency. Currently, federal financial aid is tied to credit hours, which stifles innovation and options for students — particularly students who are working while attending school to acquire skills to improve their income potential.

» Encouraging innovative, alternative higher-education providers — including online course providers — will create powerful pressure on all institutions to be more efficient. Competition for students and their education dollars will shift the responsibility to improve efficiency and eliminate waste to the institutions, where it belongs.

» Businesses should also be able to directly finance their future employees' education. Sometimes referred to as human capital contracts, this financing structure allows investors to finance college students' education in exchange for a portion of their incomes after graduation.

Reforms to higher education financing would encourage greater innovation and efficiency, making college more affordable. It would also ensure that students are getting an education that will create a brighter future.

Vicki E. Alger, Ph.D., is Senior Fellow and Director of the Women for School Choice Project at the Independent Women's Forum and a Research Fellow at the Independent Institute in Oakland, Calif. She is the author of IWF's new "Policy Focus: Student Loans and College Affordability."