For decades, the politics of higher education have followed familiar lines: Democrats champion higher Pell Grants for needy families, tuition tax credits for the middle class, and cheaper student loans paid for by cutting banks out of the system. Republicans advocate more modest Pell Grant increases and, with a few exceptions, protect the student-loan banks that enjoy a lucrative, risk-free business. President Barack Obama is following the traditional playbook. He has proposed increasing Pell Grants significantly and throwing the banks completely out of the student-loan program. Loans instead would be made directly by the government. "We should not be in the business of propping up banks," Secretary of Education Arne Duncan told reporters in April. "I'd much rather be investing in our country's young people."

But Pell Grants and student loans address only one side of the college-affordability ledger. The other is tuition, which is increasing at a rate that dramatically outpaces median family income. Student-loan debt is chasing ever-rising tuition like a dog chasing its tail. If we're going to stop the cycle and really improve access and affordability, the progressive higher-education agenda has to include slowing tuition growth.

That doesn't mean regulating tuition. Reform can be as simple as helping students make better decisions in choosing a college, incentivizing states to maintain their fiscal effort for higher education, and making the colleges that the plurality of students attend tuition-free for those willing to work. With these types of policies in place, we can restructure a large part of financial aid into a social-insurance system that has a lasting impact on college access and affordability.

In 1993, President Bill Clinton first proposed increasing financial aid by throwing banks out of the college-financing system. Taxpayer savings were to be plowed into increased financial aid offered in exchange for national service. The banks fought Clinton, but in the end, he shifted about one-third of the college-loan system to direct lending and won a scaled-down version of his national service program, now known as Ameri- Corps. Today, colleges choose whether to participate in the old system in which banks like Sallie Mae, subsidized by the government, make loans to students or in the federal direct-loan program. In 1996, Clinton worked the higher-education issue again, making it a centerpiece of his re-election campaign to win back middle-class swing votes lost to Newt Gingrich's Republican revolution. Clinton's HOPE Scholarship and Lifetime Learning tax credits provided up to $2,000 for families making between $40,000 and $120,000 a year.

A decade later, congressional Democrats again tapped higher education for a political win. As one of their "Six in '06" campaign priorities, they pledged to cut student-loan interest rates in half and boost the Pell Grant by $1,000. After the election, they cut subsidies for student-loan banks by some $20 billion over five years and increased financial aid by the same.

Obama has picked up where Clinton and congressional Democrats left off, proposing full-scale direct lending. He suggests shifting almost all the savings, estimated by the Congressional Budget Office at $87 billion over 10 years (a number hotly disputed by lenders and their allies), into the Pell Grant program, which he would convert to an automatic program that would not need to fight for appropriated funds each year. But even if Obama succeeds in raising the maximum Pell Grant to $5,500, college will not suddenly become affordable for most families. The median family income of Pell Grant recipients is less than $20,000. To reach the middle class, Pell Grant funding would have to double. And tuition is still rising faster than Obama's proposed Pell Grant increase.

On tuition, states, colleges, and student-loan banks form a kind of higher-education iron triangle that takes advantage of under-informed consumers. States are the primary culprit. The No. 1 driver of increased tuition is declining state funding for higher education as a percentage of revenue. When states run into budget difficulty, they cut higher-education aid because they know colleges can backfill the cuts with higher tuition. Colleges further hike tuition to meet insatiable growth demands and compete with nonacademic fields for highly educated labor. They do so because they know students can and will borrow from the student-loan banks to pay. For public colleges, the cycle accelerates when the economy turns down. Texas is one of several states that refused to send federal stimulus money to public colleges, on the grounds that they had the option of raising tuition.

In recent years, the triangle has squeezed families particularly hard. Median household income stagnated through most of the last decade and is now falling. To keep pace with rising tuition, families borrowed. Student-loan debt doubled. Unsubsidized private student-loan debt—with interest rates as high as 20 percent and up-front fees equal to as much as 10 percent of principal borrowed—increased five-fold. It is not uncommon for graduate students to hold over $100,000 in combined federal and private student loans. Despite the fact that more than one in four private loan borrowers is eligible for a cheaper federal student loan, banks haven't hesitated to push private loans, which are lucrative and can almost never be discharged in bankruptcy.

Still, Americans overestimate college costs and underestimate financial aid. A majority thinks college costs what the most expensive schools list as their sticker price, around $50,000 a year. But few students attend those schools, and few pay full freight (eight out of 10 pay a net price that is on average 40 percent lower than the sticker price). More than three-quarters attend public colleges, where average tuition and fees total $6,600 per year. Room and board runs around $8,000 yearly, and the sticker price reaches approximately $15,000 per year. But financial aid is widely available. The maximum Pell Grant is upward of $5,000. Tuition tax credits now reach $2,500. A minimum of $9,500 each year in federal student loans is available to every undergraduate family. For most students, most colleges are within reach.

Students, however, don't know how much financial aid they can get until after they apply to school, and the sticker price and the threat of debt deter many from applying. After all the financial-aid investments and public-awareness campaigns over the years, the percentage of young adults with a college degree is nearly the same as it was 30 years ago. What has changed is that those who attend now are paying a greater share of the cost via student loans, and, most disconcerting for families, net price continues to rise markedly faster than inflation and income.

Families know it's essential to go to college to get a good job but are limited in their ability to ascertain the value of specific institutions. Ranking guides such as U.S. News & World Report's pay attention to only the top 20 percent of colleges. So most families rely on expensive proxies, including price, advertising, and amenities to determine a college's value. The University of Vermont, for example, spent over $60 million on a new student center, complete with a pub, ballroom, and theater. ''These are not frills,'' Daniel M. Fogel, president of the University of Vermont, told The New York Times. ''They are absolute necessities. Harvard can count on enough bright kids willing to sleep on thin mats of straw to go there. That's Harvard." The first year after Vermont introduced its new student-life facility, applications jumped 12 percent. Average student-loan debt there is now $25,000. But close to 20 percent of Vermont's students fail to graduate. These borrowers—like almost half of student borrowers nationwide—leave school with high debt, no degree, and few skills with which to get a well-paying job.

On Capitol Hill, some Democrats have begun to articulate a strategy to fight back against those driving up tuition and taking advantage of students. During a major rewrite of higher-education law last year, Rep. John Tierney of Massachusetts proposed to limit federal grants to states that reduced college-aid funding. As part of the same higher-education law overhaul, Patrick Murphy of Pennsylvania proposed a "truth in tuition" plan, whereby schools would have to provide families with an up-front, multiyear tuition and fee schedule that presumably would force colleges to embrace more rigorous budgeting. Danny Davis of Illinois proposed allowing private student loans to be discharged in bankruptcy after several years of on-time payments. All these efforts were thwarted by Republicans, led by Sen. Lamar Alexander, a former University of Tennessee college president.

A progressive higher-education agenda should aim to protect students for whom a big higher-education investment doesn't result in big rewards. It's difficult to force colleges to compete over what matters most—learning—because any attempt to measure it leads to cries of intrusive testing and narrow curricula. But it's relatively easy to compare colleges according to what consumers most want out of higher education: good jobs and financial security. Over 70 percent of students say increased earning power is the major reason they pursue postsecondary education.

From a purely financial standpoint, it's possible to ascertain whether a college is likely to prove worth the money. Congress recently required colleges to report their average net price after financial aid. A private Web site, Payscale.com, lists average starting and mid-career salaries for graduates of more than 300 institutions of higher education nationally. And the Department of Education knows the percentage of students leaving every institution who default on their student loans. With that information and more like it, the department could create a higher-education value index, including a lemon list of schools that charge too much and deliver too little.

For the lemons, Barmak Nassirian, head of government relations for the American Association of Collegiate Registrars, proposes a "buyer beware" warning to accompany all college marketing materials. "Warning: One in two Acme College borrowers defaults on a student loan within three years of separation from Acme College. Acme graduates earn an average starting salary of $22,000 a year. Be careful before assuming substantial student-loan debt to attend Acme College." Schools will want to be identified as good value options and will shudder at the prospect of being on a lemon list. To avoid it, they'll be less quick to raise tuition and more interested in making sure their students get well-paying jobs.

The big idea for progressives, though, is to make community college tuition-free for all those willing to work during school. If, as colleges say, sticker shock is the main tuition problem, change the sticker price to make it tuition-free. Given how low community college tuition is and how much financial aid is available, the costs to the Treasury would be nominal. The College Board estimates that currently average after-grant net tuition price at community colleges is only $100 per full-time student per year. By building aid into sticker price and making public colleges tuition-free, we can send a clear message that everyone can go to college.

Washington could take existing or new resources and provide a higher-education block grant to states that agree to maintain their own fiscal efforts for higher education and make their community colleges tuition-free for first-time, full-time students. States would no longer be able to treat their own higher education budgets as rainy-day funds to be tapped during every economic downturn. That would slow tuition growth. And because of the attractive community college alternative, all colleges would have an incentive to adopt new cost-saving mechanisms in order to keep net tuition and fee levels down.

The main concern about free community college is quality. Only 10 percent of community college students go on to complete a four-year degree. But the No. 1 indicator of whether students will complete a four-year bachelor's degree is the rigor of their high school curriculum. Free community college tuition should be conditioned on completing college-prep courses in high school. States can and should use stimulus funds, their own existing funds, and the education secretary's Race to the Top discretionary funds to upgrade high school programs across the board. A secondary concern, though, is giving away something for nothing. President Obama has proposed that tuition tax benefits be conditioned on students carrying out a minimum amount of service or working to help pay other education-related costs. Free community college tuition should carry the same student-responsibility requirements. Students who work up to 15 hours a week while in college report they manage their time better and study more effectively.

Armed with good information and even a free community college option, not everyone will make a purely economic college-attendance choice. Some will pursue high-cost options. Traditional financial aid still plays a role for them in making education affordable. But within financial aid, it's time to embrace another big idea: student loans as social insurance with limited monthly payments. Under current law, undergraduate families can borrow a minimum of $57,500 in federal student loans. At that level of borrowing, standard repayment equals approximately $660 a month. That's a heavy burden for young graduates and constrains career choices. Income-based repayment is already an option on the books. Only 12 percent of borrowers use it, because it's not the default repayment plan, and terms are neither simple nor generous. But the default is easy to change, and Congress can make the benefit simpler and more generous by capping payment at 5 percent of income.

There are two options for doing this at no cost. The first is for the government, which currently pays interest on college loans for students while they're in school, to shift that subsidy into a post-graduation, income-based repayment benefit. Students would continue to be free from loan payments while in school, but interest would capitalize. They'd owe more up front, but most would pay less as a portion of income later. "It makes much more sense to subsidize student-loan borrowers based on their ability to pay at the time they enter repayment as opposed to their parents' ability to pay four, eight, or more years prior," says Skidmore University economist Sandy Baum. It's precisely what Australia, New Zealand, and Canada do. There are theoretical problems with income-based repayment. If borrowers know student-loan payments will be covered by a public social-insurance scheme, they may borrow more than necessary or not vigorously pursue a higher income after college. With students protected from crippling debt, schools may feel freer to further increase tuition. But little evidence exists that marginal tax rates in the United States drive down income aspirations, and the federal student-loan system includes caps on how much students can borrow.

The second option is for Congress to pay for a better income-based repayment benefit by diverting a portion of savings generated from throwing the banks out of the student-loan program. According to a new estimate by the Congressional Budget Office, Obama's student-loan plan saves taxpayers nearly double his original estimate. It's enough to hike Pell Grants for the poor and cap student-loan payments at 5 percent of out-of-school income.

With loan payments capped, college-qualified high school students from debt-averse families will be more likely to pursue post-secondary studies. Graduates will no longer be dissuaded from low-paying public-service occupations like teaching and nursing. And those who attempt but don't complete a post-secondary education program will be insured against crushing debt. There's no magic answer to slowing tuition growth and dramatically improving financial aid beyond what Obama has proposed. But we can nudge consumers to make better choices, open the doors of low-cost community colleges, and protect students for whom college doesn't pan out financially. The first step is to make sure the progressive agenda on higher education is focused on more than financial aid.