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Ending the college crush

College costs have increased three times faster than the rate of inflation, and almost twice that of health care over the past three decades. So where is the outrage? As a country, some view our university system as the best in the world. But the College Cartel is quietly crippling our economy by pushing costs so high many families must borrow sizeable sums to send their children to school.

At nearly $1 trillion, total student loan debt now exceeds credit card debt in America, and many are finding it difficult to pay the money back at a time of high unemployment.

As a venture capitalist, I see the Internet as a powerful way to dismantle this cartel. Part of the solution may come from people such as Salman Khan, who created simple YouTube videos for his cousin to help her with math. He showed us how the Internet can revolutionize teaching by creating a level playing field for access to knowledge.

Plenty of local companies are building their own tools, as well. But the federal government must do its part, and encourage change by using the big stick at its disposal — its influence over student loan money.

Here are some places to start.

Students should be required to graduate with greater technical proficiency. This is where the jobs are; yet 95 percent of our college graduates still choose liberal arts degrees. Every university needs to make computer programming courses, advanced math, and engineering a much larger part of the required curriculum. Students not majoring in a STEM (science, technology, engineering, math) degree should be required to have a minor concentration in a STEM program as a condition for securing financial aid.

College classes should be available online. Encourage students to take one year of classes online, live off campus and save on room and board. Offer them a discount for going to school online. It costs universities less, plus the slot can be filled with another on-campus student. 2Tor, a Landover company backed by Novak Biddle, is helping brand-name universities extend their graduate programs online. Lets bring this to undergraduates.

Make colleges share in the cost of student loan defaults. Have universities bear say, 25 percent of a defaulted loan. It will encourage colleges to focus on career placement and appropriate coursework so that students can land jobs that will help them pay back their loans. Encourage the use of virtual study halls such as those offered by Reston-based Koofers, an intercollegiate social site that harnesses collective wisdom to help students prepare for tests, rather than relying on resources from the university alone.

Limit federal student loan increases. Make it clear to universities that if their costs rise faster than the rate of inflation, that their students will not be eligible for student loans. Overnight, college costs will drop. Schools can save money by leveraging Internet-based tools. District-based Blackboard has created technology to do just that.

Universities should be required to fund more student aid. Colleges should use at least 5 percent of their endowments each year to fund student aid. Colleges are spending too much on expansive building programs and tenure programs. By taking more classes and students online, they can forego these expenses and use the money for student aid. If colleges fail to make annual 5 percent distributions, then their income should be subject to federal taxes just as it would be for any other trust-like entity.

Students and entrepreneurs are reinventing our education system as we speak. But the government needs to pressure universities to keep their costs down and reorient themselves to form a more productive society. That’s how we break this cartel.

John Backus is a founder and managing partner at New Atlantic Ventures, an early stage venture capital firm based in Reston and Cambridge, Mass. He has served as the chairman of the Northern Virginia Technology Council and as a technology policy adviser to Virginia governors Gilmore, Warner and McDonnell. He blogs at http://navfund.com/blog/ and is @jcbackus on Twitter.

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