Not only have 45 million U.S. college students racked up more than $1.5 trillion in loan debt - more than the total for all outstanding credit-card or car-loan debt - more than 5 million student borrowers are delinquent or in default on their loans. Even larger number have a loan deferment or "forbearance," that is, they've been given permission to temporarily not repay their debt.

This massive record of nonpayment means that, literally, hundreds of billions of dollars in obligations are at risk of nonpayment.

What to do? While some nonpayment of loans results from tragic unforeseen circumstances such as illness or the death of a parent, a very large portion of it is highly predictable and avoidable.

U.S. colleges and universities admit many students who have very dubious prospects of graduating and/or of earning sufficient amounts of money upon finishing college to be willing or able to repay their loan obligations.

Why? Colleges, hungry for the tuition revenue students provide - and often for additional state government assistance tied to that enrollment - often knowingly admit students with very low prospects for graduation. There are zero incentives for schools not to admit these individuals but positive inducements to accept them.

Yet for large portions of these students, attending college leads to bitter disappointment and financial hardship: They fail to graduate, thereby becoming stigmatized as academic failures, and they pile up debt obligations that are not even dischargeable in bankruptcy.

How can we dramatically reduce this problem? The creators of the problem are largely colleges and universities that knowingly admit large numbers of problematic students. We need to change the incentive system, making schools face financial consequences for accepting students with shaky academic backgrounds who are unlikely to complete college. Put more colloquially, colleges need to have some "skin in the game."

As the noted financial scholar Alex J. Pollock, former president and CEO of the Federal Home Loan Bank of Chicago, suggests: Make the schools pay 20 percent of the debt obligations of former students facing loan delinquency or default.

The schools have put a burden on American taxpayers already facing long-term severe financial consequences from the massive $22 trillion federal debt. Having exacerbated the problem, make schools pay at least some of the costs.

Doing this would have enormous positive effects. Colleges would be incentivized to admit fewer academically unqualified students, reducing the emotional and financial pain and distress faced by individuals who are better off pursuing other options rather than college.

The Government Accountability Office acknowledges that federal student-loan programs are a financial drain on the federal budget, and the "skin in the game" proposal would dramatically reduce and possibly end it.

Wouldn't the financial burden associated with this proposal threaten the existence of some colleges? It would, but that should be viewed as a positive. In the private-market economy, the principle of "creative destruction" moves resources to more valuable uses as companies close down or are forced to restructure for not adapting to changing tastes or potential efficiencies.

The "creative destruction" principle is needed in higher education as well, where colleges use government subsidies and private philanthropy to cushion themselves from market forces.

As falling birth rates lead to declining enrollments in coming years, the "death" of schools that fail to provide high value to their students should be welcomed. Skin in the game will help achieve that needed transition to fewer but more effective universities.

Richard Vedder of Athens, Ohio, is a senior fellow at the Independent Institute in Oakland, Calif., and is a distinguished professor of economics emeritus for Ohio University. He also is the author of "Restoring the Promise: Higher Education in America."