The four-year college degree has come to cost too much and prove too little. It’s now a bad deal for the average student, family, employer, professor and taxpayer.

A student who secures a degree is increasingly unlikely to make up its cost, despite higher pay, and the employer who requires a degree puts faith in a system whose standards are slipping. Too many professors who are bound to degree teaching can’t truly profess; they don’t proclaim loudly the things they know but instead whisper them to a chosen few, whom they must then accommodate with inflated grades. Worst of all, bright citizens spend their lives not knowing the things they ought to know, because they’ve been granted liberal-arts degrees for something far short of a liberal-arts education.

I’m not arguing against higher learning but for it — and against the degree system that stands in its way.

STARTING OUT BEHIND

Consider two childhood friends, Ernie and Bill. Hard workers with helpful families, each saves exactly $16,594 for college. Ernie doesn’t get accepted to a school he likes. Instead, he starts work at 18 and invests his college savings in a mutual fund that tracks the broad stock market.

Throughout his life, he makes average yearly pay for a high school graduate with no college, starting at $15,901 after taxes and peaking at $32,538. Each month, he adds to his stock fund 5% of his after-tax income, close to the nation’s current savings rate. It returns 8% a year, typical for stock investors.

Bill has a typical college experience. He gets into a public college and after two years transfers to a private one. He spends $49,286 on tuition and required fees, the average for such a track. I’m not counting room and board, since Bill must pay for his keep whether he goes to college or not. Bill gets average-size grants, adjusted for average probabilities of receiving them, and so pays $34,044 for college.

He leaves school with an average-size student loan and a good interest rate: $17,450 at 5%. The $16,594 he has saved for college, you see, is precisely enough to pay what his loans don’t cover.

Bill will have higher pay than Ernie his whole life, starting at $23,505 after taxes and peaking at $56,808. Like Ernie, he sets aside 5%. At that rate, it will take him 12 years to pay off his loan. Debt-free at 34, he starts adding to the same index fund as Ernie, making bigger monthly contributions with his higher pay. But when the two reunite at 65 for a retirement party, Ernie will have grown his savings to nearly $1.3 million. Bill will have less than a third of that.

How can that be? College degrees bring higher income, but at today’s cost they can’t make up the savings they consume and the debt they add early in the life of a typical student. While Ernie was busy earning, Bill got stuck under his bill.

My example is a crude one. I adjust neither wages nor investment returns for inflation, resulting in something of a wash. I don’t take out for investment taxes, since it would take Ernie only a few years to move his starting sum into a tax-shielded retirement account, and both savers could add to such accounts thereafter. I assume 2007’s income-tax distribution holds despite pending changes that will shift it in favor of Ernie’s lower income. I’m comparing only savings, not living standards. Bill will presumably be able to afford nicer things than Ernie along the way. But maybe not: I assume that Bill completes college in four years. More than 40% of students who enter a bachelor’s program don’t have a degree after six years, according to Ohio University economics professor Richard Vedder, whose book “Going Broke by Degree” sounded an alarm over college costs in 2004.

Crucially, I also assume college-educated Bill will earn what his peers did in bubbly 2005, when bloated real-estate and stock prices stoked consumer spending, producing unusually large corporate profits and loose lending, and sending banks grabbing after grads at premium pay. The bubbles have since popped, and banks have shrunk.

“The economic downturn has worsened the cost problem,” Vedder says. “There will be many more people for whom costs will exceed benefits.”

Some students will get a better-than-average deal. They’ll get more aid or end up in higher-paying jobs. But far too many will lose money.

It’s crass, you might think, to reduce education to a financial decision. An educated citizenry is healthier, more tolerant, more politically engaged and more fulfilled than an ignorant one. But I refer above to degrees, not education. The two are not the same, even if policymakers talk as though they are.

POOR PROOF OF LEARNING

Students want jobs and respect. Degrees bring both. Employers, meanwhile, want smart, capable workers. A degree is a decent enough proxy for intelligence, but we want it to be more than that. We want degrees to mean that students have learned the foundations of human knowledge: literature, chemistry, physics, composition, metaphysics, psychology, economics and so on. If we didn’t, we’d replace degrees with inexpensive vocational exams.

Charles Murray, a fellow at American Enterprise Institute, calls for just that in a recent book, “Real Education.” He argues that too many kids who lack the ability to complete a liberal-arts education are being pushed into four-year liberal-arts schools, because there’s a steep societal penalty for not getting a degree. Schools, in turn, have made their degree programs easier. Murray provides a sample of courses that students used to fulfill core degree requirements at major universities in 2004, including History of Comic Book Art (Indiana University), History and Philosophy of Dress (Texas Tech University) and Campus Culture and Drinking (Duke University). He documents not only falling standards but rampant grade inflation.

He’s not alone. In 2005, the Department of Education created a commission to study the college system and recommend reforms. A year later, the Spellings Commission (named for then-Secretary of Education Margaret Spellings) reported a long list of shortcomings, including “a remarkable absence of accountability mechanisms to ensure that colleges succeed in educating students.” It found “disturbing signs” that degree earners “have not actually mastered the reading, writing and thinking skills we expect of college graduates.” Literacy levels among college graduates, the commission noted, fell sharply over the 12 years ending in 2003.

HARVARD, A CASE STUDY

To be sure, Harvard graduates are bright. They were bright when they got accepted. Last year, Harvard’s undergraduate school accepted a record-low 7.9% of the record-high number of students who applied. Of these, 97% will earn degrees, and most will rightly go on to win plum jobs and coveted spots in graduate schools.

But universities are meant to teach, just as hospitals are meant to heal. A hospital that turned away the sickest 92% of patients would have little cause to celebrate the recovery of the rest. Harvard, though, is called America’s finest college by US News & World Report.

“There’s almost a tyranny to it,” says Ohio University’s Vedder. “Somehow a good college has become one that turns people away.”

High cost isn’t a coincidence but a necessary outcome. The way to keep a thing valuable is to keep it scarce, so prestigious schools accept few. Government affordability initiatives — grants, loans, tax breaks and the like — puff up buying power against constrained supply, ballooning prices and creating the opposite of affordability. In the 10-year period ending in 2005, increases in tuition and fees outpaced inflation by 36% at private colleges and 51% at public ones.

Harvard’s own charter, engrossed on parchment in 1650, says nothing about keeping knowledge scarce. It simply promises, in welcoming language for the time, “the education of the English and Indian youth of this country.” I single out Harvard because it’s iconic, not because it’s more guilty than its peers. How sad that elite schools are reduced to machines that cull the bright from the dull and charge mightily to brand them for success — which these students would have achieved anyhow, because they’re bright.

A more inclusive four-year degree isn’t the answer; the degree itself often obstructs learning. Consider the laid-off sales clerk who wishes to pursue a college education in hopes of finding a better job. If he wants to go to a name-brand school he must study for and take an admissions test and apply. He must also file a financial-aid application as long and complex as a tax return. He then must wait and cross his fingers. If accepted by the school, he must wait again for the right part of the academic calendar to come around and hope that the classes he wants aren’t full. Suppose all goes well. He’ll be sitting in front of a teacher a good 18 months after first deciding to learn. What folly.

As I write this, Google is putting every book ever written online. Apple is offering video college lectures for free download through its iTunes software. Skype allows free videoconferencing anywhere in the world. The Massachusetts Institute of Technology and many other schools have made course materials available for free on their Web sites. Tutors cost as little as $15 an hour. Today’s student who decides to learn at 1 a.m. should be doing it by 1:30. A process that makes him wait 18 months is not an education system. It’s a barrier to education.

THERE’S A BETTER WAY

The system must change before students are made poorer, society grows less equal, the bright are left ignorant and “college” comes to mean a four-year pajama party intruded upon by the occasional group discussion on gender studies. The answer is to relieve schools of the job of validating knowledge and return them to a role of spreading it. Colleges should no more vouch for their own academic competence than butchers should decide for themselves whether their meat is USDA prime.

The Spellings Commission recommended that government push colleges to “develop interoperable outcomes-focused accountability systems designed to be accessible and useful for students, policymakers and the public, as well as for internal management and institutional improvement.” Unencrypted, that means schools should figure out a way to prove what students have learned, beyond the say-so of their degrees. The commission was correct on what’s needed. It was wrong on who should do it.

We need a national standard for certifying what students have learned. The easiest way is to simply test independently for course knowledge and compile the results on standardized knowledge transcripts.

We do similar testing now. Students at 1,400 colleges (about a third of such US institutions) can get credit for courses by passing tests created by the College Board. (Participating schools generally restrict the number of tests students may use toward degrees.) There are 34 subjects, including calculus, biology, US history, business law and Spanish language. Tests cost $70. Guide books cost $10. There are 1,300 test centers on college campuses.

Perhaps these tests are comprehensive enough, and perhaps they’re not. I’m not qualified to say. The nation’s professors are, and they should take up the task of defining this new national standard, even at a threat to their own power, because in truth, a teacher forced to amicably promote the few when he should be boldly teaching the many is robbed of power.

I can only guess what this knowledge transcript would look like — something like a résumé or credit report, perhaps. I picture a scrawny tree drawn on a page, with the branches representing the fields of learning and the student tasked with extending them. Perhaps vocational certificates would be listed, too. Maybe, once the tree reached a prescribed fatness, we’d call the student a bachelor of arts. But employers could select whatever tree shapes suited them, and college would no longer be a degree-or-nothing affair. Learning would be available everywhere and at a moment’s notice, and would be rewarded right away.

This knowledge transcript would care nothing about where a student had learned, how much he spent or how long he took. It wouldn’t care whether he was 12 or 60 when he proved he knew algebra or how many times he failed before succeeding, or whether he knew important people. Employers would have better proof of what students knew. Policymakers, too. Students wouldn’t pile on debt. They wouldn’t be misled by a college degree into believing they knew more than they did. They’d become true stewards of their own lifelong education.

Universities, I’m guessing, would look much the same. Students would always want to go on long learning sabbaticals at places with top teachers and well-appointed classrooms, and to be around like-minded people for collaboration, sports, fellowship and, not nearly least, mating. But schools would have to truly compete on price and teaching excellence. They’d no longer be able to charge students high prices just because of their ability to confer on them high pay. They’d teach as many students as would learn, since doing so would strengthen their brands, not dilute them. Whisperers would once again profess, and we’d all be better for it.

Jack Hough is an associate editor at SmartMoney and the author of “Your Next Great Stock: How to Screen the Market for Tomorrow’s Top Performers.”