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The challenge of American higher education policy today is reconciling two seemingly contradictory facts.

First, higher education is more important to economic opportunity and middle-class security than ever before.

And second, the standard credential of higher education – the bachelor’s degree – is being devalued by the diminishing quality and exploding costs of undergraduate education.

How is it possible that higher education is becoming more valuable and a bachelor’s degree less? Because they aren’t the same thing.

American workers need post-secondary knowledge and skills. But a four-year (or five- or six-year) sojourn at a brick-and-ivy residential institution is not the only way to get them. Indeed, it’s not the way that most Americans get them.

There are vocational schools and professional training programs. There are apprenticeships in the skilled trades. There are hybrid on-campus/on-the-job models. There is the bourgeoning promise of distance learning options, like Massive Open Online Courses.

Unfortunately, this innovative, alternative market is being hamstrung by federal policy governing higher-education accreditation.

Under the federal Higher Education Act, students are eligible for Title IV student loans and grants only if they attend formally accredited institutions. That makes some sense, for purposes of quality control. Except that under the law, only degree-issuing academic institutions are allowed to be accredited. And only the U.S. Department of Education gets to say who can be an accreditor.

That is, the federal government today operates a kind of higher-education cartel, with federally approved accreditors using their gatekeeper power to keep out unwanted competition.

This closed, subsidized market has helped spur runaway inflation, which has made it impossible for all but the wealthiest students to pay their own way. So Washington’s offer to most high school graduates is: go tens of thousands of dollars into (non-dischargeable!) debt to pursue an over-priced degree, or spend the rest of your life locked out of the middle class.

This system works perfectly well for top-tier colleges and the affluent teenagers they tend to admit.

For everyone else, not so much. For marginal students, victims of social promotion, young single parents, or families who don’t want their kids saddled with debt at 22? For innovative and entrepreneurial teachers? For businesses and labor unions looking for in-demand skills?

For them, the current system doesn’t work – it works against them. However unintentionally, Washington is pricing most Americans out of the post-secondary opportunities that make the most sense for them, and plunging most of the rest deep into debt to pursue an increasingly nebulous credential.

Most progressives think ever-more taxpayer assistance will make up for any policy dysfunction. But we’ve tried that, and all we’ve done is inflate a bubble.

It seems to me the answer isn’t more funding or lower rates for existing Title IV programs. The answer is to make more kinds of students and more kinds of education eligible for them.

So last week, I introduced legislation to do just that.

The Higher Education Reform and Opportunity Act would give states the power to create their own, alternative systems of accrediting Title IV-eligible higher education providers.

State participation would be totally voluntary, and would in no way interfere with the current system. State-based accreditation would augment, not replace, the current regime. (College presidents can rest assured that if they like their regional accreditor, they can keep it.)

But the state-based alternatives would not be limited to accrediting formal, degree-issuing “colleges.” They could additionally accredit specialized programs, apprenticeships, professional certification classes, competency tests, and even individual courses.

Nor would states be limited to authorizing traditional accrediting agencies. Businesses, labor unions, trade associations, non-profit groups, and any other applicant that met the state’s requirements could be empowered to accredit.

Under state accreditation, higher education could become as diverse and nimble as the job-creating industries looking to hire.

Authorized businesses could accredit courses and programs to teach precisely the skills they need for their employees. Apple or Google could accredit computer courses. Dow could accredit a chemistry program, and Boeing could craft its own aerospace engineering “major.”

Unprepared high school graduates could get loans to either acquire basic professional skills, or start to pursue the academic education their dysfunctional school boards and teachers’ unions denied them.

Workers whose life circumstances make it impossible to take more than one course at a time – single parents, perhaps, or those working two jobs – could finally be eligible for Title IV funds.

Meanwhile, talented teachers could side-step time-consuming and esoteric “publish or perish” research, and spend their careers in the classroom instead. Groups of professors could form new business models, like medical practices, and offer high-quality higher education for a fraction of the cost of four years at a traditional university. Finally competing on a level playing field, new options like MOOCs could finally find their markets.

Institutions of civil society could play a role, too. Non-profit groups like the U.S. Historical Society, the Sierra Club, or the Mayo Clinic could accredit programs in their respective fields, or even competency-measuring exams for various courses.

Think of the proliferation of opportunities. Faith communities and civic organizations could begin to offer accredited courses, for next to nothing, as part of their missions. Qualified individuals could make teaching higher education their form of community volunteering.

After all, the retired mechanic down the street and the stay-at-home mom with the masters degree, and the Civil War re-enactor with encyclopedic knowledge of military history are all potential teachers sitting on the sidelines. Alternative accreditation could get them into the game.

We already know that people other than tenured academics can teach college-level material, because adjunct professors, teaching assistants, and high school Advanced Placement teachers do it every day.

And we already know credentials other than the B.A. work perfectly well in fields that use them (for example, the CPA exam, the Series 7, or journeymen exams in the skilled trades).

Everything we know about education and professional training in our diversifying economy says it’s time to decouple Title IV eligibility and enrollment at degree-issuing institutions. There are too many valuable opportunities and invaluable people the current policy excludes.

My bill begins that process. How might it help?

In state-accredited higher education markets, alternative providers would have to price-compete with their traditional and alternative competitors. Among other benefits of quality and efficiency, disciplined pricing would mean students might need loans of hundreds of dollars, instead of tens of thousands.

Providers will have to market their teaching excellence –  only the best teachers will earn their keep.

They will have to build up their brand reputations quickly – so they’ll be conspicuously transparent about their students’ success and employment rates and income levels, probably with third-party verification. That will give providers enormous incentive to help their students truly learn, as those who can’t won’t stay in business.

As the alternative market establishes student/customer-friendly standards for pricing, quality, and transparency, traditional colleges will face tough questions about rigor, transfer credits, and student success.

Less-competitive colleges in particular, with weak academics and scandalous graduation rates, will have to step up or go under.

Some reformers might want to go even further – to open up the market with a national system based in Washington, or blow up the status quo altogether.

But housing alternative accreditation in the states accomplishes three conservative goals at once. It will protect policy innovation from the monolithic cronyism that inevitably infects centralized power. It will allow competitive federalism to work its magic, as neighboring states check one another’s imprudence and inaction. And, finally, it will preserve and reward what does work at today’s colleges and universities.

It is wrong to say America’s higher education system has “failed.” It has succeeded beyond any reasonable expectation. Our best colleges are the best colleges anywhere – that’s why students from around the world come here to study.

But that system – and especially the federal policies that govern access to it – is failing the two-thirds of Americans who never get a B.A., and the large minority of Americans who never set foot on a college campus.

Those Americans need access to skills that current colleges aren’t teaching, at prices that four-year residential institutions can’t afford, on timelines the academic calendar can’t accommodate. And the lower a student’s income, the greater the need.

In today’s customizable world, students should be able to put their transcripts together a la carte – on-campus and online, in classrooms and offices, with traditional semester courses and alternative scenarios like competency testing – and assistance should follow them at every stop along the way.

We don’t need to dump our higher education system – we just need to open it up to more students and teachers.

So instead of eliminating our current accreditation regime, my bill would simply allow 50 new ones to compete with it, and each other – with enough quality control to protect students and taxpayers, and enough flexibility to incentivize experimentation and innovation.

The point of higher education policy should be to make it easier and more affordable for good teachers to teach, willing students to learn, the economy to grow, and civil society to flourish. State-based accreditation reform can help on all four fronts.