As Congress works to reauthorize the Higher Education Act and strengthen student loan policies, the challenges are daunting:

Student loan debt now totals about $1.1 trillion — and is growing. That’s almost twice the total outstanding debt from as recently as 2007.

This year’s college graduates owe, on average, $32,500 in college-related debt.

There is no question this debt is a challenge to our country. This isn’t just about dollars — it’s about dreams.

So how can Congress fix what’s broken, not merely affix a bandage to buy some time?

In fairness, many members are working on the problem. A few have even proposed legislation. Yes, it is tempting, as some have suggested, to simply lower the interest rate on all student loans across the board or, as others propose, to write off some outstanding debts entirely. By doing this, we would slide down a slippery slope where there would be no rewards for responsible financial behavior and no consequences for unwise, if understandable decisions.

Instead, Congress should devise solutions that reflect the proven principles of our economic system, such as incentivizing desirable behavior.

Let me make it clear that I see struggling students not as digits on a spread sheet, but as individuals who need assistance with financial literacy, repayment planning and averting default. I’m an immigrant who improved his own life through the magic of education, who has put children through college, and who built a business from two employees to more than 800. Drawing on my experience as the CEO of a company that has helped more than 2 million current and former students understand their financial situations and avoid delinquency and default, I offer the following suggestions.

Before sending one more tweet or issuing one more news release, policymakers should take a closer look at the underlying causes of this crisis. Yes, the problems include unfettered rise in tuition and fees charged by colleges and universities, as well as cuts that states have made in student aid and other higher education programs. But there are also two key behavior issues to consider: First, 68 percent of student borrowers have maxed out on their loans, and more than 25 percent have loans larger than tuition costs, with funds being used for non-education expenses. Second, more than 40 percent of students do not complete their bachelor’s degrees after six years in school.

What should we do?

First, and most important, Congress should consider offering college students two different federal loans at two different interest rates. The loan for education-related expenses, such as tuition and textbooks, would carry the lower rate. The loan for living expenses would carry the higher rate. Neither loan could be used for luxury spending.

The reasoning behind this proposal is clear and compelling. If you make it more expensive for people of any age to do the wrong thing, you make it more likely that they’ll do the right thing. By distinguishing between the extras and the essentials a smarter loan student loan system can promote responsible financial behavior and prevent student debt from spiraling out of control. Simply lowering interest rates across the boards, as some have suggested, would not discourage students from spending wastefully and might encourage more non-students to misrepresent themselves and apply for low-interest loans.

Second, the money for non-tuition expenses should be distributed monthly and not in a lump sum.

How? Congress should direct the Education Department to deposit the portion of the loans for living expenses monthly in major banks of the individual students’ choosing. This is important since it will help the more than 37 percent of students who are unbanked, not using banks or banking institutions in any way. These banks would issue debit or credit-debit cards so that students could access their money, make online payments and save the money they would normally spend at currency exchanges.

With some adjustments to the card platforms, we could ensure that students cannot use these cards to buy alcohol, tobacco or luxury items, just as with other federal cash assistance programs. Their cash withdrawals would be limited. And, if a student drops out of college, the monthly disbursements would stop. Banks would charge a small monthly fee for their services, and ATM charges will be waived for all students using this card.

Finally, as Congress considers legislative options, policymakers should explore proposals that reward students and their schools for the timely completion of college degrees, without saddling the borrowers with excessive debt. Students who graduate in four years should be provided a discount on their principal balances.

If we adopt customer-oriented, incentive-focused, and Web-savvy policies, then the students, their families and the taxpayers will all be winners.

Balaji Rajan is president and CEO of Ceannate Corp., a leading business process outsourcing firm focused entirely on the students and institutions in the post-secondary education sector.