Transcripts For CSPAN Student Debt 20160330

Good afternoon and welcome. I would like to thank the codirectors for planning our event today, which i know you have been looking forward to. I would also like to let to acknowledge the Susan Gessner for their generous support of todays program. We are grateful for all of those engagements. Today, we will address a very important question is there a student debt crisis . In many of us are well aware of the everexpanding student loan market and the latest estimates are that nearly 40 million americans are laden with 1. 3 trillion worth of student debt. The borrowers is either in delinquency or default. Last years graduating class had in studentof 35,000 debt. The Obama Administration recently announced two policy president ial candidates have focused on a variety of alternatives of ways to lower the debt burdens. While todays seekers. Peakers are two leading voices one was recently named special adviser to the u. S. Department of education. He previously served as the assistant director of the Consumer Financial protection bureau. The secretary of treasury named him as the agencies First Student loan investment. Has frequently testified before congress on alleviating student debt burdens and private student loan performance. A colleague. She is a professor of education, Public Policy, and economics at the university of michigan. Susan is one of the countries top advocates for accessible Higher Education. Testified before congress on education and tax policy and is widely consulted on student aid reform, including a federal reserve, the department of education and treasury, and with the department of economic advisories. She also writes with a New York Times and if you are on twitter, i encourage you to follow her for an informative and witty commentary. About todays format. Each of our panelists to getting with susan will kick things off with three opening remarks. I will then have the pleasure of moderating a conversation with our experts. I will start with a few questions of my own before opening things to the audience. Please write your questions on you received and we will have volunteers circulating to collect them from you during the program. If you are watching online, please send us your questions on twitter. Lets get started. Susan, the floor is yours. Thank you, everyone. Im going to start with the data. I want to start by talking about if there is indeed a crisis in student debt, where is it . University in a school of Public Policy so we should be addressing this question with data as opposed to and thinkingtive about our own experiences or those of our friends or colleagues. Also, instead of maybe just reading the latest dramatic piece in the news about a distressed borrower, but rather by analyzing the data. Data has been a problem in this context. And it does have filled the void. If there is not a good data on the problem, the arising and anecdote will fill the void. Department of education, which is responsible for the federal loans in this country, has not been terribly forthcoming and releasing to the Public Information about who borrows, who defaults, their experiences. That is changing a bit and as of this past fall, we have some excellent data on debt to default for people who have borrowed since the late 1990s or so up until the present. What im going to say here is based on the analysis of that data. Data say . The they say you should erase from your mind if you are thinking of who the face of the student debt crisis is, you should erase it from your mind the image of a yellow graduate or nyu graduate or columbia graduate or even a um graduate. Everyone who graduate with a ba is relatively likely to default. Have a lowgraduate default rates. The default rate to drop in the schools selectivity. And harvardlike um and columbia, about 5 is what the default is. That is what it was before the recession, during. People who graduate from elite schools are pretty well above from economicered distress. Not everybody. Were talking about averages. Ofyou should also not think folks who are going to graduate school. Graduate and no you dont like debt but it is whether it is the face of the country. Everyone would rather have stuffed freedom pay for it. That is an economic sense of pull. Principal. [laughter] grad students a borrowed the least likely to default because they make good money compared to other folks. People who borrow for graduate school are unlikely to default. Graduates of select schools like um might borrow 30,000 total. A goody tend to make money so they can support a debt of 30,000 and pay it off. That is who it is not. Theng to note profiles of the people who are focused on the media. When the media focuses on student debt crises, the people they profile people at columbia, nyu, people with graduate degrees. This week am a graduate of aboutticut college spoke their experience with 200,000 in debt. That is a vanishingly unlikely amount of debt. Few people have that much debt and people who graduate with graduate degrees tend to not default. There was a lovely article in that leads meimes into writing several of shot posts from a guy who graduated with three degrees from Columbia University and subsequently defaulted on all of them and was urging others to follow his as ale and setting it up leader of a student loan revolt. These are not the victims of the crisis. Who is . The face of student loan distress is a dropout from a nonselective college. A person who spent a year or two ora forprofit College Community college or nonselective fouryear college. This is all based on the data. They are firstgeneration college students. They entered college late to improve their job market schools. Many were running away from the weak job market of the recession and went to one of these schools to get a better job. They borrow relatively little because they spent relatively little time in school. They dropped out after a year or six months. Maybe 5,000 to 10,000 a year total. In total, they borrowed 5,000 to 10,000. They are treated with low earnings. They enter poor, they left poor. Is typical loan and defaults less than 10,000. 5,000 is the typical loan in defaults. Yulia third of students who borrowed to attend a Community College or forprofit college during the recession defaulted within five years. Attending ale selective ba institution, its a 5 . The problems are at the Community College and at the forprofit institutions. So, this is who i havent firmly in mind when i think about student debt crisis. Low income, firstgeneration students attending Community College for a forprofit college. Students of Corinthian Colleges were defrauded into borrowing for a nonexistent education. A person laid off in their job who tries to pick up some skills at the local Community College and borrowed to do so and is exiting with low earnings. In my opinion, if there is a crisis of any sort, its a crisis of lower earnings in our country. We lack a safety net. We have a very large number of people earning very low earnings and who cannot handle even 5,000 in debt as a result. Thank you for having me and thank you to all of you for being here. I have recently joined the department of education and just a few days into the job. Question why do we have Student Loans . I always answer its important to remember we have Student Loans for a very good reason and that is to ensure that people who might not be able to afford to go to college can make that investment into themselves, which can payoff very big when done right. Muchthings have changed so in the past 10 years that its hopeful to think through that. Many people concerned about student debt might come from the education world. The other come from stepchild of this world, which is thinking about it from a Consumer Financial markets spective and those of us from our lens, we are really colored and shaped by the foreclosure crisis we saw in the past several years. For those of you from michigan, you probably know very well that problems in the Mortgage Market absolutely devastated parts of michigan and this was not unlike other parts of the country. Today, we have a Mortgage Market that is very different but i think some events that really change the lower the student loan market also. Crisis, thereal is no question that the financial crisis had two real big effects. One is that it really eroded family well. Actually, trillions of dollars in Household Wealth of that he waited in the form of home equity, retirement savings. Families felt distressed. At the same time, the financial crisis hit state budgets very hard and there was some very substantial cuts to public Higher Education. I want to echo something sooner said. Sue said. The Biggest Group is those who attend public colleges. Families feeling more financially stressed and higher tuition, which by the way is not just something that is recent. I understand that 40 years ago, undergraduate tuition at the 800. Sity of michigan was inflationadjusted, thats about four or five times higher. The tuition for undergraduates is well more than 45 times higher than 800. The crisis really pronounce that effect and i think we have seen substantial increases in reliance on Student Loans. Notedary of education has that Student Loans became kind of the norm at a certain point. What else happened i think is important context and i think that we forget there is a lot of talk about the rescue of the Financial System due to gambling on wall street. But there is also a huge change in our federal student loan thatm, which was a law essentially led to the Government Purchasing a huge amount of federal Student Loans. Most federal Student Loans before 2010 were originated by stampedl institutions with a government guarantee. Now much of them are owned by the government and in 2010, the president got a law passed to essentially end this bank Subsidy Program and now when you borrow, its all directly through the department of education. All of this put together more borrowers. More students relying on pell grants, Student Loans combined with the government taking the unprecedented action really has in some ways created a lot of holoceneties that the makers and the Research Community are thinking about all of the different tools that can really be used to make improvements to the system. I think that we are at a place where we need to keep helping people go to college but we need to remember that the macro environment as well as some poor performing programs are leading inpeople, many people being very high levels of distress. I cant tell you enough. What i would push you to remember is when somebody is delinquent on their Student Loans, it is often just one sign of a broader array of shocks happening in their life. Fighting to keep paying rent, struggling to make payments on their car loans, and thinking through that as an entire consumer about the trauma that they are managing is something we always have to keep in mind. That said, there is a lot policy being pursued to not only address the borrowers who are struggling but also to a nokia a few of them i will mention. There is now new repayment plans. Ofs is a broad expansion affordable Loan Modifications and free payment plan that allow borrowers to play pay a tosonable amount of income manage those times of distress. My understanding is theres about 5000 people enrolling in that per day on average. We have to figure out how we can keep them in there and manage through that. There are new ways for borrowers to get out of default on their federal loans. Rules have been put into place allow borrowers to get back on loan feet through rehabilitation and we need to make sure borrowers are not hiding and they know there are options for them. Of course there has been a lot of interest and activity on enhancements to student Loan Servicing. Student loan servicers are the companies that help collect payments and manage your loans. There is a lot of work to do to make that process work better. The president enacted a student aid bill of rights that called for a number of potential improvements to student Loan Servicing and that might be an. Mportant way there is good work being done to help borrowers go through that process. Going forward, we have to think about how to a nokia late future generations to not be deterred by low prices. A few of them, ending those bank subsidies for the old federal , money toam created invest in the pell grant program. A lot of people taking a look at the role of the creditor and state oversight agencies. The collapse of Corinthian Colleges has raised a lot of questions about the role of how we do oversight and many of you might have heard of the gainfulration employment initiatives, which is essentially a Regulatory Framework to prevent schools from graduating or even not graduating students with unaffordable levels of debt. There is a broader conversations all over. About making Community College free or more affordable. I think i would encourage all of you as you think about this not oneat there is initiative that will be a cureall. It is a series of tools to fight a discrete set of problems. Focusing on just College Affordability wont really fix issues for people struggling today. Tackle hard problems to the Big Solutions are needed. Thank you very much for helping to frame this very complex and nuanced set of issues. And are of vital importance i say that both from my perspective as a dean of a policy school and as a parent of two college students. There are many, many issues on the table. I will ask a couple of questions first to start things off but i encourage you to use the no cards for us to open things up to the audience participation. Perhaps the place to start is to more of a sense of just how worried should we be about this crisis anyway . You spoke about the Mortgage Loan crisis at the beginning of your remarks and certainly some have suggested that what is happening with Student Loans is a bubble that could be as concerning as the mortgage crisis was as we all well know. How we read should we be about what is happening in Student Loans and with student debt . Coming from the view of someone who is more of a Financial Services practitioner, a very stringent definition in my mind of what a debt crisis is. You get crisis a debt crisis likely seeee is in europe or puerto rico a very different animal. It is where there is an whichate precipice upon there will be some systemic change that will cause mast of the station vary, very quickly. The term bubble denotes an economic term that something will pop and be quick and dramatic. I do not think what were seeing in Student Loans is one that will create rapid, Systemic Risk because there is really not close interconnectedness with big Financial Institutions that could reverberate through the economy. That being said, those are technical terms. There are many people in our country and that it is a personal crisis for them that they cannot manage in this debt. I will say i totally respect what sue has a shared with the data but i wonder, are some of the borrowers who dont borrow very much but are in default, are they actually in the debt on a lot of other instruments . Did they finance their education in other ways that may not show up in the student loan data . How i would answer that is maybe that we a doomsday thought with the collapse of some of the large finance total Financial Institutions but on a personal level, i think we have to ask ourselves how can somebody who default on the student loan really recover and become someone who can participate in the economy and not be discouraged and frankly not to feel like a failure . I dont want to debate over the word about what the status is but i think we can all agree theres so much we can improve for individual borrowers and we need to know more about what the potential impacts are on the rest of the economy. There may not be something immediately by there is more to learn there. I agree with everything you just said. A bubble emerges when an asset can get flipped over and over again and its pricing gets inflated. Think of the tulip crisis in holland, think of a house that gets flipped in the price increases. You cannot flip human capital. Of cannot get the same kind crazy inflationary. What we do have is a lot of suffering. I want to mix in concrete observations about what it means when we have 8 Million People in default. What does that actually mean for individual lives . For someone in default, they have a enormous of the lot on their credit record. What does that mean . Any landlords now do credit checks before somebody can rent so they are shut out of parts of the housing market. If they want to buy a car to get to work because they are living in a neighborhood that is not aree the jobs are, they shut out of getting a reasonably priced alone for their car and they have to get a 25 Interest Rate loan, which further depresses on their finances. Many employers now check credit records. They will miss out on job opportunities. Of course add to that the psychological stress of someone calling your cell phone or your home phone, your relatives on a daily basis to harass you about your debt. Of sufferinga lot and thats bad. I think that is what the crisis is. We had people who went to school ourmprove themselves at encouragement. We provided a lot of subsidies and told people the right thing to do was improve your self in school. As a result, they are suffering and its a manmade crisis. Is what i think of as the student debt crisis. In terms of the magnitude, the mortgage crisis at the peak, the lending was the magnitude of the dead was close to two thirds of u. S. Gdp. Magnitude is not at that level, correct . Mr. Chopa there is 14 trilliony outstanding mortgage debt. Mortgage lending context, there was a set of risky features as part of those loans that led to some potential cataclysmic events. There was in fact a subprime private student loan market that really blossomed in the years of just one subprime mortgage lending. Most of the lending that is occurring is in the federal loan where fortunately people have access to these income driven repayment plans. I think that understanding how the Mortgage Market unraveled is important but there are also important differences and i think an important lesson is looking at servicing. We regulated role both mortgage servicers and student loan servicers. I was quite struck particularly with the private student loan servicers at the same type of deficiencies. Servicing is a tough business but when it goes wrong for a really be quite devastating and it can lead to some suffering. I really encourage that there is a lot of interest in doing more to improve that piece of the puzzle. It sounds like both of you actually agree that this is not in the realm of the mortgage crisis in that sense. However, perhaps in addition to concerns about the impact on are broader there Economic Impacts in terms of economic growth. Certainly some of the things you you,uggesting come each of suggesting, each of you, pointed to the fact there are other consequences we should be worry about. I wonder if each of you can comment on that. ,s. Dynarski on that front there is one fact i didnt explicitly put out there which is that the people who had the largest loans are the least likely to default on their loans. It is a straightline relationship where the smallest loans are the ones most likely to default. The narrative tends to be loan debt is going up. One . 2 trillion, trillion. Defaults are going up. It must be that one leads to the other. The fact is the debt most likely to default are like 5,000. These are not the numbers we think of when we say people now cant get married and cant buy homes because of this debt. People who have the most debt are the people who are currently the winners and our society, people who graduate with a ba, masters degrees. They are the only people whose earnings have been growing steadily for the past decade. Earnings of others folks have been dropping or flat. Incomeow skill, low folks with fairly small debts who are suffering but they have other debts as well. So we have a very large group of people who have terrible employment prospects. We dont have a sufficient safety net. Their problems are the important ones. The student debt may have been the needle that broke the camels back. Its not the burden that is causing the main problem. Think yourthough i analysis is right on who is hitting the default but i think there are reasonable people love asked questions. The extent to which people are graduating with higher levels of debt even if they are not defaulting, many of those graduates may actually be located in metro areas where costofliving, rent has gone up quite a bit. As to whether are they paying higher student loan rent, maybegher in not actually experiencing a huge amount of wage growth and theres that interaction, which we dont know too much about, does that have an impact on their ability to hit some of the other milestones, some of the survey data of Public Opinion suggests having a lot of student debt might change the way people think about saving for a down payment, buying a home. We dont really know the specifics of it and i think as you have mentioned so many times, having better data about help usdebtors will really understand their problems but i agree, i think mostly about the people who have defaulted. The of like i think about people not too far from here where there were very high levels of foreclosures. Recognize that yes, crisis from an economic term, maybe its not there. But what happened to people and therefore closed and they lost their homes and happens to people when they defaults from his personal tragedy and dealing with that is something we have to tackle. Ms. Dynarski every dollar someone is putting into a student loan is a dollar they cannot use to save. In that sense, a doll has to add up in some way. Fed among others have been sort of developing, putting on a narrative that really pushed the idea that loans were reducing homeownership rates, for example. From this newer data that we more and more poor people are taking out loans. Most people who have loans, the homeownership is going down. People who never could afford alwaysthe people who used to borrow, their faraway rates have not changed. Compositiont in the of the borrowers that includes a lot of people as opposed to the impact of the student loan company. Home recording. This data has given us a much clearer picture about what is going on. We have a good snapshot now of what happened from the late 1990s to the present. How are we going to make sure that we keep seeing this information as time goes on. Mr. Chopa part of the things many of my colleagues and i are thinking about are how can we be more transparent about the release of Data Information . Scorecarde college which includes a i encourage anybody who is interested in meditation to look at the College Scorecard because it actually gives you a much more detailed view. That is another side of the equation that can really help us think about what is the next about wherelysis will i go and where will that payoff . You are right that there is an increasing need to make data scorecard wasthat a big piece of that and i think weve will do more. I am always happy to theribute to the plug for importance of data but the important of helping people understand what the data is telling them so they can influence their own decisions in those ways. A number of your comments have really highlighted the among dimensions of peoples lives. The interactions among the different groups who are participating in the loan markets is part of that complexity. In addition to student borrowers and various lenders, we have the colleges and the universities. Some have said, and i believe there is actually research, including by the fed, that finds that as availability of student aid in Student Loans went up, colleges simply raise their prices. That may be a kind of challenging dimensioned and i would like to hear from each of you your views about whether that is simply how things would unfold. Support for the student aid went up and universities and colleges simply raise their prices so that simply doesnt help us address the challenge. Mr. Chopa i am not ultrafamiliar with the literature on it but my understanding is there is some disagreement and a mixed view about whether the impact of additional aid and loans on the price of college. That it isthough thertant to remember that published tuition and fees out there is not actually what a substantial portion of lower income people pay. , the netith more aid price for several years now has actually stabilized among many sectors of Higher Education. I dont know the answer to it but its obviously one that you would want to know. But i want to make sure its is really thewhat answer, we have to tailor the program so they meet the policy goals and the policy goal is for people to be able to go to college and advance ahead. Questiont goes to the of the importance of research and analysis is just increasing every single day. Frankly, when you release more information, new questions arise. Ms. Dynarski my read of the evidence on this at this point is that forprofit colleges indeed raise their prices when grant aid and loans go up. They sticker price. They dont give their own aid to people. Giving scholarships to people and their prices do go up when aid gets more generous. 80 of students attend public institutions. At those institutions, what drives praise price . How much the states are giving to them. It has been pretty slack. What has changed is less of the money is coming from the states and more is coming from the students. It looks like cost is going up nowits who pays for it is the students rather than the state taxpayers. There is some evidence that schools that provide their own scholarships when the pell grant goes up will scale back on their scholarships and ship them to other people who arent eligible. The main action appears to be in the forprofits. Host thank you. Each of you have proposals for policy Options Limited in order to address some of the aspects of the student loan crisis. Thehave mentioned incomedriven repayment plans and those allow borrowers to repay in installments and over longer time periods. There have been proposals and susan, you have been want to propose this, of a management repayment plan through payroll withholding and i would like to ask each of you how much of the problem do those kinds of policies really fix . Mr. Chopa i personally think borrowersworld where campaign as a percentage of their income, its not a cureall to College Affordability and the student debt but its an important weapon that a borrower can use to fight delinquency and default and avoid it by getting an affordable payment. I think thats a pretty good weapon and i want to make sure that for anybody who you think a struggling about it, they should know about that and its important they are able to enroll and to reenroll each and every year. There have been some the president has directed the multiyear look into certification of incomedriven repayment plans. For the purpose of tackling delinquency, it is pretty and i urge people to figure out are they learning about it and give ideas about how to improve. Are there service is telling them about it . If they are not, we need to fix that. Ms. Dynarski the very fact we have one Million People in default and the ranks continue to grow indicates that the contingent loan repayment programs we have is not working. None of those people should be defaulting. If they are very low income,18,000 a year, for example they basically would be paying at all in pay as you are. Where theack to rubber hits the road. How do we actually implement these programs. Answer been saying and servicing sounds like such a boring topic. Borrowers towith get them into a program that works for them . The issue came up with the mortgages. There is a big push for the Mortgage Companies to restructure loans. Restructure the mortgages so people would have more reasonable payment plans and where it fell apart was the implementation of it, getting the servicers to actually do it. That is happening right now as well. I think the big problem is the department of education owns this in norms portfolio of loans. Its essentially one of the biggest banks in the country. Its not a financial organization. Its very good at getting people to college and that is what it should be doing. It should not be in the service other billiondollar portfolios. I i dont think want to ced turn into an organization whose focus is collecting money from people. I think this business should be moving out of the department of education. What do you think of that . [laughter] well,opa [applause] mr. Chopa i will say though that the issues of engaging borrowers and getting the incentives right is hard. Especially when using private firms. There will be their own economic incentives. Also, i would add that borrowers the process to walk through that many borrowers need individualized counseling that i think sometimes is just hard to deliver. Many Companies May not be set up to do that. I dont really know what the right answer is. Paidynarski they are not to do it. They have a contract with the department of education and if its not paying them enough for the time that it takes to walk someone through an enrollment in an incomebased program, that the contracting failure. Mr. Chopa what we saw in the Mortgage Market was that many of those services working for other Financial Institutions or trusts. It did not work so well. Tofiguring out related your point about payroll deduction, maybe there are ways to streamline the repayment issues and i know you have done some work on automating how that might work. Tot is the concept we have really think about. Ist i want to make sure very clear is when a borrower is having a tough time on their there mayans, actually be bigger issues they are dealing with financially speaking that might have more immediate consequences. For example, getting there car repossessed or making rent. To remember that once people are in trouble, its like a treadmill that sometimes gets faster and faster and faster. So figuring out how to deal with all of these mini explosions in hard and that is why getting those repayment plans clear and that people know about it and can easily enroll in it ms. Dynarski even if we had my dream of a payrollbased progressive system, it would not deal with fraud. If there institutions out there that are selling a product, charging people tuition, getting them to take out loans, but not actually educating them, that will not get fixed by this. The regulation of the forprofit college will not be fixed by there being an incomebased program. Politics is is the back end about how we make sure people are getting the education they are paying for. That is a separate issue that cannot be dealt with by incomeissued repayments. The ftca just today, and the department of education took enforcement action related to the devry. Of course you are right. Those repayment plans wont solve it. The other thing i think is important to remember, there is the sense that everyone would Student Loans is having a tough time and i think that is just not true. Who graduate,e make good money, sign up for auto debit on their loans, they dont they have a good experience with repaying. Ms. Dynarski it makes me very happy to pay my loan every month. [laughter] mr. Chopa the sense that they feel like they know what to do where as i think when people are really struggling, that is where it gets tough. Host we are now ready to go to the audience. The first question is actually from twitter. Weve actually had a nice segue to it. We have been talking a lot about the repayment approaches and mentioned that that is not going to fix everything. This question is is it possible to produce guidelines such as borrow no more than exit dollars if you are getting a degree in a particular field or getting an Associates Degree . What are your views about that . [laughter] mr. Chopa i went first to last time. Ms. Dynarski we essentially do have some of that in that we have annual limits for undergraduates. Caps on it. We dont have caps on other loans such as the parent plus loan. Pretty much, parents can borrow that thee contribution formula says they are supposed to be making and that has been causing lots of problems. The same with grad plus loans. Should we do that . And would government to do it . I think it would be great if student to better information about what the payoff is to say a degree in education or social work or in fine arts that would guide them and how much they would borrow for that degree. On average, its worth it to borrow to go to medical school and not so much for some other degree. Is the government going to do that . I think that is kind of what the College Scorecard is intended to do. If the government ever going to have a hard caps . You are getting a degree in animation, not going to lend to you. I dont see it happening. We dont have that degree of regulation in our country. I can see an informal advising system trying to get that information. Majorhink we could have by major, school by school loan limits . I dont see it happening. Mr. Chopa a lot of people answer this three rules of thumb about you should roughly not borrow more than this. I think the challenge about doing that when it comes to a degree type bachelors versus associatesthere are significant variations in earnings within those degree types. This is just my own quick thinking. One it comes to vocational training, certificates, where there is pretty clear understanding of what the type of job you might earn afterward im sorry, the salary you might earn based on that occupation. It may be simpler to come up with what they write a amount to borrow it is so its comfortable to afford. Athink when it comes to number of undergraduates, particularly fouryear bachelor degree, we have to acknowledge so many people dont really know what kind of profession they will pursue several years later. There are huge complications in developing rules of thumb or regulating it. Host the second question. This is a question related to data. Data hadhat does the and mr. Chopa i dont have that off the top of my head but my understanding is that some of the survey data suggests that minorities, particularly africanamericans, borrow at higher rates and more. The percentage of people borrowing and the average level of borrowing is higher. That being said, my understanding is there is not a similar framework like there is have muchges where we more granular information on how much people are borrowing and low level data by race, ethnicity, and some other. As i understand, that is not in the facile. Ms. Dynarski there is a long history of racial redlining and so forth and because of that, there are requirements that race is included in mortgage applications. The data i was describing to you that gave the inside we now have come from the administrative data that the department of education has on Student Loans, which includes the fasfa. If you remember filling that out, there is no room for race. What you can say is you can try to piece it together. Lookacts are that if you at who attends forprofit institutions, Community College, students willtely be nonwhite. Have muchlations also lower wealth levels. For a given level of income, if you compare an africanamerican family and a white family, the africanamerican family will have lower wealth. To have not only your parent but your parents parents to have had good income for many years for you to end up with wealth and not have it seized and appropriated in the institutionalized ways it has been in the u. S. We know there is disparities, according to some of the government data, on what College Graduates who are minorities are earning per hour after college versus their what counterparts. There is a lot of next are there that raises some serious questions about how do we look at this in a way if we believe education is a vehicle to social mobility. Host clearly, more work to be done to understand those gaps. With the failure of corinthian, what is the role of the government shutting down institutions versus letting the market take care of poor performing schools . The cfta when i was at b, i was heavily involved in a lawsuit against corinthian which alleged a number of misconduct related to their private loans. Obviously, they had shut down. I think it has raised some questions about how does oversight in Higher Education work . Is actually the history of oversight in Higher Education, referred to as the triad where the federal government of creditors and the states all role ine play a doing so and i think there have been legitimate questions to ask about corinthians of being accredited to the very end and what is the appropriate role. Part of what im working on his thinking about what is the appropriate role of the states and protecting consumers in those closures . I think you are asking me a different question about the market closing it. There are schools that do fail because of their own whatever it may be, financial mismanagement, not providing good programs. But i do worry there are some wherems that particularly there might not be the level of transparency we would like and honesty in how they represent their programs to their students that some of them may be able to live longer than the market would typically allow its students really knew the full truth about what that program was going to deliver. If you have an image in your mind of the forprofit College Industry as being this competitive, private market, you are wrong. Because they get 90 of their income from student aid programs through loans from the governments and grants from the governments. There is something called the 9010 rule, which meet institutions cannot get more than 90 of their income from program. Nt aid before profits tend to be right at that margin and then they can get more money from people getting benefits. That doesnt count in the 9010 rule. Ways weone of the regulate the forprofits but the idea that somehow Market Forces are going to compete them out of existence, i dont think is accurate. The 9010 will we use as a way to make sure no institution is completely living off of student aid but its a fairly weak regulatory tool. One of the things that i have been closely following for years is we cannot deny the fact that there are a number of people post 9 11 who have returned from service and have a generous and appropriately deserved g. I. Bill. I think because of what you have , theabout the 9010 rule 90 is only related to student aid programs that are part of title iv of the Higher Education act but a money from the g. I. Bill and other militaryrelated programs, they do not count. The Obama Administration has supported closing that loophole because it is, i think, leading to targeting of those individuals and i just think the last thing we want to do is have someone use their benefits on a program that is not going to help them get ahead. Ii, the g. I. Ar bill was actually a key instrument of transitioning those from service into productive civilian life. Many people believe it was part of the engine of growing the economy, of getting people in jobs that pay. I think we have to fix that. Host ok. It is virtually impossible to discharge Students Loan debt through bankruptcy. Situationat make that worse than mr. Chopra the main area i have worked on in the student context, not really bankruptcy is a 2005 change which treated private Student Loans like federal Student Loans, and it is worth noting that federal Student Loans at do have income repayment, which is a chapter 13 style repayment plan, but private loans do not have that. A study published by the department of education if you years ago showed that the change in the Bankruptcy Code did not lead to lower prices, nor did it lead to expanded access to loans. Because of that, it probably did not meet its intended goal and is something that needs to be looked at again as to whether it was an appropriate change. , i thinky though that that bankruptcy is very wellknown, that it is not dischargeable, what im not sure if anyway, what i talked about before as a single issue cureall, i do not think it is a solution for what is going on because many particularly young people, even if they could file would not because of some of the other effects it would have on the credit. When it comes to the federal Student Loans, i would like to see that people really are able to get into those programs that help them to lincoln city. Delinquency. You lose yourif job and your earnings stop as a result, your Mortgage Company is not going to say, because you are not earning much, no payments, just a when you are. You can do that with Student Loans like getting into one of the income driven programs. Behindson and rationale them not being dischargeable in you have a, say good year five or 10 years later and at some point, you could be doing fine, and as a society, we want to make sure people that are doing fine are contributing so they can be helping other people get access to college, right . The idea if we have a pool of money that comes from people when it works out, let them contribute their money and the form of taxes and that loan payments and that gets recycled, paid for to the next education generation. I would not want to see people doing these bankruptcies where it is just a mechanism for the next deal. He want to make sure people are paying their fair share toward the commonwealth. This question, also from the audience, follows susan on the comments you are just making about how you want to encourage people to move forward in Higher Education in ways that improve their opportunities for the future, so the question is, how do we prevent students from over borrowing without discouraging students from enrolling in college that improve their economic future. That is a delicate alanson act. What are your thoughts about alanson act. Balancingour ways act. What are your thoughts . Ms. Dynarski the traditional access point for firstgeneration students, low income students, has been public institutions. In keeping those in the way we sort of protected students against high risk and making the bet on college is making this ep public ke college cheats of people do not have to go into debt. They are not left with a big erms of debttur they cannot pay later. Even public colleges have become a more risky place to go to college because you have to end up having to borrow some. Returning to Community College as being an essentially free access point for education, i think that is an important way to make sure that low income, firstgeneration folks can experiment with college. It is not going to fix everything. There are still going to be people going to private institutions, forprofit institutions who are going to borrow, so we still have to be thinking about how do we deal with repayment, how do we make a well functioning loan system, but having a vibrant, cheap low committee college is one way we keep that promise. Mr. Chopra to be clear, the orsequence of not completing going to committee college and it not working out is not as grave as if you borrowed a lot for a different type of school. In some ways it provides a lower risk gateway for people to not borrow much, but also frankly, get that credential and maybe they do not pursue further studies but they are able to get that wage increase. Ms. Dynarski one dynamic we saw during the recession was people school,rding back into want to to go back into the Community Colleges, being underfunded and they are oversubscribed. People cannot get into classes they want to take, the nursing programs and the forprofits took advantage of that. Thatve strong evidence when committee colleges are underfunded, forprofits rise. That is a manmade problem and it could be undone. The next time we have a recession or another event that pushes people into school, if we have an expanding capacity at the Community College, the thing is going to happen all over again. The University System is compared to systems in our counterparts in other industrial countries, and frankly the u. S. Is a wealthier country that some of those countries which have not faced the types of repayment challenges, crisis that the u. S. Is grappling with. Lessons, are there lessons that we should be drawing from those experiences in terms of financing post secondary education . Mr. Chopra i have not studied the International Comparisons but my illinformed view is that i think most of the differences in borrowing and financing is college as ae percentage of Family Income is dramatically lower in other countries. From my understanding there is also many industrialized countries, Continental Europe in particular, have universities that are federally funded in ways that keep tuition very, very affordable. I know in some anglo countries that ship has changed quite a bit. I do not know the exact answer but it is possible the simple answer may explain a lot of it. Ms. Dynarski there is another piece as well. Post secondary system is the land of Second Chances and third chances. If you did not do well in high school, you can go to a Community College. Eventually you may be them to go to a university. Germany, france there is restricted access to the universities, so based on how you are performing in middle school, you have to go to a high school that prepares you or does not prepare you for university and the same people going onto university is much, much lower. I was meeting along with other people from the Higher Education group and we went to england and we were talking to our counterparts there. Their Graduation Rates were astoundingly high because they restrict the share of people who can go to universities, the best events can go and they go on and graduate. Ess risky proposition for the government to invest in them, but we are not taking a risk on the same number of people, so that is the other structural side. We get the opportunity to take a risk but then we place all the risk on them, and if it goes badly, what were hearing is, it goes very badly and if we want to let people experiment, we need to provide more in a way of insurance against things going badly. One way to do that is to make it free. If you do not end up with a strong seller, you just do not pay. That is but a well structured, well functioning incomebased repayment system would do. The next question is, how much of the problem is just that the Interest Rates charged on the Student Loans are just too high . Elizabeth warren has proposed making Student Loans a much lower Interest Rate. What you think . Thathopra i understand somethinge 2012 or the rates were fixed at generally 6. 8 , that was a very common Interest Rate. Today, new federal Student Loans conditions,market so rates today for loans that you are taking out are much lower. Look, their Interest Rates are set by congress. If congress once to lower the rates or increase the rates that is their prerogative. For many people, interest accrual is a part of what they pay. For those who are struggling badly and in default, they are not even close to not paying the interest portion but ever getting near the principal. Ortion, so i do not know it is one of the many issues about loan repayment that either relates to the default issue, i am not sure it is directly related, but many people have in thee argument Interest Rates during the Obama Administration did go down with Congress Passing a law and many people felt that was a more fair outcome to be tied to the broader Interest Rate environment. Ms. Dynarski i would say that lowering Interest Rates cuts costs for borrowers. That is undeniable. Does it deal with default in a targeted way . No. Andare taking a subsidy say, ok, over the next 10 years i am going to reduce your payment by 20 a month. That is not the most targeted way to help someone who is struggling right now with their repayments. Of 20,000has a debt and you charge them 6. 5 versus 4 , itll make a difference of 25 a month in the repayment. It is going to benefit everybody, including the people who have a 100,000 debt and are earning very good money. They will get the benefit of that Interest Rate cut as well so it is not targeted in the sense that it does not get money to people when they are struggling nor does it get the money to the people who need it the most. A lot of the money ends up going to people who are doing just fine, so that is my main concern about using that as a tool to reduce the payments. It is not targeted. Reduces the total amount you pay over the life of the loan, which, people want. Ms. Dynarski it makes people happier to pay less for things. Again, another controversial economic principle. [laughter] beunfortunately, this will our last question and it is a different type of option to address this broader challenge. If we are worried about access to college and see Student Loans as an obstacle, why not make college free . Mr. Chopra i think that is why there is an effort to essentially make a Community College available and free or near free, to be that gateway given that if we believe as a society that getting the credential is critical for that persons future then that is part of it. I think you always have to think about the distributional effect of how you make it free and who you make it free for, but there is no question that the increase has beene tuition something that feels like a real impediment to so many people to get a head and they feel like they are putting a lot on the line and risking it and there is really no other option for them because going to college is the way to ensure in some ways, against poverty for many people in the labor force, so it is tough. It is very personal to people, dealing with college cost because they felt like they were able to go to school, you always hear people, 40 years ago was only 800 here and when you go to school it feels like such a gateway to your life, of how you chart out your career. Not only does it give you more withngs but more ability what you choose to pursue, so i think it is so important, which ding economist for doing, overemphasizing College Education as a ticket to higher wages, it actually shapes a lot of us as we are as citizens. Ms. Dynarski it is a wharton mba sort of thing. [laughter] i do feel that though. It is more than just purchasing some, it is not like buying a factory that produces a certain amount of widgets. It is about who we are as people and citizens. I want susan to weigh in on this, but i will push you just a little bit. If i pull out one of the things you said at the beginning of your response, i think it was, no, you answered no, we should not make college free because of al aspect. Bution mr. Chopra four people with for people with lower income, the cost should not be an impediment. I am more on the Financial Services side than the education side, but making college free would that come at the expense of limiting the ability for people to go, would it lead to lower tell grants . Grants . The pehl what are the tradeoffs. . What are you losing i doing that . The data approach to figuring out what the right intervention to meet all sorts of goals, i think the world we about goalsot just but figure out costs and benefits. Community college was free and expanded in the 1960s and 1970s and tuition was very minimal. We departed from that history during, we have been departing from the history as the states have this invested. Invested. Should we make all of the fouryear colleges free . That would be extremely expensive. Community colleges are were firstgeneration students and low income students go. Those of the people that most need education as a form of economic mobility. Unfortunately, we are out of time. I am sorry we did not get to all of the questions but i want to thank all of you for coming and participating by offering such a wide, varied range of questions to our panelists. I would like to thank our panelists for a very informative and wide ranging set of perspectives. Please join me in thanking both of them for their comments. [applause] ms. Dynarski thank you. Cspan, then Supreme Court cases that shaped our history come to life at the cspan series landmark cases. Our 12 part series explores reallife stories and constitutional dramas for some of the most significant decisions in american history. John marshall said this is different. The constitution is a political document, sets up the political structures but it is also a law and if it is a law, we have the courts to tell us what it means. What sets this apart is the fact that it is the ultimate antipresident ial case. It is exactly what you do not want to do. Who should make the decisions about those debates