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 ebt. One in four of the borrowers is either in delinquency or default. Last years graduating class had an average of 35,000 in student ebt. Those are striking numbers. The Obama Administration recently announced two policy changes and president ial candidates have focused on a variety of alternatives of ways to lower the debt burdens. Todays speakers are two leading voices on student debt. Rohit chopra 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. He led that agencys work on behalf of students and young consumers. The secretary of treasury named im as the agencies First Student loan ombudsman. He has frequently testified before congress on alleviating student debt burdens and private tudent loan performance. Susan is a colleague. She is a professor of education, Public Policy, and economics at the university of michigan. Also codirector of the ford schools policy initiative. Susan is one of the countries top advocates for accessible Higher Education. She has 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. First, ignored about todays ormat. Each of our panelists begining 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 the notecards 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. Using the hashtag e. P. I. Student debt. Lets get started. Susan, the floor is yours. Ms. Dynarski 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 . Were at a university in a school of Public Policy so we should be addressing this question with data as opposed to say introspective and thinking 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. In part, anecdotes 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. What does the data say . 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 yale graduate or n. Y. U. Graduate graduate or even an um graduate. Everyone who graduate with a ba is relatively likely to default. People who graduate have a low default rates. The default rate to drop in the schools selectivity. The more selective the school is, the lower the rate of default. For schools like um and harvard 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 buffered from economic disstress. Not everybody, but were talking about averages and tendencies. So you should also not think of folks who are going to graduate chool. People who graduate i know you dont like debt but it is whether it is the face of the country. Everyone would rather have stuff free than pay for it. That is an economic principle. [laughter] you have your certificate now in economics. Grad students a borrowed the least likely to default because they make good money compared to other folks. Graduates people who borrow for graduate school are unlikely to default. Graduates of select schools like um might borrow 30,000 total. It is a typical debt for people graduating but they toned make good money so they can support a debt of 30,000 and pay it back. That is who it is not. One thing to note the profiles of the people who are focused on the media. Hen the media focuses on tudent debt crises, the people they profile people at columbia, nyu, people with graduate degrees. This week am a graduate of Connecticut College spoke about 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. Here was a lovely article in the New York Times that enraged me 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 example and setting it up as a leader of a student loan revolt. These are not the victims of the student loan crisis. Who is . The face of student loan distress is a dropout from a nonselective college. A person who spent a year or two at a forprofit college or Community College or nonselective fouryear college. This is all based on the data. If you look at who is defaulting, that is who it is. They are firstgeneration college students. They grew up poor. 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 ix months. Maybe 5,000 to 10,000 a year total. In total, they borrowed 5,000 o 10,000. They are treated with low earnings. They enter poor, they left poor. The typical loan and defaults is less than 10,000. 5,000 is the typical loan in efaults. 44 of the dollars in default are coming from forprofit nstitutions. More than 1 3 of students who borrowed to attend a Community College or forprofit college during the recession defaulted within five years. For the people attending a selective ba institution, its a 5 . The problems are at the Community College and at the forprofit institutions. So this is who i have firmly in mind when i think about victims of a 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. Mr. Chopra 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. My comments today represent my own opinion. I often get the 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. But, things have changed so much in the past 10 years that its hopeful to think through that. Many people concerned about student debt might come from the education world. I probably come from the other stepchild of this world, which is thinking about it from a Consumer Financial markets perspective 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 hink some events that really changed the student loan market too. I think it is worth mentioning. To the financial crisis, there is no question that the financial crisis had two real big effects. One is that it really eroded family wealth. Actually, trillions of dollars in Household Wealth of that he waited in the form of home equity, retirement savings. Many families felt more stress about being able to contribute toward their dependent childs education. 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 sue said. When you think about who goes to college, you really want to remember the Biggest Group is those who attend Public Colleges. The mix of families feeling more inancially 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 university of michigan was 800. Inflationadjusted, thats about four or five times higher. The tuition for undergraduates is well more than 45 times igher than 800. The crisis really pronounce that effect and i think we have seen substantial increases in reliance on Student Loans. Secretary of education has noted 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 system, which was a law that essentially led to the Government Purchasing a huge amount of federal Student Loans. Most federal Student Loans before 2010 were originated by Financial Institutions stamped 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 opportunities that the holocene makers and the Research Community are thinking about all of the different tools that can really be used to make mprovements 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 erforming programs are leading to people, many people being in 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 hrough 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 ddress the borrowers who are struggling but also to inoculate the broader structures hard to afford. A few of them i will mention. There is now new repayment plans. This is a broad expansion of affordable Loan Modifications and free payment plan that allow borrowers to pay a reasonable amount of income to 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 their feet through loan 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 important way. There is good work being done to help borrowers go through that process. Going forward, we have to think about how to inoculate future generations to not be deterred by low prices. A few of them, ending those bank subsidies for the old federal loan program created, money to invest in the pell grant program. A lot of people taking a look at the role of the creditor and tate 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 administration gainful 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 ll over. Society inside and outside washington about making Community College free or more affordable. I think i would encourage all of you as you think about this issue that there is not one initiative that will be a ureall. 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. Ots of hard problems to tackle but Big Solutions are needed. Thank you very much for helping to frame this very complex and nuanced set of issues. They are of vital importance and 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 note 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 now. W worried should we be about whats happening with student oans and student debt . Coming from the view of someone who is more of a Financial Services practitioner, i have a very stringent definition in my mind of what a debt crisis is. Debt crisis like you see in europe or puerto rico a very different animal. It is where there is an immediate precipice upon which there will be some systemic change that will cause mast of mass devastation very, 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 ersonal crisis for them that they cannot manage 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 its not a doomsday that we thought with the collapse of some of the large Financial Institutions but on a personal level, i think we have to ask ourselves how can somebody who defaults on a 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 somethi