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Discussion, The Future of Student Loans and Financing Higher Education

NOVEMBER 18, 2013

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view the conference agenda and presentation slides »

   Julie Stackhouse, Federal Reserve Bank of St. Louis (4:20)

   Rohit Chopra, Consumer Financial Protection Bureau (30:08)
   Keynote Q&A (8:06)
   Interview with Rohit Chopra (6:40)

Resources for Managing Student Loans
   Introductions (2:12)
   Paul Combe, American Student Assistance (7:02)
   Interview with Paul Combe (12:58)
   Vicki Jacobson, Center for Excellence in Financial Counseling (5:46)
   Marilyn Landrum, Missouri Department of Higher Education (3:58)

Resources for Economics and Personal Finance
   Mary C. Suiter, Federal Reserve Bank of St. Louis (3:10)

Research Panel:
What We Know About Student Loans in the Eighth District and Nationwide
   MODERATOR: William R. Emmons, Federal Reserve Bank of St. Louis (4:14)
   Bryan J. Noeth, Federal Reserve Bank of St. Louis (13:53)
   Kelly D. Edmiston, Federal Reserve Bank of Kansas City (9:17)
   Caroline Ratcliffe, Urban Institute (14:22)
   Research Panel Discussion (35:46)

The Future of Student Loans and Financing Higher Education
   MODERATOR: Ray Boshara, Federal Reserve Bank of St. Louis (7:32)
   Sandy Baum, Urban Institute and George Washington University (11:06)
   Interview with Sandy Baum (7:23)
   William Elliott III, University of Kansas (13:12)
   Jen Mishory, Young Invincibles (8:37)
   Interview with Jen Mishory (8:01)
   Gary A. Ransdell, Western Kentucky University (11:35)
now playing  Roundtable Discussion (40:21)


Below is a full transcript of this video presentation. It has not been edited or reviewed for accuracy or readability.

Ray Boshara: This was a fabulous foundation for the policy discussion; exactly what we were hoping for. And I think you’ve all put some really interesting ideas on the table. Sandy, sort of, really saying it’s more of a repayment problem than a debt problem. I thought it was very useful. Will be challenging us to think differently about our metrics for success on student loans. I thought that was very valuable. You know, is there a tipping point, perhaps? And Jen sort of breaking it down between the front end and the back end and the very specific things we need to do on both. There’s clearly not a one size fit all solution here. And President Ransdell reminding us of the, sort of, the reality and the benefits of student loans. And I appreciate your plug for internships. I’m guessing our applications for internships here at the Fed are going to go way up thanks to that stat that employers look for that more than anything else in resumes. So, I really appreciate that.

So, President Ransdell, you mentioned, you know, trying to get kids into jobs that actually, or into choose majors that lead to good jobs that employers want. And, which I think is the right way to think about it. The Obama Administration, and this is a question for the panel, is also talking about as some of you might know, trying to link various performance measures around access, around employment. You know, various measures of what constitutes success. Or putting these measures out there trying to rate the schools along these measures and then later on if congress goes along with it, tying the provision of financial aid to those success measures. And I’d welcome anybody on the panel responding to whether or not, does it make sense—okay, if you agree that there should be performance measures, you know, does it make sense then to tie those to the provision of federal aid from the government? You know, should the government be using its leverage along these lines? Would anybody like to take a stab at that?

Gary Ransdell: Let me start because Sandy and I may have a little bit of a difference of opinion here.

Ray Boshara: We encourage that.

Gary Ransdell: I worry about the federal government getting into that business because so many students, especially in public higher education can go to institutions for geographic reasons and for cost reasons. And when you start threatening with holding a federal support for institutions, which means support for those students based on an institution’s performance on students getting jobs or other variables, then it’s the students who are going to suffer. Not the institutions as much as the students. And I worry about unintended consequences of such performance measures by the federal government. And the second thing I worry about are the liberal arts. Are the important learning variables in a higher, and it is higher education for a reason that go way beyond a chosen discipline. And when we start threatening to withhold federal support for institutions that don’t produce employable graduates as much as those who do, the Liberal Arts Institutions are going to take a beating in that measure. And so will public institutions that try to continue to emphasize the importance of learning outcomes that aren’t necessarily only tied to job performance. I understand the dynamics of repaying student loans. You’ve got to get a job to be able to do that. Yes, I get that. But it’s not that simple. It’s a far more complex picture. And one of our jobs is to create learned, globally thoughtful, civically engaged graduates and that doesn’t always relate to getting a job. But those who do have those skills are going to be far more successful in those jobs if they do get a job.

Sandy Baum: So, I’m worried about what you think I could possibly disagree with in what you just said. Because I totally agree with what you said. Moreover, however, if we are going to have—I mean, students do need more information. So, I think we have to be careful about saying that we shouldn’t put the information out there. But right now there’s a lot of data that is worse than no data. So, I mean, earnings—and again, people do need to get jobs. But totally I agree with you. Earnings are a poor measure. We would say, don’t ever educate teachers because teachers with Bachelor’s Degrees have like, the worst earnings. But you need to make sure that any metrics are adjusted for the characteristics of the incoming students as well as for the geography and so-on. But the worst idea is to link these ratings, if we had them, to the student aid that individual students get. I mean, really? You’re going to say to a low income student, if you go to that institution you’re going to get a smaller Pell Grant. So, you should go to the institution with the higher rating. And as you said, they don’t pick institutions that way. And that is just going to punish students. It’s not going to happen so we shouldn’t put too much energy into it. But it’s a terrible idea.

Gary Ransdell: Cool. We agree.

Ray Boshara: Okay. I tried to start a little spark here, a little fire, but I didn’t succeed. So, maybe I’ll come up with something else. Willie or Jen, did you want to comment on that question? Or, you don’t have to.

Jen Mishory: I mean, I would say that data and information is very important to students. And providing that information and then providing that information in a way that works for students to help them make decisions is very important. You know, we do want to make sure that something like this wouldn’t cut off access for low income students. That being said, we know that there are schools that simply aren’t serving students at all.

William Elliott: I’ll say one simple thing. It is interesting to me. And I don’t want to like, because I’m actually for student loans. But it is interesting to me that they drive our decision making process to the degree, so I think it puts over-emphasis on it. Right? Why are they, it says too much, they’re making too much of the financial aid pack, it’s too much money. It’s driving my decision to where I have to choose what major I take based upon how much student debt I’ll have afterwards. There’s something just not quite right with that. If we can’t find an alternative to that. Right? So, I don’t get that. And you could see that in many different ways where it’s driving, where we keep talking. It’s like, well, it’s going to make this decision, this decision, this… Are students are making their whole decision about—I was privileged to go to the Washington University here in St. Louis. And every time I come back here to St. Louis, I always go and I walk, and I stand in the middle where you can look at all the buildings. I mean, education is more than, like you’re saying, just getting a job and making money. It’s that total experience that shapes you as an individual. That gives you perception about the world at 18. And I also think it’s a problem with how much information, we’ve given more information, but when is it too much information when I’m trying to make this calculation as a student of what’s a good cost/benefit. And if you keep dumping all this stuff, I’ve got to factor all this in. I’m not—that’s a hard thing for me to figure out. Ten years from now, twenty years from now what’s going to be the best job and all this. How much debt, how much interest is going to be on it? How do you do that? And do it well? I don’t know.

Ray Boshara: Thank you. It’s a challenge. I think everybody would agree there’s complexities even if we thought it was a good idea. But the core question is accountability. Is there some accountability or more accountability perhaps for the universities? I hope we can come back to the IBRs, the Income Based Repayments and hear your thoughts on that. But I’ll hold that and I’d like to turn to the audience. And if you please raise your hand and be sure to state your name and affiliation. So, let’s see. Let’s start in here. Anybody who hasn’t yet asked a question? I see two people who’ve asked questions already. Anybody with a new question? If not, we’ll… Okay. Please. Now, I’ll get you guys too. Okay. Please, go ahead. Yes?

Ann Robertson: Ann Robertson, Washington University here in St. Louis. Thank you so much for your thoughts and comments. And I want to speak maybe to something a little bit different that hasn’t been discussed in depth. And that is this group of people who are not traditional students. And I’m thinking specifically of student parents. These are people who are going back to school when they’re trying to also parent children. And the debt that they may incur. And I know one of the speakers talked about how this non-traditional group is incurring quite a bit of debt. Women in particular are worried about paying that back. And there isn’t much research on why these students may not matriculate, be successful and matriculate. But some of it that is out there says that it’s the culture of the university that is more of a problem than actually the coursework. And that is the culture of the university; childcare, healthcare for themselves and their children, housing, policies at the university that might not allow them to finish a class if there’s a large event like a pregnancy. So, I’d like you to speak a little bit more about how the culture of the university, policies in particular could change to facilitate successful matriculation.

Jen Mishory: I think you’re right that there’s not enough research on this and it’s an issue that we’re particularly interested in investigating more. But particularly around how we can be supportive of young parents when it comes to childcare and going to school. That’s something when we do talk to young parents that comes up quite a bit is the barrier of trying to make sure that they have access to childcare, access to childcare that they can afford when they’re perhaps taking out student loans and Pell Grants and trying to attend school.

Sandy Baum: There is some encouraging work going on to try to connect students, older students particularly to income support programs. Unfortunately some states and some federal programs make it more difficult to get income support programs if you’re in school. And certainly being in school should qualify as working to make people be able to get these benefits. I think we have to acknowledge that we have a really huge problems which is like a single mother with two kids. I mean, we can’t give her more hours in a day. And in order to make it feasible financially for her we don’t just need to give her a couple thousand dollars extra, we need to sort of give her, pay for her kids to have childcare and for everybody to eat and to have housing. And this is a complicated question whether we really are going to do that other than through these other income support programs. But I think also getting people guidance about what is feasible for them. I mean, it’s probably not a good idea for her to start a Bachelor’s Degree in, you know, Liberal Arts right now because she’s going to have real trouble with that. She needs to do something that’s going to make her employable in a short term. And, unfortunately, life circumstances mean that her options are probably more limited. But I really think that this access to other funding and the institutions can go a long way to helping people get that access.

Gary Ransdell: That’s really an insightful question and I don’t have an answer. But it’s going to cause me to go back and do a little bit more research. We’ve grown for 15 straight years in our total enrollment. And this is the first year that we’ve been down since 1998. We’re down a few hundred. And as we drill into the data we’re finding that white females is a significant portion of that decline. Mainly part time students. And your question causes me to think that maybe some of the things you mentioned may be part of that reason. So, thank you for your question because I’m going to go back and look into those kinds of things as maybe a cause and effect.

Ray Boshara: I would just do a brief shout out to a report that Sandy co-authored at the College Board that we need to re-think Pell Grants. And maybe bifurcate them into Pell Grants A for adults and Y for younger students. And, you know, it’s not a one size fit all anymore. We need to re-think how we structure that aid. And maybe that might provide some insights as well, and some help if that goes forward. So. Great. Okay. Next question? Yeah. Go ahead, please. Here, here and then in the back. Please.

[Unintelligible 00:13:00]: [unintelligible 0:13:00] St. Louis Fed, particularly for President Ransdell but other representing institutions of higher education maybe wanted to comment too. My question is about the business model of higher education. Is it sustainable in the sense that you have means of financing that may or may not be around in ten years? For example, we’re talking about the student loans and the difficulty that young people are facing; borrowing for their education. What about for the students who are paying full freight? Or, out of state students? Or even in state students who are paying full tuition? In other words, do you worry about these revenue sources that may change pretty significantly?

Gary Ransdell: Yes. I do worry about that. Like a lot of public institutions, with watching the decline of in-state residential students in Kentucky, it’s a modest decline but it is a decline. And that decline is nationwide in most states. And so, we’re challenged to maintain market share from those students. But we are absolutely looking at recruiting more out of state students and more international students. We went from 800 to over 1100 international students, full paying international students, from last year to this year. The world’s a big place. It’s a big marketplace. And it’ll be a generation, 20, 25, 30 years, before most countries build enough new universities to meet their demand as their economies grow, particularly in the Middle East and in the Pacific Rim. So, we’re recruiting international students pretty aggressively. Is that sustainable? Yeah, I worry about that. Particularly as there’s a dramatic growth in students from Saudi Arabia and some of the other Middle Eastern countries. But particularly Saudi Arabia. And that could change in a heartbeat based on a world event or any number of public policy matters that could affect that number. And we’re starting to get a little bit dependent upon that. So, yeah. We’re trying to grow those numbers. But at the same time there’s a caution in that strategic decision. But on the other hand we’ve got to look at new markets. And how do we penetrate those markets like most American universities are doing? So, yeah. Your question is right on. But that doesn’t change our immediate strategies. But, yeah. We don’t fully understand the risk but we know there’s a risk there. And it’s going to be one of those short term, long term things. We’re just going to have to measure the short term need against the long term implication.

Ray Boshara: Quickly.

Audience member: In general the research and teaching balance, is that a sustainable model?

Gary Ransdell: I don’t think it is sustainable because the federal government is dramatically reducing its support for research which is an unfortunate thing, I believe, in terms of our economic vitality as a nation. And universities first and foremost are drivers of our local, regional, and state, and national economies. And when you start declining support for research you’re going to impact that economic impact of higher education. However, how much can major research universities continue to support research? Only faculty in light of that declining research support mechanism, that variable. So, I don’t have an answer for that either. But I know that dynamic is changing. It’s even changing on my campus, where we’re more undergraduate oriented but we have major research dynamic. And we took a big hit when federal earmarks ceased. So, yeah. There are a lot of things changing in higher education. And you address too significant dynamics that all, well public university, but public and private institutions that are thinking about while we’re watching the poor profit sector and the online dynamic change how we do business as well.

Ray Boshara: Can I ask my colleagues to put our standing slide back up that has the website? Somebody can just put that back on, that’d be great. Okay. So, Robert Nasser, and then the back in the white shirt. Sir, you had your hand up. I don’t know if you still have a question. And then Sandra. And then in the back. So, those are the next five. And remember to state your name and affiliation.

Bob Hildreth: Thank you, Ray. I’m Bob Hildreth and I represent FUEL Education in Boston. I don’t know if the panel saw yesterday, I guess, or this week, that Lesley University in Cambridge made a major decision. And what Lesley did is they cut their tuition from 40,000 a year to 25,000 dollars a year. Now, part of their thinking was that at 25,000 dollar a year you’d need a lot less student debt. And they hope that especially they can save but that’s obviously going to help just about every middle class student at Lesley University. Now, what they can’t do, and what they were doing before with differentiating pricing is, to the people who were paying 40 or 50,000 a year, they were using that to subsidize low income admissions. So, now they have killed their ability to really do that. And I’m just wondering if this became the new world—Lesley University, by the way, is kind of a major institution because of its online footprint which has thousands of students. But it’s also, in Boston, a major institution for elementary education teachers. I’m just wondering do we want to stick at that very high price and have a subsidized system or do we want to go down to as low of a tuition as possible?

Sandy Baum: Let me just say that I think in the case of Lesley College they were very clear that it’s not really that anybody’s going to pay less. It’s that they were giving grant aid to discounts to almost every student. And so really what they’re doing is just saying it’s going to be clearer. So, I don’t think it really is going to diminish the amount that anybody has to borrow. But the fundamental question is, is this pricing model where we price discriminate and charge some students who can pay more than other students? Right now we’re charging not just some students who can pay more but some schools are actually charging students who can’t pay more because they’re trying to attract students using merit aid. So, I think that we are going to move towards a system where there is less of that, a hundred percent of the students get a discount. I think that’s a good thing. It’s a little bit crazy to do that. But, no. You’re absolutely right. That we absolutely have to have institutions subsidizing low income students and using need-based aid or we will dramatically restrict access to, at least, to private institutions. And that’s true for public institution to an increasing extent.

Ray Boshara: Thank you. Nasser? I think you were next.

Nasser Humdee: Thank you. My name is Nasser Humdee [phonetic 00:20:46]. I’m with Equifax and the questions and views I’m expressing are not opinions of Equifax. So, I know that today’s topic was rather promise perils of the future of student loans. And we’ve heard the distinction between federal and private loans, repayment options, the income based repayment potential impact on the segments of the society. As well as impact of choice of major on your ability to repay. When I think of education I think of it both from an economic perspective as well as a social perspective. And those two don’t necessarily align. From an economic perspective I might argue that comparative advantage says maybe we should import our education. We shouldn’t spend money educating because it’s more advantages than economical to get a PhD in our engineers from India, China, or otherwise. On the social side there’s an ally to society. You know, just have individuals that are more educated and enlightened as Doctor Elliott eluded to has substantial value. Who should be paying for that? Should I ask the individual to pay for that? Or should society, the government be paying for that? There’s an issue or moral hazard implicit in the way we set up students loans. On the one hand those liable for the loans are the students. But those who end up with the money are the colleges and universities. And those footing the money or putting out the money is government. So, there’s this huge issue of moral hazard that arises. When we talk about the RY in education and Mr. Emmons commented on the sustainability of the business model. So, many economists argue that a college education is nothing more than a screening mechanism. That the value that you’re driving is not inherent in the education you got but rather it’s a very expensive way in which we screen individuals that are more capable of performing certain types of jobs. Based on that argument, should everybody be going to college? Does everybody has the capability to go to college? Or, should there be a certain threshold where we say, you know, you do have the capability, it’s worth making the investment in you. Or did I just hey, we’ll foot the bill for anybody that wants to go to college?

Ray Boshara: Willie? I’m really worked up here.

William Elliott: I’ll jump in just on one piece of that.

Nasser: One last comment: And I just want to know if we need a more efficient system. If it is a screening mechanism, do moves for instance, massive online open courses coupled with certification, are those deemed to replace the current education structure, in which case we might not need student loans?

Ray Boshara: All right. Thank you.

William Elliott: I’ll take the easy piece of that. If it was a screening mechanism, I don’t think I would have made it. I’m a high school dropout, GED person. And I developed much later in life. And so I think you would lose out on some really, people can add a lot to the conversation by having a screening mechanism at an early age. And so, yeah.

Gary Ransdell: Let me try to address a couple of those. We have different types of institutions. Community colleges, vocational institutions, public, private, graduate research. And so there is a way for most everyone to get a higher education. But it is a higher education. And not everybody is capable of achieving it. It’s called higher education. But everybody should have a shot. And I think our portfolio of institutions in this country gives everyone a shot. But it should not be a screening. And again, it’s not to be more than just the discipline that you chose to study that leads to a job. And so I want to reiterate that point. There’s great value in it in terms of producing employable people but good citizens with social responsibility and a global context to be a contributor in ways that go beyond just income. And that, to me, when you say higher education, that’s what you’re talking about. And I don’t remember the other seven things you asked.

Ray Boshara: To be continued in the reception.

William Elliott: I know we don’t have time for this. I just want to throw this question out there though. I do think there is a valid question about, do individuals benefit more or society benefits more in a modernized, specialized society like we live in today. Where if I solve cancer I benefit monetarily a lot. But you’d also benefit quite a bit as well. And so, I think there is a real valid concern about that.

Jen Mishory: I mean, more often than not a college education is the gateway to a middle class. And so, yes. I think that everyone should have the opportunity to that gateway.

Ray Boshara: I’m going to take the next three questions together. And then we’ll have a chance for the panel to respond. Gentleman in the white shirt, you had your hand up earlier. I don’t know if you still have a question. No, you. You. Yeah. Did you have your—you didn’t. Okay. I’m sorry. Sorry about that. Okay. I know, okay. Up here.

Audience member: I did earlier but necessarily kind of touched on itself. I’m fine.

Ray Boshara: Are you sure? Okay. Then, okay. Then, Sandra, and then, is that Sean in the back? Okay, great. I’ve got some glare here. Why don’t you guys each take your questions first and then I’ll have the panel. Is there a third we can put on the floor? Okay. Yes. And oh, okay. One more if we have time. Let’s do the next three to begin with. So, Sandra, Sean, and then in the back. Okay.

Sandra: First of all I’d like to say good afternoon and this was really a very informative panel. My question revolves around the issue of securitizations. And first of all, are you aware or do you know the magnitude of the student loan securitization market? Number one. Number two, has there been any sort of lessons learned from the mortgage crises in terms of implementing the securitization process so that we don’t repeat the same mistakes that we made in the mortgage market. An example of that would be a volume driven or a volume based business. Making loans without regard to the individual’s ability to repay. And the resultant default that occur that pretty much crash the financial markets. And so that’s it for me. Basically the idea of securitizations; how big is the market? Have we implemented any lessons learned from the mortgage crisis to ensure that we don’t see a similar sort of calamity on the investment piece of student loans in default?

Ray Boshara: Okay. Hold that thought. Sandra and then Sean if you want to put your question on the table.

Sean Wang: Yeah. Hi. I’m Sean Wang. I’m currently a student at Wash U. If you don’t mind I wanted to jump back to more, a topic that we discussed earlier. And just a reminder, Rohit in his keynote address, he kind of mentioned that in his opinion, when the primary incentive misalignments lies between schools and the federal government in that some schools may have a focus on enrollment rather than educational outcomes. Now, as we discussed earlier, the panel seemed very strongly against high performance to financial aid. Because it might distort individual choices in schools, it might distort access. But if this incentive and misalignment is a particular problem, just know, what does the panel think are some good ways to hold schools accountable for student outcomes rather than simply enrollment without having these big distortions on an individual choice as perhaps tying performance to financial aid might be?

Ray Boshara: Okay, great. Hold that thought. And, sir, in the red shirt. Yes. Name and affiliation.

John Brandt: John Brandt from Missouri Baptist University. One thing I was asking is, what impact do we think our national debt has as a society on our ability or willingness to borrow? You know, if our government can borrow so much money, then, you know, why can’t I do that and have it forgiven and all that stuff? But, coupling that with the national debt but also, the funding for higher education. Because did he say we want to have less loans and more grants. Well, with the mandatory spending that the government has to deal with, there isn’t much left when you get all those pieces and then to deal with higher education and finance. So, that’s the piece between national debt and then budgeting appropriate funding.

Ray Boshara: Thank you. So, I think what would be best is if each of you take one of those. We’ll just go down the line. Whichever one you want.

Sandy Baum: And I get to go first. That’s good.

Ray Boshara: And we’re going to fight over who goes first here.

Sandy Baum: Because some of these questions I think none of us are actually the right people to answer these financial questions. But.

Ray Boshara: Okay. Well, and then what we’ll do is we’ll just do one each. And remember, we have an hour and a half reception with a nice dinner and you can continue all these discussions in the hall. Okay.

Sandy Baum: So, I’m going to address the accountability question because I think maybe I said some things that might require some clarification. One is, I do not think in any way that a student’s individual aid should be like, metered by the rating that their institution gets. That just punishes the student and it’s very complicated. That is not to say that we shouldn’t restrict access with federal aid to schools. I mean, if schools are totally not performing, then you should not be able to take your federal aid there. I think students reasonably believe that if they can get a Pell Grant and a federal student loan to go to an institution the federal government is in some way giving that institution a stamp of approval. And if that school has a five percent graduation rate and nobody ever repays their student loans, then they should just be out. It’s not that you should get a smaller student loan or something like that. There are some proposals, so we should absolutely be accountable. We might do things like talk about if students have a lot of debt forgiven through an income based repayment, maybe the institution has to be responsible for part of that. So, there are ways to do that without punishing the student. But there are a number of proposals out there not to sort of risk rate federal student loans to sort of say, let’s do a complicated econometric model and find out what your probability of having reasonable earnings and being able to pay back your loan is. And then give you a different interest rate. Giving students higher interest rates because they are at risk is not the solution to saving students or to getting students to go to the right institutions.

Gary Ransdell: Yeah. I’ll try to answer a couple of those briefly. First of all, securitization should, in my opinion, should not be a factor in the granting of student loans because how do you know when you’re talking about a 17 or 18 year old? I just think that gets to be a very complex and potential for an unfortunate situation. To tell a 17 or 18 year old, you can’t securitize that loan therefore you can’t be it because you’re from a low-income background. Which is probably going to end up being a factor. And no, I do not think that the 1.2 trillion dollar number of student loan is anywhere near what the mortgage bust was in terms of the total value in our nation’s economy. So, I don’t think there’s a correlation there at this point and time. Ask me again in ten years. You know? Might have a different story there. But right now no correlation between the student loan problem and the mortgage problem that led to the recession that we’re just now coming out of. In regards to the national debt, the federal government is making money off student loans. So, I don’t think that student lending and Pell Grant funding is contributing to the national debt. And in fact, if we’re going to come out of this national debt we need to have more wage earners with college degrees in the workplace. So, right now, as I understand the numbers, the federal government’s making more off the interest on loan repayments than it’s paying out in Pell Grants.

Ray Boshara: 45 billion compared to 36 or 7.

Gary Ransdell: There you go. So, I don’t see that as a contributor to the national debt problem. That’s a whole different political and economic discussion that we’ve got experts with the Federal Reserve that could address those problems. But I don’t think student lending is a contributor to that. And if we have institutions that are performing as low as you suggested, then, yeah. Hell with them.

Ray Boshara: All right. Jen?

Jen Mishory: What I thought I heard was a question as to whether there’s a debt culture problem. And I think that it’s important to remember that students don’t want to take out debt. They are facing a situation in which in order to go to school and in order to pursue an education to get ahead they need to take out debt. When my mom went to school in a public college, you know, around that time it cost a third of what it costs at a public college today. So, they’re just facing a different situation than earlier generations.

Ray Boshara: Willie?

William Elliott: I don’t think I have too much to add. I agree with Sid here. I would just say is, I would like to pick up on that one statement, that I do think for a low-income individual, it’s the slight opportunity, right? It’s like a lottery ticket. It’s like football for some of them. Right? In the sense of, it’s the one opportunity they see that they’ve been told they can change their life trajectory. Right? And so, if I have kids or I have whatever else to go to school, it’s worth me taking out all this stuff to get into debt because it’s my opportunity to make it. So, if I’m asking can you make a rational calculation, it’s rough, right? It’s the only opportunity that they see for. So, yeah. They’re going to take on the debt. They’re going to say, well, just give me the debt because it’s the only opportunity I have. And they’re going to move forward. There should be a better option for them in the end of the day. There really should be. Can’t ask them to make a decision.

Ray Boshara: Okay. I would be remised, we have three minutes, if I didn’t mention one of my own favorite ideas. Which is putting together work that Sandy has done with work that Willie has done. You have this huge funding stream of Pell Grants; 37, 38 billion dollars a year. It’s a major form of aid to low income students. And it’s basically working as intended. It needs some reforms as Sandy has pointed out. But there’s an idea that maybe you can take a portion of somebody’s Pell Grants, a small portion of it, and put it into a college savings account when the kid is five, or maybe when they’re 11. So, if they’re income eligible at age five, you know, assuming they were starting school. But they’re income eligible at age five or eleven, you’d take a portion of that they would have received as a Pell. You put it in a college savings account and you get that effect that Willie talked about with a friend who had the college savings account and went to college. And which is now the cornerstone of Willie’s and CSD’s research. So, you know, I think it’s a very interesting idea. I hope many of you ask them more about that idea in the hall. But I wanted to close with just giving each of the panelists, you know, to say, what’s your one take-away? What’s your one big idea for the future or for policy going forward? If you wanted people to remember, what did Jen say, what did President Ransdell say? What did Sandy say? What did Willie say? What’s the one big idea you have for the future or for policy as we go forward?

Willian Elliott: I think the one big idea is the Pell Grant idea for me. And I guess if I had, from what I said today, the one thing is, is I do we have to think about what our bar is for whether student loans are being successful. I mean, and are there alternatives? Often times you get the idea that we can’t do anything else. I don’t know if that’s a good enough reason. Maybe we should just do something else.

Ray Boshara: Hm-hmm. [affirmative] Great. Jenn?

Jen Mishory: Yeah. I think we’re going to be concentrating a lot on those two points; the front end and the bank end. And the front end, making sure that states are investing in public institutions and making sure that students really have a voice at the table when it comes to those decisions. And on the back end making sure that when students leave school that they enter a payment system that works for them. And we’re really looking hard at this and come driven repayment program that we can get all students into and make sure that we’re avoiding some of those high levels of default.

Ray Boshara: Thank you.

Gary Ransdell: I’m intrigued by the savings account idea by an advance on some of a Pell Grant eligibility, assuming that the savings account is managed. But I guess my question or my thought would be, is there a way that you can create incentives for students to finish? In other words, if they inherit a student loan at X rate, can that rate be reduced for those who graduate? And I don’t know how that gets done, or how much, if it’s even practical. But create an incentive that encourages students to finish because if you do, you pay less interest on your student loan than if you fail to finish. So, somebody can do a research project with the Federal Reserve on that one and see if there’s validity to that.

Ray Boshara: Take notes, Bill and Brian. Okay. Sandy?

Sandy Baum: So, I guess it would say, we have to design our policies with the understanding that higher education has a very high average pay off. It has a very high pay off to most people. And when people are saying, you know, it doesn’t pay off anymore. Or too many people are going to college, they don’t really have the data behind them. That said, not every path pays off for every student. And part of that is about the choices and the decisions they make. And part of it is just that this is an uncertain investment. We have to design policies that both encourage students to take risks, but reasonable risks. And then protect them when they don’t get those payoffs.

Rah Boshara: Great. Okay. Well, a round of applause for our panelists again.