NOVEMBER 18, 2013
Resources for Managing Student Loans
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)
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)
Roundtable Discussion (40:21)
Below is a full transcript of this video presentation. It has not been edited or reviewed for accuracy or readability.
Q: Hello? We are here as part of the Center for Household Financial Stabilities Conference: Generation Debt: The Promise, Perils, and Future of Student Loans. Joining me is Sandy Baum from the George Washington University and also doing some work with the Urban Institute. As part of today’s conference, Sandy will be part of a roundtable on the future of student loans and financing higher education. Hi, Sandy.
Sandy Baum: I’m happy to be here. Thank you.
Q: Thank you. Before we start, could you tell us a little bit about your research and your work in conjunction with the Urban Institute?
Sandy Baum: Well, I’ve done a lot of work on student loans over time partly documenting how students deal with their student loans and actually doing annual reports for the College Board on trends in student aid that document how much student aid there is. I’m very much involved in thinking about improving student aid policy and then trying to find out really what the accurate description of the student loan situation is.
Q: Interesting. You mentioned the accurate description so, you know, one of the questions here is what–this is a–you’re involved in research. We’re a research driven organization.
Sandy Baum: Right.
Q: So, what is the–what types of research do you think we need more of and also what types of data do you think would improve really the quality of the research that’s going on in student loans?
Sandy Baum: Well, I think there’s a tendency to look at the outliers, to look at the people who make headlines, to look at aggregate figures. A trillion dollars, that can be startling and get people’s attention, and we do need to get people’s attention because there are real issues that need to be solved with student loans. But, we also need to look more broadly at how student loans are helping people, at the vast majority of students who are borrowing and paying back their loans successfully and then focus on how we solve the problems that are facing the students who are not succeeding and who are really struggling to pay back their loans.
Q: So, to follow up on that, what is the biggest issue then in regards to student debt in your opinion because certainly we’re going to hear a lot of perspectives today?
Sandy Baum: Right. Well, I mean the issue is that there are a wide variety of students and a wide variety of institutions in this country and many students don’t borrow at all, others borrow excessively. And there are students–most of the students whose stories we see on the front pages of the paper, we could tell them in advance that this is not going to end well, but nobody does tell them.
And so, we need to figure out how to get better advice to students, how to make sure that the loans and the institutions that are trying to attract them but won’t be good for them don’t have the opportunity to take advantage of them. But, we can’t do that by painting all student loans and all student borrowing with a broad brush because without student loans and without accumulating debt, many students would simply be unable to get the education that transforms their lives.
Q: So, this is a conference today that’s really putting together the latest research and also the latest policy thinking on student debt. So, what do you–what is the best idea that you’ve heard and best policy idea in terms of the student lending market as we kind of look at some of these figures in terms of just the level of student debt in this country and some of the challenges that some students are facing?
Sandy Baum: Well, historically, we’ve provided subsidies for student loans, but we’ve decided who deserves the biggest subsidies by looking at their circumstances before they enroll in college. And really the repayment problems are problems that occur depending on people’s circumstances after they leave school. So, there is now a federal income based repayment plan that does allow students to pay according to their earnings.
But, if we really understand that higher education is a very good investment, but it’s an uncertain one and that one that works well for most people, but not for everyone, then we understand that we really have to focus the subsidies on people who are unable to pay after they finish college. So, we need to strengthen the income based repayment options. We need to make that the way that most people pay off their student loans so that students know ahead of time that if it doesn’t work out, that if they don’t earn enough money, they’re not going to be drowning in debt.
Q: So, we are about six months out from a brand new group of high school graduates many of whom will fund their higher education through student loans.
Sandy Baum: Right.
Q: Based on what you’ve seen, based on your research, if you’re sitting there talking to a group of high school graduates, what’s your best piece of advice for the individuals?
Sandy Baum: Well, before I talk to the high school graduates, let me just say that some of the people with the biggest problems are not recent high school graduates. Actually older adults who go back to school tend to borrow more than people who go right after high school. So, we need to think about getting advice to those people as well and that’s actually harder to do because we can sit down with groups of high school graduates and it’s much harder to sit down with groups of adults who are going back to school.
But, we need to tell these students that they need to think carefully about their options, that they need to look not just at the published prices, the sticker prices of institutions, but at how much financial aid is available at those institutions and that they need to understand the difference between federal loans and private loans. They should try very hard to borrow only through the federal government and they should think about what the repayment obligations are going to be, think carefully about whether the borrowing that they are planning to do is necessary and whether they think it will be manageable. And encourage them to borrow, but to borrow wisely.
Q: If I could follow up on your–on the other point you made on some of the older adults and financing college because I think that’s an important point and it’s one that doesn’t always come across.
Sandy Baum: Yes.
Q: We’re five years out from really the debts of the financial crisis and one of the stories that we heard over and over again was that lots of jobs just went away, employment shrunk. And so, retraining was an important aspect for certain individuals to re-enter the work force after losing their job and it seems to be exactly where that sweet spot is. As one is trying to retrain and better themselves, they may take on debt. So, can you talk a little bit more about what you’ve seen among these older adults, some of these retrainings and some of the pitfalls that they’ve specifically fallen into?
Sandy Baum: Well, you’re right that the recession was a time that brought many older adults into the workforce because of limited–into school because of limited opportunities in the workforce. And it’s important to note that federal student aid does extend to these older students. About half of the Federal Pell Grants for low income students do go to older adults. So, it’s not that we don’t subsidies them.
But, for these people, they don’t have parents in the background to help them out and they are allowed to borrow more than others. So, what we really need to look at is where they’re going to school. Many of them who could actually go to a community college in order to get education for the jobs that they’re interested in, instead chose much more expensive for-profit institutions. For some of them that works out well, but for many of them they accumulate much more debt than they would have to accumulate if they went to a public institution. So, they need more guidance about where to study, about what to study, about which occupations are going to have jobs in their local areas, and about which borrowing and which institutions is likely to help them achieve their goals.
Q: Well, thank you.