The Real Cost (2021) - full transcript

- Roll it.
- Is this... Is this good?

Camera's rolling.
Sound speed.

In the last
decade, student loan debt

increased by an average
of 91 billion dollars per year.

Schools are
just incentivized to sign up

anybody for a loan
and not think about:

can this person get a job, are
they going to be able to repay?

College should be a ladder up.

For too many people,
debt is the anchor

that weighs them down.

There was
some kind of crown put atop



a four-year college degree.

This
is hurting the country badly.

So, when I look
at the question about should

student loans be forgiven,
implicit in the word forgiven

is that someone
did something wrong.

The student loan program
was a program

started with
the worst of intentions.

I just spent $50,000
on this degree.

You would think that
it would mean something.

You know,
I pay all this money in,

but am I really getting what I...

what I'm putting into it?

Baby boomers
only had to work 306 hours

to pay off
their college tuition.



Millennials today would
have to work 4,459 hours

at minimum wage to pay off
a four-year college degree.

Everybody who is in
high school now sees the debt

being erased, then they're going

to borrow as much
as they want and maybe

more because, eh,
it'll, you know, I'll wait

for the next
round of forgiveness.

It was supposed to be

for the impoverished
and low income people.

On the student loan issue

there's quite a bit
of low hanging fruit.

Things that could
be fixed, but that take

a tremendous amount
of time to be implemented.

And unfortunately,
in the meantime, people suffer.

Several Democratic lawmakers

have unveiled a plan
to cancel thousands of dollars.

President Biden could cancel

$50,000
worth of student loan debt

basically
with the stroke of a pen.

A.O.C. is overreaching
here and it's a bad policy.

We need to think hard about

the distributional consequences.

Who benefits and who pays?

The guaranteed
student loan program.

What that title
does not tell you

is the guarantee
was for bankers.

The guarantee
was that if a banker

put out the money
for this incredibly

risky financial product,
the banker would be repaid.

Not that a student would
get admitted, not that a student

would finish,
not that a student would

really be able
to compete with a well-paying

job with equal pay.

The banker would be repaid.

And we're
going to have a new wave

of a different set
of concerns over time.

This program
that was beneficial,

it's become almost like a curse.

- It's a ripple effect.
- And I think it is

one of those great tragedies.

It makes you
see a lot of American history

in a different way.

The American dream

has almost been
weaponized to induce people

into borrowing loans
because you have to go

to college if you want
to live the American dream.

We don't talk about
debt and money and how to handle

that properly with our parents
or in our upbringing.

We don't talk
about that in school.

Of all places, we should
be taught that in school.

Certain decisions
can be catastrophic

and lead
to lifetime consequences.

It just doesn't make sense that
this could come out of nowhere.

It just doesn't.

The solution
to the student loan crisis

is probably expensive.

It's not going to be perfect.

There is no magic wand
that makes everything better.

Some people are going
to end up much better off

than others
no matter how we fix it.

And because when people
don't like the solution

to the problem, they deny
the existence of the problem.

Should I...

Is this... is this good?
Does this work?

Yeah,
that's perfect. Roll it.

Camera's rolling.
Sound speed.

Okay. I'll practice
my "I'm Melanie Noel Hanson."

No. Melanie Hanson. Sorry.

Hi, I'm Melanie Hanson.

I am a research
analyst and senior editor

at the Education
Data Initiative.

- Awesome.
- Okay.

I always wanted to be a writer.

Well, I got my master's at
the School of the Art Institute

of Chicago and,
you know, said to my...

some of my classmates,
like, "Ah, yeah, I love...

I love writing, but gosh,
don't you miss math?

Just, don't you... don't you just
want to do some math homework?"

And they're... "No!"

I focus a lot on fact-based
evidence.

I also taught academic
writing at the college level.

I realize that
the emotional side

of the argument,
the personal anecdotes,

they're very useful
for helping people understand

a problem and empathize
with the... the people affected.

But the thing
I like about data, I mean,

you can look at these
numbers and say, "Look, this...

this is a fact.

This isn't
just somebody's story,

and maybe it
happened and maybe it didn't.

This is the actual
1.75 trillion dollars

is how much we all
owe in student loan debt.

It's... see,
it's right here."

The Federal Reserve website.

You can look at it.

♪

Student loans
are a nuanced, uh, problem.

And nuanced problems require
nuanced policy solutions.

My name is Constantine Yannelis.

I'm an assistant
professor of finance

at the University of Chicago,
and most of my research focuses

on the student loan market
and human capital investment.

♪

There's definitely very
strong academic evidence that

colleges have raised their
prices due to government loans,

and this was first proposed
by William Bennett, the, uh,

Secretary of Education
in the Reagan administration.

And this idea
that government loans

lead to higher
tuition is often called

the Bennett Hypothesis
for that reason.

And I think in
the eighties or the nineties,

it was viewed as kind
of this crazy idea,

but now it's commonly accepted,
and there's quite a bit

of evidence that government
loans do cause higher tuition.

♪

There are a lot
of indicators that we have

a very serious
problem with student loans.

We've got nearly
two trillion dollars

of student debt, people
are living with student loans

for decades,
delaying having kids,

delaying getting married,
they're unable to buy a house.

It affects every major decision

that an entire generation
of people are making.

We can do better.

Student loans should
be a tool for generating access,

but they've gotten
so out of control

that it's scaring people away.

♪

My name is Michael Lux.

I am the founder
of The Student Loan Sherpa,

and I guide
people through repayment.

♪

The idea behind
The Student Loan Sherpa,

where the name
Sherpa comes from.

The Sherpa are the guides
who help people scale Everest.

And the reason
these Sherpa are such

excellent guides
is they've been there before.

And I still have student loans.

I've been there.

And I don't know all the issues

that every borrower faces,
but I do know the stress,

I do know the pain, I do know
losing sleep over student debt.

And the website
is designed to be

a resource
for people to get answers

to the questions that
are keeping them up at night.

And it's to guide them through
their mountain of student debt.

Student loan debt
has surpassed credit card debt.

It's surpassed motor
vehicle loans, title loans.

It's surpassed every other type
of debt except for mortgages.

So, you have mortgage debt,

which is huge,
like, an unfathomable-ble...

unfathomable amount of money
I can't even conceive.

It's like Jeff Bezos type of...

maybe not that much.

But, like, more
money than I can imagine.

And then student loan debt,
second only to that.

It's got to have a tremendous
impact on our economy.

There's no way it... it couldn't.

♪

Now, in terms of why are

student loans
different from a car loan

or a home loan,
there are a couple of reasons.

So, one: if somebody
defaults on a car loan

or a home loan,
we can seize that asset.

So, it's collateralized,
whereas with a student loan

there's no asset to seize.

Another major
difference is that these are

18-year-old kids, essentially,

making borrowing decisions
with no underwriting.

And because of this
perverse incentive system

that's been created
by government loan programs,

schools are just incentivized
to sign up anybody for a loan

and not think about:
can this person get a job?

Should this person
be doing this, uh, degree?

Are they going
to be able to repay?

♪

Do you want
me to take my mask off?

- Now is the time.

Hi, I'm Elizabeth Tandy Shermer.

I'm an associate professor
of history,

and I am focused
on U.S. politics,

U.S. economics, labor rights,
um, the histories

of working people, law,
public policy,

looking at the intersections
of all of those things.

It is incredibly dangerous

that it's so
easy to get these loans.

That you can just
click through so simply.

And I actually had
a friend who used to work

in the student loan industry,
and she talked about...

they had the time.

About how quickly
people clicked through that,

and it was just seconds.
It was just seconds.

And it's dangerous
because it's just something

that you click through on yet
another website, yet another

form that you're trying
to do is you're trying to pursue

your dream, um,
of going to college,

that it doesn't teach you.

You don't learn about
the intricacies of these loans.

♪

Somehow, when you put the word

student in front of,
like, loans, it doesn't

sound like you should
be thinking twice about it.

So it doesn't feel like you're
actually taking on actual debt.

There's not a lot
of responsibility

in the decision making.

When you are taking a mortgage
it requires a lot more, right?

So, you have
to have your credit score,

employment, and have some
income in order to pay for this.

But there's no responsibility,
proof of income,

or anything that you have
to show taking a student loan.

It seems like it makes...

in theory, it makes higher
education more accessible.

But in practice, if
it's just seconds that people

are clicking through,
it really is dangerous.

It's not really the thoughtful

consideration about
what someone is entering into

and what you're
also signing up for.

And I do think
that is profoundly dangerous.

You know, oftentimes it feels

like a pyramid scheme...

here in the United States.

The people on top,
you know, they're making

all the money,
and the people at the bottom

are the ones
that are struggling.

Where's my Weber diploma?

It really isn't worth
as much as I paid for it.

Yeah, I don't even know.

I honestly haven't even looked
at it since, uh, since I got it.

♪

This... having this degree,

you know, I just spent $50,000

on this degree,
you would think that it would

mean something
and that you could...

you could actually turn around
and get a high-paying job.

But that's really not the case.

You know,
I pay all this money in,

but am I really getting what I...
what I'm putting into it?

Like, are they... are they
giving me that proper education,

or is it all just
watching movies and theory

and things that might help
me a little bit, but in the real

practical world,
it's not transfer...

translating over.

♪

One of my concerns
is education in this country

was set up
for a very specific reason:

to really raise,
uh, the lower class

and middle class up
from an educational standpoint.

And, uh, and it does
exactly that, right?

But I think
when you get to the college

or university side
of things, it's become way

to commercialized, and I think
it's more of a business.

And... and these...
these colleges don't

have the students'
best interest at heart, right?

They're running a business,

they're... they're
looking for profit.

My name is Taylor Nadauld.

I'm the H. Taylor Peery
professor of finance

in the Marriott School
of Business

at Brigham Young University.

I teach courses
in corporate finance,

venture capital
and private equity,

and I do research
in consumer credit markets.

So, for the past
12 years since I've been

a scholar,
since I finished my PhD,

my research has been
in consumer credit markets.

Student loans
are one of the biggest

segments in
the consumer credit complex.

They represent a really
important aspect of how,

you know, of how people's
financial lives are organized.

Part of the reason that we don't
know as much about student

loans perhaps as we might
want is because it's just really

hard to get your hands
on the right set of data.

There's this really
pernicious relationship between

the supply of student
loans and what it costs

to go to college.

And so, because that
relationship is reinforcing

the... the more student loans
are made available to students,

particularly through
the federal government,

the more expensive
it gets to go to college.

And so you
just have this pernicious

relationship
where tuition costs increase

and student loan
balances increase in concert.

♪

And really
the core of the student loan

problem, as I see it,
is an incentive, uh, problem.

And this incentive
problem is created

by these government loans.

So, the problem
is that the revenues

of these for-profit
schools are disconnected

from the actual
outcomes of the students.

If we have a revenue-maximizing
for-profit school,

if we have a for-profit school
that just wants to make money,

what they can do
is find warm bodies,

essentially, get them to
sign up for a government loan,

then those, uh, students
pay tuition to the school.

After they pay
their tuition they drop out,

they don't find a job,
it's not the school's problem.

They already got paid.
You know whose problem it is?

It's the taxpayers'
problem because the borrowers

are going
to default on their loans

and taxpayers are
going to pick up the cost.

So, we have
no mechanism of aligning

the incentives between
the school and the borrower.

And I think that's
why we see this predatory

behavior on the part
of for-profit colleges.

For-profit colleges
and universities,

almost 90 percent of their
revenue comes from federal aid.

So, the way that you
qualify for federal aid is

that you fill out a FAFSA
that helps the government

determine... determine
your financial need.

And you compare
their reported cost of living

off campus, cost
of living in a given city,

compared to the off-campus
cost of living

in the same city for a...
for a not-for-profit university.

Those differences have been

substantial in some
places that I've seen.

Why does that matter?

That matters because
it allows applicants to qualify

for a higher need,
and therefore to qualify

for more money which would allow
them to pay a higher tuition.

Did that... did that make sense?

What I want to say is
that I think there... there are

some examples of for-profit
colleges and universities...

at being really aggressive
about helping their students

qualify for loans and that
they do it for their benefit.

Top for-profit colleges

like DeVry, Remington
and the University

of Phoenix received
24 billion dollars

from federally-funded
student aid money last year.

These are schools
that allegedly were

misrepresenting
their enrollment benefits,

job placement rates
and program offerings,

often leaving students
with big debts and no degrees.

Critics
say the reason these for-profit

schools are keen
to enroll students is big money.

And it's really,
these for-profit institutions

that are driving
many of the very adverse

outcomes that
we, uh, that we see.

So, they account for about
10 percent of, uh, enrollment,

about 20 to 25 percent
of student loan borrowers

and about half
of all loan, uh, defaults.

So, these schools are
disproportionately the problem.

They're more
concerned about the bottom line.

What is the bottom
figure on this student?

They look at, "How much
money did we make

this term or this quarter?"

Many of these for-profit
schools are allegedly scams.

On average,
people who go to for-profit

institutions are
much more likely to borrow,

to borrow more, and not
to be able to repay their loan.

And so the issue
with the federal government

is that they're
really liberal in... in providing

the supply of student loans,
which is excellent,

we want our population
to be educated,

so... so we want to be, uh,
liberal in our granting of aid.

The cost of that
is that institutions capture

that increased federal
aid by increasing tuition.

I just want to make
sure you understand

that the... the for-profits...

so, if 90 percent
of your revenue comes from

the government in terms
of... in terms of federal aid,

then your ability
to increase revenue is tied

explicitly to
the supply of federal aid.

So, when federal aid goes up,
you're able to increase

your tuition, you know,
almost dollar for dollar

if 90 percent of your revenue
is coming from federal aid.

♪

When it comes to
the responsibility to make smart

decisions, we put that
entirely on the students.

You know,
the college doesn't say

"you probably
shouldn't come here

if you have to borrow
the entire cost of tuition."

Um, many students are first
generation college students.

You know, they don't... they
don't get training in personal

finance in high school,
and a loan with a 10 percent

interest rate in
compounding interest and things

like that,
they don't necessarily

understand
the consequences of it.

It's a huge problem because

a lot of the students
that they're targeting,

they don't have access
to the best information.

They're often first generation
college students.

They went to high schools
where most kids don't go

to college, so they don't
know the value of a degree.

They don't necessarily
know what information

to look at in terms of job
placements or what to major in.

And these schools,
they're very good at signing

these students up,
getting them to take,

uh, a government loan
that's used to pay tuition.

And making
matters worse is the fact

that we almost
indoctrinate our youth

on the importance
of attending college.

Uh, a college degree is almost
a necessity in American culture.

There's a way that it becomes

very easy to blame
the individual when in fact

we're talking about
a larger system of one,

um, instead of funding
these vital public goods.

And you're then going
to blame an individual

for following
what they were told.

You're going
to blame them for struggling

to pay something back,
which is an inherently risky

and challenging
financial product.

It becomes so easy
to blame the individual

for a societal
pressure and a structural

issue in terms of how
we pay for higher education.

We put college
on this pedestal that

this is where you need to go.

The American dream
is based on education,

and to realize that dream
you need to go to college.

And what's
required to go to college?

Well, if you want
to go to your college,

you've got to... you've got
to sign for these student loans.

So, there's almost
not a decision for students.

If students are told
"you have to go to college

to be successful,"
and they're told "the only

way you can go to college
is to take out student loans,"

well, then, I've got
to take out student loans.

There's not
even a decision to make.

Many students enroll
in for-profit colleges,

often in online degree
programs, thinking

that they've found a fast track
to the American dream.

The federal government

must become
a responsible lender.

The system today is broken.

We encourage
millions of students

to take on billions in debt.

Growing up, it was drilled
into our heads: you've got

to go to college if you
want a middle-class job.

They're not being able
to buy a home or start a family.

They cannot achieve
the American dream.

Borrowers who did everything
went to school,

took on debt, got the degree.

Now they are desperately trying

to pay it back, but
are derailed at every turn.

The government
can garnish a borrower's

wages without judgment,

seize tax refunds, such
as the Earned Income Tax Credit,

and portions of federal benefits
such as Social Security.

Americans should
not have to go bankrupt

pursuing higher education.

On the one side,
education, very important,

is highly correlated
with your financial well-being.

Research has shown
again and again that, uh,

college education is very
important to the success of,

uh, young people,
and especially given,

uh, the technology
advancement and international

trade, the gap between
those who have college education

versus those who
do not is going to be bigger.

Um, so, definitely
college education is important.

On the other side,
uh, we have this increasing,

um, debt burden
on students, right?

So, this is, uh, something
we have to really balance out.

Number one reason
is just the number

of college graduates
is increasing by more students.

Uh, not surprisingly,
we have more debt.

Number two,
uh, the cost of education

is increasing, right?

So, the tuition is rising.
Room and board.

Number three is more students
are going to graduate school.

So, a combination of all
these factors have made student

debt outstanding
increasing over time.

And young people
are told that they have

to go to university
in order to be successful.

And the issue is that
not only they are choosing

the best opportunity
that is available to them,

because this is what
their parents have told them

and this is what, you know,
society expects from them,

but they get there and they
might not be aware of that...

what they actually would like to
do for the rest of their lives.

So, I feel that a lot
of parents, and really society

as a whole are putting
a lot of pressure, or,

of deciding what you
want to do right away.

So, when you
attend college today,

there are so
many potential landmines.

You might
select the wrong school

and the tuition price
might not be justified.

Uh, if you take
out student loans,

you might pick the wrong
loan that has an interest

rate that's too high,
you might borrow too much,

you might pick the wrong major
that doesn't lead to a job

that affords you the ability
to pay off your student loans,

you might not graduate,
you might change majors.

And all these possibilities, um,

are things that
students don't contemplate.

Nobody goes
to college thinking about

what happens if they drop
out after their second year.

But it happens all the time,
and a lot of people have a ton

of student debt,
no degree to show for it,

and what are
they supposed to do?

Good morning.

- Ah!
- This took

We have friends with us today.

This took.

Oh, no. Should
we go downstairs? Whee!

Stop it.

Like that, right?

It's really
snowy today, so make sure

to have your
jacket on, okay, Chris?

- Yeah.
- Yeah.

Get that tongue in.
Okay.

It's dangerous that
we make this a trivial topic.

This should be at
the forefront of every

discussion because
the system does need to change.

We don't talk about
debt and money and how to handle

that properly with our parents
or in our upbringing.

We don't talk
about that in school.

Of all places, we should
be taught that in school.

We only learn it
by going out into the world

and hoping for the best,
but certain decisions can be

catastrophic and lead
to lifetime consequences.

There's definitely
a taboo in many homes

where it's improper
to talk about money.

There's also an element of shame
associated with student loans.

Um, you know,
there are a lot of people

who believe
"well, you signed the contract.

You have to pay for it.
It's your problem, not mine."

That makes
many borrowers hesitant

to bring it up,
even among family members.

Why are so many people prone
to dig deeper into debt, right?

Why do they feel
like debt is the solution?

It comes back
to lack of education,

lack of understanding how...

how much bondage debt really is.

If we were
talking about it openly,

more people could
avoid making bad decisions.

Debt is not
freedom, debt is not prosperity,

debt is not lifestyle.

Even if it's a short-term fix,

it's-it's not
a long-term solution.

In fact,
it's a long-term prison.

It's bondage.
It's captivity.

They're not able to do
a lot of things they want to do

because now they're
stuck paying off debts

and they have to make
extra money for that,

or they can't do other things

because all their money
is going towards that.

I think family
and friends all expect it.

Everybody's like "you know
what, you're going to be in debt

with a house, you're
going to be in debt with a car.

You know,
you might as well be in debt

with, uh,
with student loans, too."

Like, it's just
a normal part of life.

College education
is a part of what we call

a social agreement, right?
Social compact.

Uh, if students are,
you know, our futures

educated, uh,
they are better citizens.

And this is very
important for us to remember.

There should
be other options to get

into a career
without having to basically

destroy your
life at the same time.

But this
is a sort of pressure cooker,

so to speak,
and everyone has to work

harder to, uh,
you know, move forward.

I don't think it's...
there's a quick solution at all.

I think everybody's got to work
together to find a solution.

There's got
to be some brainstorming

going on because
there's got to be something

better than what...
what's going on now.

Economists would
use the term Pareto Optimality.

Uh, in other words,
they want to compensate,

make sure that
nobody is left behind.

So, how do we accomplish that?

I think right now
social policy plays

a very important
role in the process.

Well, I... I think
we're near 30 trillion dollars

in debt as a country
right now, and, uh,

I don't see
any slowing down in sight.

If nothing else, future
generations are going to be

paying for this
in some capacity.

Whether... whether it's forgiven
or not, something has to pay

all this debt off, and it's,
uh, probably going to be taxes.

No matter where you've been

or where you've come from,
this is your time.

If you work hard,
if you believe in yourself,

if you believe in America,
then you can dream anything.

You can be anything.

And together we can
achieve absolutely anything.

The American dream
is the chance for every person

- to improve their lot in life.
- But based on the numbers,

that dream is becoming
the stuff of fantasy.

The dream shared in big cities

and small towns, across races,
regions and religions

that if you work hard,
you can support a family.

That if you get sick
there will be health care

that you can afford.

That's the essence
of the American dream.

But today,
for far too many Americans,

this dream is slipping away.

Americans are
working harder for less.

Costs are rising,
and it's not clear that

we'll leave
a legacy of opportunity

to our children
and our grandchildren.

But this nation
was not founded solely

on the principle
of citizen rights.

Equally important,
though too often not discussed,

is the citizen's responsibility.

And therefore, the educated
citizen has a special obligation

to encourage
the pursuit of learning.

The highest
A.P.R. I had

for my own federal
loans was over eight percent,

and that was the one
that clinched it for me that,

you know, when I sat down
to do the math and realized:

I'm never going
to be out of debt,

I'm going to be
in debt my entire life.

And I had people explain
to me how student loans work

and how you need
to pay them off for years

and years and years,
and I understood that,

but I was expecting
to have a similar experience

to my siblings who are all
ten years older than me.

They went to
college and they got a job.

But that didn't happen for me.

I had, like, 800,
900 dollars a month I was

supposed to be paying
in student loan payments,

and I wasn't
even making that much.

I could not conceive
of the amount of money.

It... it didn't seem
like a huge amount to me

because I assumed I'd be
making what my siblings made,

like when they started
working at the same age.

I'm just now
making what my sister made

as a 23-year-old
in the late nineties.

You can't
have the American dream

if there's no solid economic
foundation for the middle class.

Wages for the top
one percent skyrocketed

160 percent since 1979,
while the share of wages

for the bottom
90 percent shrunk.

This not only separates us
on an economic level,

but widens the social gap
from the rich to the poor

and eliminates
that middle class.

There's been
a recent poll that shows that

just over half of all
of us Americans, 54 percent,

believe that the American
dream is still attainable,

while 28 percent personally
believe that it's unattainable,

and 9 percent
reject it completely.

American dream is inspiration

we all want to accomplish,
and right now

we are really
on the cusp of changes in...

at the crossroad at this point.

On the one side
we have this increasing

generational divide
in terms of their access

to opportunities,
their income and the jobs.

Uh, on the other side,
we also see the society,

um, is increasingly,
um, diverse.

So, how do we deal
with this new reality?

It's going to be, uh,
very important for the future.

Um, so, the idea,
uh, right now is

to build up a new
social compact between

generations and between
different racial ethnic groups.

I think only until
we find a mutual, you know,

area of agreement
that it will be very hard

for this society
to move forward.

Student loan
debt has surged to over

1.6 trillion dollars,
and only two thirds of that

is expected to be paid back.

For young people, debts mean
dreams delayed or destroyed.

It means families aren't formed.

The numbers are out of reality,

and certainly they make
it out of reality for students

when you have to pay
back those loans someday.

Helping more young people afford

college should
be at the forefront

of America's
agenda, and it shouldn't be

a Republican
or Democratic issue.

This is an American issue.

The only avenue to prosperity

is an expensive college
four year college education.

That that is one
of the biggest lies

sold to young people
in this country.

We don't give
student loan borrowers

a second chance in bankruptcy.

We let their wages be garnished.

We even let
their Social Security

benefits be seized.

College should be a ladder up.

To too many people,
debt is the anchor

that weighs them down.

This is hurting
the country badly.

We should care.

An old
17-year-old family friend?

Yeah, my mom is a...

Okay.
Sit. Sit up.

I think there's
a generational change now, too.

Millennials,
Gen Zs and maybe even Gen Xers

kind of don't
share the same ideals as perhaps

our parents
and our grandparents.

For us, really
having tons of money

in our bank account
isn't a satisfying life.

We're looking more
for meaning and value

in the things that we do
and in the lifestyle we live.

And supporting sustainable
future rather than this previous

notion of American
dream that was about,

in some ways,
a rampant consumerism.

And I don't necessarily
think that's a bad thing.

We have a... we're in a different
economic state,

the world looks totally
different, and I think the...

the ideals of a nation need
to be updated to match that.

What's our best future?

I think
the American dream is that

America is the land
of opportunity,

and anyone who's
willing to work hard

can find opportunity

and build a better life
for themselves and to build

a better life for them...
for their kids.

But it's scary to think
about the American dream

in the context of student loans.

This nation,
this idea called America,

was and always
will be a new world.

We want to see the future
we can make for ourselves.

But dreams alone
won't get us there.

We need to extend our horizon.

Commit to the long view.

And our mission
for the future starts today.

Whoa!

All right, well...

For me, the American
dream is... is having a house

of my own, having a dependable
car, being able to travel

around the world
with my wife and kids.

That to me is...
is what I want, you know?

I... I... I think
about it all the time.

I wake up every morning
thinking about what can I do

next to be able to get my
family to that point...

If you go back
about 100 years, early 1900s,

about nine out of ten
Americans were self-employed.

They had their own business.

They understood how to run
a business and monetize it

and contribute to their
community, and today,

nine out of ten
Americans are employees.

It really needs
to foster, uh, opportunity.

Creating more opportunity for...
for young people for our next

generation
so that they can accomplish,

um, what they want,
and reach their American dream.

I think that the
American dream needs to change,

and is changing, and thus the
way that we go about college,

go to college, and make
use of the education we get

from college,
needs to change as well.

- You know...

any parent just wants the best
for their kids, you know?

♪

- We want them to...

We want them to be able to,
you know, have a life that's...

that's happy,
that's full of joy,

where they have opportunities
to do what they want to do.

They have ways
to grow and... and not be, uh,

stifled by the limits of not
having enough funds, you know?

You only have enough
money to... to pay the bills.

I think we need to work harder

to make it even
more of a reality.

I think education plays
an extremely important role

to equalize, uh, equalize
opportunities, and I think, uh,

college education
is even more valuable,

important, for the future.

So, I think
that's why I, you know,

the student debt issue
is such an important concern.

♪

I like to believe
in the American dream.

I like to believe that
in the United States,

people can build a better
life than what their parents

had and build
a better life for their kids.

It's scary because
the American dream has almost

been weaponized to induce
people into borrowing loans,

because you have to go
to college if you want to live

the American dream,
and if you don't go to college,

you're a failure.

And when people have
that pressure on them to live

the American dream,
then they're going to borrow

the student loans
and they're going to make

ill-advised decisions.

And then when they're living
with the consequences of that,

you can't save for the future.

You can't buy a new house.

And when you can't buy a home,
which is another huge

component of the American
dream, you can't build wealth

and you can't achieve what
the American dream is selling.

So, I believe in the American
dream, I still think it exists,

but it doesn't
look what it looked like

for my grandparents,
or my parents.

And in the context
of student loans,

I think we owe
students a lot more

than what we're giving
them right now.

When I dream
about, um, my future,

is providing
a future for my children.

That they can have
an even better life,

uh, than, uh, than I had.

I think college
should be an educated choice

that you have thought about,
that you've been taught

about the pluses and minuses
of, and that decision

shouldn't involve
a lifetime of debt or not.

It should involve:
what do I want to do?

What will be my career?
How do I want to contribute

to society?

how much debt will that incur?

How fast will I pay it back?

Which job will
make me the most money?

That to me
is not an American dream.

That doesn't lead
to a better society.

A better society is a better
educated public with people

that are doing what they love
to do, what they want to do,

and we're all together to make

that dream
possible for everyone.

We're kind of in
a snowball effect that I don't

know if it's going to be very
easy to stop, but I feel like

if we don't figure out
a way to solve this problem,

things are going
to continue to get worse.

It's going to be harder

for students to... to get
an education.

It's going to be
harder to buy a house.

Honestly, the American
dream is going to end.

It's going to end
if we don't figure out a way

to... to solve this problem.

♪

And so the book
I wanted to do was a book

that actually tried
to reimagine the entire story

that we told about
American higher education.

And then my father fell ill.

And I, like so many women,
was going to provide his care.

And I'm cleaning out his house,
and I found the student

loan documents,
the first one that I signed

when I was 17 years old,
which is not a legal adult.

And the thing
that's very difficult,

people want to think of the
student loan crisis as recent.

They did not start
disaggregating household debt

to include a separate category
for student debt until 2003.

And then it was not until 2008
that more data was required

from schools, from bankers
involved in the programs,

and it changed everything.

And that has made
such an important impact.

But it meant
that this entire burden

that was on people's
shoulders has been lost.

And that was what I was
trying to do as a historian,

saying it just
doesn't make sense

that this could come out
of nowhere. It just doesn't.

To find
the origins of student debt

we have to go
back to the Cold War.

To 1958
and the space race to the moon.

All the eyes of
the world now look into space,

to the moon,
and to the planets beyond.

That only
an educated and informed people

will be a free people.

The Federal Student
Loan Program can really trace

its roots back to Sputnik.

Um, when Sputnik
was first launched,

American legislators
were very scared.

They realized:
"We're going to need

smart Americans to compete.

To get smart Americans,
we need to provide access

to higher education."

So, that's how the first
student loans came

about way back at
the beginning of the program.

Poverty must not
be a bar to learning,

and learning must
offer an escape from poverty.

This story that there's
a small Soviet satellite

that circles the globe,
and Americans are terrified,

and they pass this
National Defense Education Act

to finally put federal
money into higher education.

Except the first title,
the first section of the bill,

was a student loan program
for undergraduates.

And it really just,

I think of it as just
unleashing this Pandora's box.

John F. Kennedy actually,
when he was president,

hated the idea of asking
stu... people to borrow

four thousand dollars
for four years.

And the average annual, um,
income was $5600

at the time.

And he could not imagine asking
people to borrow that much.

♪

So, from 1963
to 2018, the cost of tuition

increased 1,873%,

which is an annual
increase of 34%.

Meanwhile,
the value of the U.S. dollar

increased 13% per year
in that same time.

The cost of college
education has increased

much faster
than the rate of inflation.

Like, a lot faster.
Like a lot, a lot faster.

It is estimated
that between 1980 and 1981,

the school year cost
students the modern equivalent

of $17,410 for private college,

and $7,900 to attend
a public college.

Just by 1990,
this cost increased

to $26,050
and $9,800, respectively.

The student debt situation

was about to become
a student debt crisis.

The Guaranteed
Student Loan program.

What that title does not tell

you is the guarantee
was for bankers.

The guarantee was that
if a banker put out the money

for this incredibly
risky financial product,

the banker would be repaid.

Not that a student
would get admitted,

not that a student would finish,

not that a student
would really be able to compete

with a well-paying job
with equal pay.

The banker would be repaid.

Even though the lawmakers were
trying to pass something that

would intentionally create
a student loan industry,

cre... intentionally create
a market for student debt

for them, they finally agreed
to what was supposed to be,

this was my favorite part, you
know what I mean by "favorite,"

it was supposed to be temporary.

It was supposed to be temporary.

And then it just... if the,
um, the National Defense

Education Act opened
Pandora's box a little bit,

this one just ripped it open.

And I think it is one
of those great tragedies.

It makes you see a lot

of American history
in a different way.

♪

Among all student
borrowers, the amount of money

that they borrow has
increased 135% since 1995.

That's before
adjusting for inflation.

After adjusting for inflation,
it's increased 35%.

Students, today, borrow
more than one third more

of what students
were borrowing in 1995.

So, students are borrowing more,

and more students
are borrowing more.

♪

Student loan
debt is like a B.M.I., right?

Body mass index
is imperfect measure.

So, for students who have debt,
not necessarily bad,

but in general, it's not
as good if they have no debt.

And it's always been a pu...
puzzle to me that so many

progressives call policies
like taxpayer-funded higher

education or student
loan forgiveness, progressive,

because... because they're not.

Uh, what these policies
are doing is they're giving

transfers
to higher income individuals.

However, the most important one
is whether they have a career

that leads them
to productive lives.

If they are able
to achieve that,

student debt can be
an investment for the future.

So, bottom line is I... I don't
see the amount of debt

as the sole
indicator of the burden.

We need to think
hard about the distributional

consequences of these policies.

Who benefits, and who pays?

do
want to see is these colleges

and universities who charge
outrageous amounts of tuition

and do nothing
currently to have any kind

of accountability for it.

And to me it is...
it is absolutely indefensible.

We've saddled a generation

with unaffordable debt
and an education that does

not outmatch
the cost of that education.

In one survey, 60% of younger
borrowers said they'd be

in their 40s before their
student loans are paid off.

The student
debt relief solution to this,

the problem, the crisis
that we have here, they have

to be very, very
careful about how they do it

because it has the potential
to screw over a ton of people.

It has a potential
to destroy people's lives

if they don't do it right.

I don't see, uh,
you know, a total eradication

of student debt would
be the best way forward.

If you just, uh,
retire all the debt right now,

uh, we're going to have
a new wave of a different

set of concerns over time.

The danger of the blank check,

without altering college
finance is you're going

to have to write another check
years from now because colleges

won't have an incentive
to lower their prices.

They won't have an incentive
to help students find jobs

or to, um, prepare
them for the workforce.

And not just
the people who have loans

currently,
but also anybody who wants

to go to college in the future.

Like we saw with... with
the mid-century when the loans

started, when the federal
government first started

offering loans, but then once
the institutions realized that,

"Oh, we can... we can
really squeeze these guys,

make a lot more money," this
program that was beneficial

to students in the fifties,
sixties and seventies,

it's become almost
like a curse to students

in the 21st century many years
later. It's a ripple effect.

♪

The model...
the model for the loan program

really was
the federal mortgage program.

Now, but there's two key

one was the assumption
that someone would pay back

their loan in ten years
as opposed to 30,

because the federal mortgage
is 30 years.

But the key thing about
the American mortgage program

is that it has
a fixed interest rate

and that it is built
into the amount

that you are actually
borrowing upfront, right?

That is not the case
with the student loan program.

It's an important divergence
that what you're borrowing,

right, is
the principal of the loan.

And then what can really
catch people is that Congress

will set those
interest rates over time

and that you're not borrowing
for the course of the loan,

but instead you're
borrowing the principal

and then the interest
continues to accrue.

That is why so many
people can get caught

by the interest rate.

These are incredibly
complex financial products,

and we're just talking
about the federal loans.

Dr. Yannelis, you are
recognized for five minutes.

The weekend before I testified

before the Senate
on student loans,

I saw three people in person.

I got a... a haircut, I took
an Uber to get a haircut,

and I had dinner with a friend

who had just finished Yale
Law School and was clerking.

I was talking to my
barber about student loans,

so he had about
$15,000 of student loans.

My Uber driver
didn't go to college,

he had no student debt,

I think he made much less
than my, uh, barber.

Uh, my friend who had
just finished Yale Law School,

he had a great
corporate law job lined up.

He's going to make
a lot of money over his life.

He had around $200,000
dollars in student loans.

This policy would have, uh,

benefited my friend who
finished Yale Law tremendously.

My barber has a little
bit student debt and an okay,

um, income, and this...
this driver who was low-income

would have benefited not at all.

So, I think that's a great
example just to illustrate

the regressivity
of many of these policies.

You know, it's a sample size
of three, but if you actually

look at the data,
you see similar patterns.

If you look at
student loans, the past couple

decades at least have been
just a series of Band-Aids.

And these Band-Aids are great.

You know, some of them
genuinely help people

and they make a real difference,

but the problem
is they're Band-Aids.

They're not fixing
the underlying problem.

I mean, college continues
to get more expensive.

Student debt
continues to balloon.

People continue
to be impacted by it.

And we can keep putting
Band-Aids on the problem,

but at some point we're going
to have to address the problem,

because
the Band-Aids won't work.

The thing that we also have to
confront, a good middle class

job with good wages
and good benefits,

that is becoming increasingly
nice work if you can get it.

Real wages for working
and middle class people

have stagnated
since the seventies.

And at the same time that
housing costs are going up,

health care costs are coming up.

So, it really is this crush
on people that is hard to see

unless you step back
and see the entire picture.

And I think,
especially seeing it over time.

♪

When
we say forgive student debt,

we're not really
talking about canceling debt.

It doesn't, um,
uh, uh, disappear.

We just mean is that we're
canceling debt from current

students and moving
it to future taxpayers.

Forgiveness for
all, I think, is an excellent
solution

if it's part
of a comprehensive reform

to higher education.

The government says "All right,
well, we're going to write

that check, we're going
to erase all the debt."

College is still
really expensive.

People still
have to pay for school.

And you're going to have
another student loan crisis

in ten or 20 years.

Only this one's going
to be worse because everybody

who is in high school
now sees the debt being erased,

then they're going
to borrow as much as they want

and maybe more because,
"Eh, it'll, you know, I'll wait

for the next
round of forgiveness."

Now, in economics
they call that a moral hazard.

But forgiveness for all
is maybe a necessary step

at some point, but
we have to fix higher education

and higher education finance.

On the student loan issue,
there's quite a bit

of low-hanging fruit of things
that could be fixed,

but that take a tremendous
amount of time

to be implemented,
and unfortunately,

in the meantime, people suffer.

♪

And living with that debt
means you've got to make

some pretty tough choices.

It might mean putting
off buying a... a first home.

I teach in a place
that sells education

as the path to a better,
more secure life.

And I don't have
a part of that life.

You'll have to wait
a little bit longer

to start a family
or save for retirement.

And when a big chunk
of every pay check

goes towards loan debt,
that's not just tough on you,

that's not just tough
on middle class families.

That's not good for our economy,

because that money
that could be going

into businesses,
is going just to service debt.

♪

Now,
when I first started college,

I expected to be
done in five, six years,

and to be able
to get into a house and...

and it's crazy looking,
I mean, it's... it's 16 years

since I started college
and I still don't have a house.

I still don't have
a thriving business yet,

or a... or a career that's...

this amazing career
that's making me a good living.

The stress of... I get from
other people around me talking

about, "Well, maybe
you need to go back to college,

and get a different degree."

And it's like,
do I really want to go back

into that system again?

Only to be spit back out
with more debt, more problems,

and the possibility that
I might not have a better job.

College tuition has more
than doubled since the 1980s,

and consequently,
millennials have taken on

at least 300% more student
debt than their parents.

Baby boomers only had
to work 306 hours to pay off

their college tuition.

On the other hand, millennials
today would have to work 4,459

hours at minimum wage to pay
off a four-year college degree.

It takes
the average person 21.1 years.

Your standard repayment plan

with a federal
student loan is ten years.

And the... the 20-year
plans are...

those are the income-based
repayment plans.

Those are the ones where
you end up paying way more

in interest,
because you can't afford

to pay the large payments.

So, you end up paying
more for having less money.

What is it, the boot conundrum?

Where you can buy the cheap
boots every year that fall

apart or you can buy the fancy
boots that will last forever,

but they're too expensive.

In 2008 I'd been
in college for a couple years.

I was married for two
years and had a brand new baby.

You know, life was great.

American Dream,
we're... we're on our way.

We've almost got a house.
We can see it. It's coming up.

And then, boom,
the recession happens.

Let's talk about the speed

with which we are watching
this market deteriorate.

This could be the most
serious recession in decades.

The worst day on Wall Street
since the crash of 1987.

The stock market
is now down 21%.

And that means life
as most Americans

know it is about to change.
In some cases, dramatically.

I finished law school
during the Great Recession.

Uh, it was really
hard to find a job.

Seeing my student loan
balance and not having a job

waiting for me
at graduation was terrifying.

All of our dreams
kind of got put on hold.

We had to kind
of just focus on surviving.

So many businesses
were going under,

we had people
losing their houses.

And, uh,
you know, but we continued

to have to pay student loans.

Those were... that was
something that didn't stop.

It put a lot of frustration
and stress in... in my marriage.

We didn't know what to do.

Um, that was... it was a pretty
frustrating time in our life.

One aspect of student
loans that I think is really

misunderstood is that you
cannot bankrupt your way out

of, uh, student loans.

And this is
different than a mortgage,

or an auto loan
or a credit card.

If you default on those loans
and creditors come after you,

the last resort
is to declare bankruptcy

and those loans get written up.

That is not true
for student loans.

They end up becoming like taxes.

So, it's really difficult
to default on a student loan.

You can stop paying
a student loan the same

as you can stop
paying any other kind of loan,

but you can't get
a discharge in bankruptcy,

unlike other types of loans.

They'll garnish your wages.

First thing they'll do
is garnish your wages,

meaning you... any job you have
for the rest of your life,

they'll take... they'll take
their money out of it first.

They'll garnish your wages
until they get it back

and however long that takes.

They just don't
allow you out of that debt.

They're going to make
sure that you pay that off,

or there are families that have
enough student loan debt

that, uh, if they stay

at a certain income
level low enough,

they qualify for a deferral,

like, a permanent
deferral on it.

And then if they start
making too much money,

then they have to start
making payments on it.

And so, for a lot
of families that are in that

specific situation,
it's not even worth going

after a higher income
because now they have to start

putting all that extra
income towards the debt.

So, they're working harder
and not making any more money.

A deferment or forbearance,
and often these terms

are used interchangeably, um,

basically what that means
is you are delaying payment.

They typically come
in six-month increments,

and during that six months you
don't have to make a payment

on your student loans.

The danger to a deferment
or a forbearance is that,

in most cases, your loan
is still accruing interest

during that time.

So, let's say
you're in a situation where,

"I can't afford
my student loan bill."

Lender says "No problem, we
can defer it for six months."

That sounds
like a great solution,

but really all you're
doing is you're kicking the can

down the road,
and six months later,

because you didn't make any
payments and interest continued

to accrue,
you now have a larger balance.

And unless something happened
to change your financial

circumstances
during those six months,

you're right back
to where you started.

Interest will continue

to accrue the same way.

So, your debt will continue
to go up even if your problem

is "I can't. It's too much.
I can't pay this."

It's... "Okay, well,
we'll give you debt relief,

but now you have to pay more."

It doesn't seem like
the options that are available

to them really make any sense.

Things
eventually worked out for me,

but so many people are
in so much worse situations.

I think policymakers
really need to consider

what these people are going
through, and we need to... to do

something so that people
don't face that situation.

Since the eldest
millennials graduated,

student loan debt
has increased 362%.

Since 2006, the national
student loan debt balance

has increased 248%,
which is about 18% per year.

As an 18-year-old
who, you're about

to start college, your big
concerns with student loans

are, is the college going
to have the money on time?

Am I borrowing enough
to meet all my living expenses?

When you're
a borrower in repayment,

now you're really
worried about, jeez,

how much student debt do I
have? What's my interest rate?

What repayment
plans are available?

How am I ever
going to pay this off?

An 18-year-old, I think
it's fair to say the majority

don't know
to ask these questions.

As long as we put
that burden on college kids

and their families, we're
going to have a lot of people

who make bad decisions.

♪

Okay, it's...
Today is... what day is it? 15?

Ten!

I'm extremely lucky,
and I recognize that,

because I have parents who
were able to help me qualify

for a mortgage to get
this house that I'm in.

Millennials keep
pushing back the personal goals

because we can't afford it.

We continue to rent because
we can't afford to buy a house.

I'm making enough
to pay the mortgage,

but I wasn't making enough
to qualify for the mortgage.

Our jobs don't
make enough money,

and we're laden
with so much student debt.

Student
loans can have a huge impact

on your ability to get
a mortgage, specifically

because they impact
your debt-to-income ratio.

What the debt-to-income ratio
looks at is it's how much money

you earn each month
compared to how much money

you have to spend each
month on your existing debt.

And if you have a huge
student loan bill each month,

it's going to negatively affect
your debt-to-income ratio,

and it will affect either the
size of a house you can buy,

or it will mean you can't
qualify for a mortgage at all.

Now, there are certain, you
know, strategies that borrowers

can use to minimize the damage,

especially with federal loans.

But, you know,
student loans certainly

affect your ability
to buy a house.

Without my parents' help,

buying this house was not
even remotely on the table.

I would have been
decades working to pay off more

of my student loans in order
to qualify for this house.

♪

When I look at my
kids' future, I'm scared

because I'm not
sure I can recommend them

to get a college education,
which is absurd.

As someone who has two degrees,
a bachelor's and master's,

I know the value of education.

It's absurd to me that I can't
recommend that wholeheartedly

at-at this moment for my kids.
I hope that will change.

You know, 40 years
ago when you went to college,

it didn't really
matter where you were going,

what you were studying,
or how much it cost.

It was a great investment.

And now, college is essential,

but it's not
always a great investment.

I'd like to see
that no longer be the case.

If a school costs $30,000
a year in tuition,

it better be worth it.

And right now,
that's not the case.

The issue here has an immense
emotional toll as well.

We're raised to believe
that if we're not successful

in our career, it's completely
the individual's fault,

and the system has no
part to play in it whatsoever.

New generations tend to believe
that success is a matter

of luck rather than
a matter of actual hard work.

From a couple
of days after my first daughter

was, uh, born,
we started saving for college.

My wife always calls
me a little bit neu... neurotic

with how much I save, but I... I
want my children to be secure

and live in a society where
everyone is secure, right?

Because we have a lot of
problems now in this country,

and part of providing
a secure future for my children

is making sure that we don't
have destitute people.

That people are taken
care of if, they're struggling.

I think the redeeming aspect

of student loans
is that they provide access

to higher education.

When we set about
fixing the student loan crisis

and actually doing
something about it,

on a fundamental level,

we can't lose sight about
the one thing that student

loans still do well,
and that's providing access

to higher education.

Any time
somebody that's coming right

out of high school asks me,
"Is it worth going to college?"

I have to honestly say
that I don't think it is.

I have two kids, and both my
wife and I have student debt.

At this point in our lives,
it's a really scary thought

to think that my kids are going
to go get a higher education

or a degree from a college.

I want them to know
what they're getting into,

and that they have a plan with
the degree that they're going

to get, because that's something

that they shouldn't
take lightly.

It's a beautiful time to be in
college, to get an education,

to have that community.

But it is something
that does have consequences.

I think, you know,
we should try our best to make

college more affordable, or
this is social responsibility

for us to do.

A lot of it comes
to mentality and belief.

A lot of times people
have grown up in an environment

where maybe they've been told
no, you can't, that's not okay,

enough times that they just
kind of fall into submission

with whatever is
presented for them, right?

Whether that's just taking
a job or whatever the path

of least resistance might be.

And that's why a lot
of people end up deep in debt.

I think, um, a happy
resolution would be a system

of higher education financing,
where schools are incentivized

to put students, um, first,
so that their... their revenues

are directly linked
to providing value

for... for students.

There... there
needs to be almost kind

of a... a revolution of, uh,
you know, what... what the mind

is capable of
and what you can create.

It's part of why
America is so great.

It's because people were free
to think and go out and pursue.

I think people need
to feel okay to fail,

and if they feel okay
to make mistakes as... as,

uh, those stumbling
blocks are just steps

towards their future success.

So, er... somebody here
had a parent or grandparent

who said "Maybe
I can't go to college,

but someday my son can. " " Maybe
I can't start my own business,

but someday I can
picture my daughter

starting her own business."

"Maybe I'm an immigrant,
but I believe that

this is the country, this
is the place, where no matter

who you are,
no matter what you look like,

no matter where you come from,
no matter what your last name

is, you can make it if you
try." That's what we believe.

If the pursuit
of learning is not defended

by the educated citizen,
it will not be defended at all.

You will have the unequaled
satisfaction of knowing

that your character
and talent are contributing

to the direction and success
of this free society.

For all those to whom much
is given, much is required.

♪

♪

♪

♪