1 00:00:04,880 --> 00:00:07,840 Speaker 1: On this episode of Mutu World, I wanted to talk 2 00:00:07,880 --> 00:00:12,360 Speaker 1: about President Biden's recent announcement to forgive ten thousand dollars 3 00:00:12,360 --> 00:00:15,560 Speaker 1: of college loan debt to single borrowers making less than 4 00:00:15,560 --> 00:00:18,600 Speaker 1: one hundred and twenty five thousand and a couples making 5 00:00:18,680 --> 00:00:20,720 Speaker 1: less than two hundred and fifty thousand dollars a year. 6 00:00:21,239 --> 00:00:24,280 Speaker 1: Biden's announcement last week has made those in the college 7 00:00:24,280 --> 00:00:27,520 Speaker 1: owned debt grateful for the relief, and those who have 8 00:00:27,560 --> 00:00:30,400 Speaker 1: already paid off their college loans and those who never 9 00:00:30,440 --> 00:00:34,479 Speaker 1: went to college raising questions about fairness. But as everyone 10 00:00:34,600 --> 00:00:37,920 Speaker 1: reacts to the announcement and takes their sides, we need 11 00:00:37,920 --> 00:00:41,760 Speaker 1: to better understand the root cause of the student loan 12 00:00:41,840 --> 00:00:45,159 Speaker 1: debt crisis in America. Is it the spiraling cost of 13 00:00:45,200 --> 00:00:50,440 Speaker 1: college tuition, easy access to student loans, loaning large sums 14 00:00:50,440 --> 00:00:52,720 Speaker 1: of money to students who may not be able to 15 00:00:52,760 --> 00:00:56,000 Speaker 1: pay it back, or is it even more complicated than that. 16 00:00:57,120 --> 00:01:00,240 Speaker 1: Here to talk more about the student debt crisis and 17 00:01:00,440 --> 00:01:04,280 Speaker 1: the loan forgiveness announcement, I'm really pleased to welcome back 18 00:01:04,280 --> 00:01:07,960 Speaker 1: to the podcast Josh Mitchell. He is a reporter in 19 00:01:08,000 --> 00:01:10,919 Speaker 1: the London Bureau of the Wall Street Journal, writing about 20 00:01:10,959 --> 00:01:14,560 Speaker 1: banking and finance. He last joined me on news World 21 00:01:14,600 --> 00:01:19,039 Speaker 1: in September twenty twenty one to discuss his book The 22 00:01:19,160 --> 00:01:32,959 Speaker 1: Debt Trap, How student loans became a national catastrophe. Josh, welcome, 23 00:01:33,080 --> 00:01:36,160 Speaker 1: and thank you for joining me again on news World. 24 00:01:36,600 --> 00:01:39,959 Speaker 1: Sure of course, thank you. So first, I want to 25 00:01:39,959 --> 00:01:42,200 Speaker 1: just start with you personally. I think the last time 26 00:01:42,240 --> 00:01:44,600 Speaker 1: I talked to you in the Washington office of the 27 00:01:44,600 --> 00:01:47,520 Speaker 1: Wall Street Journal. Now I'm talking to you in London. Yes, 28 00:01:48,000 --> 00:01:50,320 Speaker 1: that's quite a jump. Yeah, you know. I grew up 29 00:01:50,360 --> 00:01:53,000 Speaker 1: just outside of Washington, d C. I spent the past 30 00:01:53,040 --> 00:01:57,360 Speaker 1: fourteen years inside DC, literally inside the Beltway, writing about 31 00:01:57,400 --> 00:02:00,400 Speaker 1: the economy and student dad. And I figured I needed 32 00:02:00,440 --> 00:02:02,760 Speaker 1: to take a jump across the pond. But I wanted 33 00:02:02,800 --> 00:02:05,600 Speaker 1: to learn more about how the global economy is interconnected. 34 00:02:06,160 --> 00:02:08,560 Speaker 1: I wanted to learn more about the finance system. So 35 00:02:08,639 --> 00:02:10,600 Speaker 1: I made this big move. I was going to say, 36 00:02:10,680 --> 00:02:13,680 Speaker 1: and the British economy right now is probably the biggest 37 00:02:13,720 --> 00:02:17,280 Speaker 1: mess it's been since Margaret Thatcher was elected in nineteen 38 00:02:17,320 --> 00:02:19,600 Speaker 1: seventy nine. It's pretty bad, and I don't think we've 39 00:02:19,639 --> 00:02:22,280 Speaker 1: seen things get as bad as they're going to get. 40 00:02:22,320 --> 00:02:25,600 Speaker 1: The energy crisis looks to be pretty scary here this 41 00:02:25,639 --> 00:02:28,080 Speaker 1: winter when people have to turn on their heat, I 42 00:02:28,120 --> 00:02:30,600 Speaker 1: think it's going to be pretty scary. So people are 43 00:02:30,680 --> 00:02:33,400 Speaker 1: bracing for worse times ahead. And as I understand it, 44 00:02:33,600 --> 00:02:36,400 Speaker 1: you have a dual problem of energy cost. And then 45 00:02:36,440 --> 00:02:40,120 Speaker 1: on the continent, the drought now has dried up places 46 00:02:40,160 --> 00:02:42,960 Speaker 1: like the Rhine River, so that commercial traffic is a 47 00:02:43,000 --> 00:02:47,200 Speaker 1: disaster of Switzerland. For example, you're really cut off from 48 00:02:47,200 --> 00:02:49,840 Speaker 1: most of your bulk products because they can't come up 49 00:02:49,880 --> 00:02:52,480 Speaker 1: the Rhine. It's not only that, you know. I'll just 50 00:02:52,560 --> 00:02:55,280 Speaker 1: tell you what my experience has been moving over here. 51 00:02:55,560 --> 00:02:58,760 Speaker 1: My stuff that I shipped from my apartment in DC 52 00:02:59,520 --> 00:03:01,880 Speaker 1: is finally gonna arrived this week. That's two months, and 53 00:03:01,919 --> 00:03:03,959 Speaker 1: then it's going to sit at the port for probably 54 00:03:04,080 --> 00:03:07,359 Speaker 1: three to four weeks because there's a labor shortage. There's 55 00:03:07,400 --> 00:03:11,480 Speaker 1: some workers that are striking, and so I still don't 56 00:03:11,480 --> 00:03:13,160 Speaker 1: have my stuff. And if you just look at the 57 00:03:13,160 --> 00:03:15,680 Speaker 1: rental market here, it's a lot like what you're hearing 58 00:03:15,680 --> 00:03:19,519 Speaker 1: in New York. Rents are skyrocketing, there's a housing shortage. 59 00:03:19,520 --> 00:03:22,000 Speaker 1: There's just a lot of problems going on here. So 60 00:03:22,360 --> 00:03:24,839 Speaker 1: I should mention by the way that when we talk 61 00:03:24,960 --> 00:03:27,919 Speaker 1: last about your book, The Debt Trap, it is now 62 00:03:27,960 --> 00:03:30,440 Speaker 1: out in paperback, Yes it is. It just came out 63 00:03:30,480 --> 00:03:33,280 Speaker 1: on paperback, and quite at the perfect time. I was 64 00:03:33,320 --> 00:03:36,480 Speaker 1: gonna say, I can't imagine a better time for this 65 00:03:36,600 --> 00:03:38,880 Speaker 1: to come out, because it tells the story of Sally 66 00:03:38,960 --> 00:03:42,960 Speaker 1: me the student loan company in Congress, which really created 67 00:03:42,960 --> 00:03:46,800 Speaker 1: a debt crisis that would submerge a generation of Americans 68 00:03:46,840 --> 00:03:51,040 Speaker 1: into an estimated one point six trillion dollars in student debt. 69 00:03:51,440 --> 00:03:56,480 Speaker 1: I mean the scandal, scams, predatory practices, and government malpractice 70 00:03:56,840 --> 00:03:59,720 Speaker 1: all coming together to go back to that period. Why 71 00:03:59,760 --> 00:04:01,680 Speaker 1: did you write The Debt Trap and what did you 72 00:04:01,720 --> 00:04:04,600 Speaker 1: hope would come from it? Well? I started covering student 73 00:04:04,640 --> 00:04:08,400 Speaker 1: debt in twenty twelve, right after across the trillion dollar mark, 74 00:04:08,520 --> 00:04:11,560 Speaker 1: and there was such a strong response that I got 75 00:04:11,600 --> 00:04:14,560 Speaker 1: when I would write stories from parents and students who 76 00:04:14,600 --> 00:04:18,040 Speaker 1: just couldn't understand why they had to take on so 77 00:04:18,120 --> 00:04:20,400 Speaker 1: much student debt in the first place, why college had 78 00:04:20,400 --> 00:04:22,560 Speaker 1: become so expensive, and as a reporter, and it kind 79 00:04:22,560 --> 00:04:25,880 Speaker 1: of became an intellectual exercise for me to really understand 80 00:04:26,600 --> 00:04:30,599 Speaker 1: why tuition skyrocketed. It rose at triple the rate of inflation. 81 00:04:31,040 --> 00:04:33,080 Speaker 1: And one of the main things that we do as 82 00:04:33,080 --> 00:04:36,040 Speaker 1: economics reporters as we look at charts and we see 83 00:04:36,040 --> 00:04:39,200 Speaker 1: when there's a trend, and few trends have been as 84 00:04:39,200 --> 00:04:42,200 Speaker 1: stark as the rise in tuition over the past thirty years. 85 00:04:42,200 --> 00:04:44,240 Speaker 1: And so I just spent a decade trying to unpack 86 00:04:44,920 --> 00:04:48,479 Speaker 1: why that happened. What were the multiple forces, And you know, 87 00:04:48,600 --> 00:04:51,320 Speaker 1: it wasn't one sort of flashpoint. There were a lot 88 00:04:51,360 --> 00:04:54,800 Speaker 1: of factors that converge over a long period of time. 89 00:04:54,839 --> 00:04:57,120 Speaker 1: But I think that you know, the stage was set 90 00:04:57,120 --> 00:04:59,880 Speaker 1: by two thousand and eight, and then the housing CRI 91 00:05:00,360 --> 00:05:02,919 Speaker 1: really put a lot of these trends into overdrive. And 92 00:05:02,960 --> 00:05:05,479 Speaker 1: we can go into detail if you want, but this 93 00:05:05,640 --> 00:05:07,920 Speaker 1: really took a long time to unfold well. And then 94 00:05:07,960 --> 00:05:10,719 Speaker 1: the rising cost of college tuition outpaced the rate of 95 00:05:10,720 --> 00:05:14,599 Speaker 1: inflation by an amazing one hundred and seventy one point 96 00:05:14,640 --> 00:05:19,039 Speaker 1: five percent. I mean, it's just astonishing. Yeah, I should 97 00:05:19,080 --> 00:05:20,240 Speaker 1: ask you. I's like, I don't know if you've had 98 00:05:20,279 --> 00:05:22,560 Speaker 1: a chance to look at it. But Mitch Daniel, while 99 00:05:22,600 --> 00:05:24,880 Speaker 1: he was the president of Purdue, I believe they had 100 00:05:24,880 --> 00:05:27,960 Speaker 1: no tuition increase for eight years. Yeah, he really has 101 00:05:28,000 --> 00:05:30,840 Speaker 1: tried to come in and be very reform minded and 102 00:05:30,920 --> 00:05:36,320 Speaker 1: introduce different types of loan programs such as income share agreements. 103 00:05:36,400 --> 00:05:39,479 Speaker 1: There are many people who are trying to really cut 104 00:05:39,480 --> 00:05:42,240 Speaker 1: down on college costs. He's certainly been one of them 105 00:05:42,279 --> 00:05:44,719 Speaker 1: to try to experiment with different things. Candidly, it's harder 106 00:05:44,720 --> 00:05:48,960 Speaker 1: for me to understand if Harvard has forty six billion 107 00:05:49,000 --> 00:05:53,960 Speaker 1: dollars in its endowment why they are charging tuition. Not 108 00:05:54,040 --> 00:05:56,680 Speaker 1: to pick on Harvard or any one particular school, because 109 00:05:56,720 --> 00:05:58,200 Speaker 1: one of the things I argue is that this is 110 00:05:58,240 --> 00:06:01,960 Speaker 1: a very broad, widespread problem of colleges raising tuitions at 111 00:06:02,000 --> 00:06:04,839 Speaker 1: unsustainable levels. But one of the arguments that I make, 112 00:06:04,880 --> 00:06:07,760 Speaker 1: and this is based on just interviewing college presidents and 113 00:06:07,839 --> 00:06:11,360 Speaker 1: officials in the system, is colleges charge a lot because 114 00:06:11,400 --> 00:06:16,880 Speaker 1: they can. And colleges for years had enjoyed this reputation 115 00:06:16,920 --> 00:06:19,120 Speaker 1: as a public good, and I think there was so 116 00:06:19,200 --> 00:06:22,479 Speaker 1: much faith that society put into them as these quote 117 00:06:22,520 --> 00:06:26,599 Speaker 1: unquote nonprofit institutions that really weren't out there to make money, 118 00:06:26,640 --> 00:06:29,480 Speaker 1: but we're really just out there for the pursuit of 119 00:06:29,640 --> 00:06:33,440 Speaker 1: education and to really just help society become a better society. 120 00:06:33,800 --> 00:06:36,200 Speaker 1: And one of the things that I really noticed as 121 00:06:36,240 --> 00:06:38,560 Speaker 1: they dug deep into how these colleges work is that 122 00:06:38,640 --> 00:06:42,560 Speaker 1: they behave very much like profit seeking institutions. They are 123 00:06:42,640 --> 00:06:46,159 Speaker 1: run by human beings. Human beings like to be paid money. 124 00:06:46,320 --> 00:06:48,279 Speaker 1: Professors like to be paid money. I like to be 125 00:06:48,320 --> 00:06:51,359 Speaker 1: paid money. So I don't necessarily blame them. But the 126 00:06:51,440 --> 00:06:53,320 Speaker 1: one thing that I do think happen is this was 127 00:06:53,360 --> 00:06:56,239 Speaker 1: a very dysfunctional system that didn't have any guard rails. 128 00:06:56,680 --> 00:06:59,440 Speaker 1: And so if you look at other types of industries 129 00:06:59,480 --> 00:07:03,359 Speaker 1: that really to respond, for example, to sharedholders who wanted 130 00:07:03,400 --> 00:07:06,400 Speaker 1: to maintain high profit margins and keep their costs low, 131 00:07:06,839 --> 00:07:10,200 Speaker 1: colleges haven't faced that type of pressure. You know. They 132 00:07:10,240 --> 00:07:13,000 Speaker 1: sort of get this income stream from this third party, 133 00:07:13,040 --> 00:07:16,200 Speaker 1: which is the taxpayer, and they're also the administrators of 134 00:07:16,200 --> 00:07:18,240 Speaker 1: this program. I don't think a lot of people realize 135 00:07:18,280 --> 00:07:22,640 Speaker 1: that the government deputizes colleges to administer this program. So 136 00:07:22,680 --> 00:07:26,160 Speaker 1: the people that are standing to benefit the most from 137 00:07:26,200 --> 00:07:29,240 Speaker 1: college student loan dollars are the ones that are actually 138 00:07:29,240 --> 00:07:31,960 Speaker 1: awarding the loans. The financial aid officers of these schools 139 00:07:32,400 --> 00:07:35,960 Speaker 1: are actually deputy tied by the Education Department to package 140 00:07:35,960 --> 00:07:38,280 Speaker 1: these loans and give the loans to students. This is 141 00:07:38,320 --> 00:07:41,760 Speaker 1: like the fox washing the headhouse. So the cumulative effect 142 00:07:42,080 --> 00:07:45,120 Speaker 1: you point out in the debt trap, Americans currently about 143 00:07:45,240 --> 00:07:49,160 Speaker 1: one trillion, seven hundred and forty eight billion dollars in 144 00:07:49,240 --> 00:07:53,400 Speaker 1: student loans, and the outstanding federal student loan balance is 145 00:07:53,440 --> 00:07:55,920 Speaker 1: about a trillion, six and twenty billion. And you know, 146 00:07:55,960 --> 00:07:59,840 Speaker 1: there's great quote, Americans owe more and student debt, the 147 00:08:00,200 --> 00:08:04,120 Speaker 1: Owen credit card debt and Carlans combined student debt in 148 00:08:04,160 --> 00:08:08,520 Speaker 1: the US is the size of Canada's economy. Yeah. Isn't 149 00:08:08,520 --> 00:08:11,880 Speaker 1: that a staggering trap to have gotten ourselves into. Yeah, 150 00:08:11,920 --> 00:08:14,040 Speaker 1: And it happened so quickly. That's why I think it 151 00:08:14,080 --> 00:08:16,920 Speaker 1: became such a political issue over the past fifteen years. 152 00:08:17,280 --> 00:08:19,880 Speaker 1: Student that doubled between the end of two thousand and 153 00:08:19,960 --> 00:08:22,960 Speaker 1: seven and the end of twenty thirteen, and a very 154 00:08:23,000 --> 00:08:26,160 Speaker 1: short amount of time. It just became this big mountain 155 00:08:26,200 --> 00:08:29,200 Speaker 1: of debt and it happened just incredibly quickly, and it's 156 00:08:29,280 --> 00:08:31,480 Speaker 1: very widespread. You know, it's not just held by well 157 00:08:31,480 --> 00:08:34,000 Speaker 1: off families, it's not just held by middle class families. 158 00:08:34,040 --> 00:08:37,800 Speaker 1: It's increasingly owed by poor families. There's a lot of 159 00:08:37,840 --> 00:08:40,520 Speaker 1: different types of people from all walks of life who 160 00:08:40,520 --> 00:08:43,720 Speaker 1: have been affected by it. Wasn't the original premise that 161 00:08:43,800 --> 00:08:46,160 Speaker 1: the government would actually take this over and would make 162 00:08:46,240 --> 00:08:48,560 Speaker 1: money out of it. Well, yes, you know. And interestingly, 163 00:08:48,600 --> 00:08:51,280 Speaker 1: if you want to go back even further, the original 164 00:08:51,280 --> 00:08:54,839 Speaker 1: premise was to respond to the Soviet Union's launch of Sputnik. 165 00:08:54,920 --> 00:08:58,920 Speaker 1: And this was when Lyndon Johnson and Eisenhower and others 166 00:08:58,920 --> 00:09:02,640 Speaker 1: were very concerned about the Russians overtaking us in the 167 00:09:02,720 --> 00:09:05,920 Speaker 1: space race. And so the original premise was, let's just 168 00:09:06,360 --> 00:09:08,800 Speaker 1: give a few thousand Americans some loan so they could 169 00:09:08,800 --> 00:09:11,400 Speaker 1: become scientists or people who could become teachers that could 170 00:09:11,960 --> 00:09:14,800 Speaker 1: teach science and engineering, so that we could win the 171 00:09:14,880 --> 00:09:17,560 Speaker 1: space race. So it started out as this narrow goal, 172 00:09:17,640 --> 00:09:21,719 Speaker 1: and it really then became this broad entitle one program 173 00:09:22,040 --> 00:09:25,120 Speaker 1: where basically anyone who has a beating heart can go 174 00:09:25,200 --> 00:09:28,920 Speaker 1: to any school at any price, to study any major, 175 00:09:29,280 --> 00:09:33,079 Speaker 1: to take out any size of loan, regardless of the 176 00:09:33,080 --> 00:09:36,760 Speaker 1: family's ability to repay. It turned into what the architects 177 00:09:36,760 --> 00:09:39,839 Speaker 1: of this program called a monster. And yeah, there was 178 00:09:39,880 --> 00:09:42,960 Speaker 1: this very rosy assumption for the past thirty years, at 179 00:09:43,040 --> 00:09:47,040 Speaker 1: least leading up to the twenty tens, that student debt 180 00:09:47,120 --> 00:09:50,439 Speaker 1: was an investment and it was not only an investment, 181 00:09:50,480 --> 00:09:54,080 Speaker 1: but it was a necessary investment, and that there really 182 00:09:54,120 --> 00:09:59,319 Speaker 1: wasn't much risk here because college always leads to a degree, 183 00:09:59,400 --> 00:10:02,079 Speaker 1: which always leads to a good paying job, which always 184 00:10:02,200 --> 00:10:05,480 Speaker 1: leads to hir incomes. And so what's the problem about 185 00:10:05,480 --> 00:10:09,160 Speaker 1: taking on fifteen twenty twenty five thousand when you're going 186 00:10:09,200 --> 00:10:12,280 Speaker 1: to have an extra million dollars and earnings over a 187 00:10:12,280 --> 00:10:14,520 Speaker 1: lifetime if you go to college. That was always the 188 00:10:14,600 --> 00:10:19,079 Speaker 1: response whenever someone questioned the wisdom of going to college. 189 00:10:19,120 --> 00:10:21,240 Speaker 1: Don't you want to earn a million dollars more than 190 00:10:21,280 --> 00:10:23,480 Speaker 1: someone who only went to high school. In the nineties 191 00:10:23,480 --> 00:10:26,360 Speaker 1: and mister speaker by was graduating high school, and the 192 00:10:26,559 --> 00:10:28,520 Speaker 1: big expression at the time was you have to go 193 00:10:28,559 --> 00:10:30,280 Speaker 1: to college. You don't want to spend your life flipping 194 00:10:30,320 --> 00:10:33,520 Speaker 1: hamburgers at McDonald's. There was like this stigma to not 195 00:10:33,600 --> 00:10:35,560 Speaker 1: going to college. It was like you would never make 196 00:10:35,600 --> 00:10:38,520 Speaker 1: something of yourself. And so the idea was the government 197 00:10:38,520 --> 00:10:41,800 Speaker 1: would never have to cover losses on these loans because 198 00:10:42,400 --> 00:10:46,120 Speaker 1: students would come out and get good jobs and repay them. Ironically, 199 00:10:46,160 --> 00:10:50,680 Speaker 1: my brother I actually worked for years in Pennsylvania collecting debt, 200 00:10:50,880 --> 00:10:55,120 Speaker 1: particularly from doctors who had borrowed huge amounts from a 201 00:10:55,160 --> 00:10:59,280 Speaker 1: Pennsylvania state program and then just defaulted. He just said, no, 202 00:10:59,320 --> 00:11:02,880 Speaker 1: I'm not paying up. One of the interesting factoids that 203 00:11:02,920 --> 00:11:05,920 Speaker 1: I discovered was in the late eighties early nineties, the 204 00:11:06,040 --> 00:11:11,080 Speaker 1: Education Apartment and Congress discovered that a lot of chiropractors 205 00:11:11,120 --> 00:11:13,120 Speaker 1: where they would have to spend a lot to go 206 00:11:13,200 --> 00:11:15,880 Speaker 1: to medical school, but then they went and earn enough 207 00:11:15,920 --> 00:11:17,880 Speaker 1: to pay them off. And so the government got so 208 00:11:17,920 --> 00:11:21,720 Speaker 1: frustrated that they started publishing in the Federal Register the 209 00:11:21,840 --> 00:11:24,600 Speaker 1: names of debtors that hadn't paid their debt to try 210 00:11:24,600 --> 00:11:27,480 Speaker 1: to shame them and to repaying their debt. And there's 211 00:11:27,480 --> 00:11:29,960 Speaker 1: actually still names on there. This is like a public 212 00:11:30,000 --> 00:11:33,080 Speaker 1: document that Congress produces every year apparently that has names 213 00:11:33,080 --> 00:11:36,480 Speaker 1: of people who are in default on their loans. So, yes, 214 00:11:36,559 --> 00:11:48,240 Speaker 1: this has been an issue for a long time. Hi, 215 00:11:48,400 --> 00:11:51,120 Speaker 1: this is nude. We have serious decisions to make about 216 00:11:51,120 --> 00:11:55,280 Speaker 1: the future of our country. Americans must confront big government socialism, 217 00:11:55,280 --> 00:11:59,880 Speaker 1: which has taken over the modern Democratic Party, big business, news, media, entertainment, 218 00:12:00,040 --> 00:12:05,000 Speaker 1: hand academia. My new bestselling book, Defeating Big Government Socialism 219 00:12:05,280 --> 00:12:09,840 Speaker 1: Saving America's Future offers strategies and insights for everyday citizens 220 00:12:09,840 --> 00:12:13,440 Speaker 1: to save America's future and ensure it remains the greatest 221 00:12:13,520 --> 00:12:17,160 Speaker 1: nation on Earth. Here's a special offer for my podcast listeners. 222 00:12:17,720 --> 00:12:20,080 Speaker 1: You can order an autograph copy of my new book, 223 00:12:20,360 --> 00:12:24,439 Speaker 1: Defeating Big Government Socialism right now at gingwishtree sixty dot 224 00:12:24,440 --> 00:12:27,160 Speaker 1: com slash book and we'll ship it directly to you. 225 00:12:27,720 --> 00:12:30,560 Speaker 1: Don't miss out on this special offer. It's only available 226 00:12:30,600 --> 00:12:33,720 Speaker 1: for a limited time. Go to gingwishtree sixty dot com 227 00:12:33,760 --> 00:12:37,200 Speaker 1: slash book to order your copy now. Order it today 228 00:12:37,480 --> 00:12:47,040 Speaker 1: at gingwishtree sixty dot com slash book. Well, you say 229 00:12:47,080 --> 00:12:50,600 Speaker 1: in the Debt Trap, the program was supposed to reduce inequality, 230 00:12:51,080 --> 00:12:55,400 Speaker 1: leveling the playing field for society's most disadvantage. Instead, it 231 00:12:55,480 --> 00:12:59,160 Speaker 1: has increased inequality, harming many of the borrowers. It was 232 00:12:59,200 --> 00:13:03,200 Speaker 1: intended to help. Minority students struggle the most with student debt. 233 00:13:03,600 --> 00:13:06,840 Speaker 1: Black households are far more than households of any other race. 234 00:13:07,280 --> 00:13:10,559 Speaker 1: Black borrowers or three times as likely as white students 235 00:13:10,559 --> 00:13:14,040 Speaker 1: to default. Nearly four and ten black borrowers who started 236 00:13:14,040 --> 00:13:17,439 Speaker 1: college in the nearly two thousands defaulted. I mean, isn't 237 00:13:17,440 --> 00:13:21,000 Speaker 1: that a tragic failure of the program. Yeah, and you know, 238 00:13:21,200 --> 00:13:24,120 Speaker 1: when Congress created the program in the first place, there 239 00:13:24,240 --> 00:13:28,280 Speaker 1: was this assumption that lower income households would not have 240 00:13:28,400 --> 00:13:30,959 Speaker 1: to take on debt, or at least not a substantial 241 00:13:30,960 --> 00:13:33,880 Speaker 1: amount of debt, that their educations would be covered by grants, 242 00:13:34,440 --> 00:13:37,360 Speaker 1: and that really student debt was meant for middle income 243 00:13:37,400 --> 00:13:41,480 Speaker 1: households who otherwise didn't have access to bank loans to 244 00:13:41,559 --> 00:13:43,600 Speaker 1: go to college. They would have lists as sort of 245 00:13:43,640 --> 00:13:46,719 Speaker 1: a backstop so that they had access to college and 246 00:13:46,720 --> 00:13:48,719 Speaker 1: that the wealth they would pay their own way. So 247 00:13:48,760 --> 00:13:50,880 Speaker 1: this was really a program that was not meant for 248 00:13:50,880 --> 00:13:53,760 Speaker 1: the poor. Grants were meant to help the most disadvantage 249 00:13:53,800 --> 00:13:57,520 Speaker 1: individuals go to college. And so this is where I 250 00:13:57,559 --> 00:14:00,840 Speaker 1: think there's a parallel to the housing crisis, when Washington 251 00:14:01,600 --> 00:14:06,120 Speaker 1: really tried to expand home ownership, and we saw in 252 00:14:06,200 --> 00:14:08,520 Speaker 1: the housing crash that a lot of the debt was 253 00:14:08,600 --> 00:14:12,400 Speaker 1: taken on by uninformed households who didn't really know what 254 00:14:12,400 --> 00:14:14,000 Speaker 1: they were going to get into, who were using the 255 00:14:14,040 --> 00:14:16,440 Speaker 1: debt to buy homes at very inflated prices and then 256 00:14:16,440 --> 00:14:19,280 Speaker 1: weren't able to pay back. And it's just really sad 257 00:14:19,320 --> 00:14:21,400 Speaker 1: to see how some of these programs with very good 258 00:14:21,400 --> 00:14:23,440 Speaker 1: intentions ended up hurting a lot of the people that 259 00:14:23,440 --> 00:14:25,720 Speaker 1: they were meant to help. Well, I'm assuming that that 260 00:14:25,880 --> 00:14:29,800 Speaker 1: reality is why under the Biden plan, he's going to 261 00:14:29,840 --> 00:14:33,960 Speaker 1: give up to twenty thousand dollars forgiven for loans for 262 00:14:34,000 --> 00:14:37,120 Speaker 1: those who received pell grants and only ten thousand for 263 00:14:37,120 --> 00:14:39,160 Speaker 1: those who did not. So I assume that's an effort 264 00:14:39,160 --> 00:14:43,160 Speaker 1: on his part to help the most disadvantage. Yeah, that's 265 00:14:43,200 --> 00:14:45,640 Speaker 1: what it seems like. It seems like he's trying to 266 00:14:45,680 --> 00:14:49,200 Speaker 1: make this rather progressive. There's obviously still a lot of 267 00:14:49,240 --> 00:14:53,800 Speaker 1: criticism among not just Republicans, but people in the center 268 00:14:53,840 --> 00:14:57,480 Speaker 1: of the Democratic Party, more centrists, who think that even 269 00:14:57,680 --> 00:15:00,920 Speaker 1: the threshold that he chose was not enough, that it's 270 00:15:00,920 --> 00:15:03,600 Speaker 1: going to end up giving forgiveness to households that don't 271 00:15:03,600 --> 00:15:05,840 Speaker 1: really need it. But I think that compared to what 272 00:15:06,000 --> 00:15:09,200 Speaker 1: his earlier campaign promises were, and certainly compared to what 273 00:15:09,240 --> 00:15:11,840 Speaker 1: Elizabeth Warren and Bernie Sanders were advocating, this is a 274 00:15:11,840 --> 00:15:16,800 Speaker 1: pretty progressive plan that's meant to really give households met 275 00:15:16,840 --> 00:15:19,280 Speaker 1: at the lower end some help. Supposedly, according to the 276 00:15:19,280 --> 00:15:23,320 Speaker 1: Penwarden budget model, about seventy five percent of the student 277 00:15:23,360 --> 00:15:28,080 Speaker 1: loan debt cancelation goes to households earning eighty eight thousand 278 00:15:28,120 --> 00:15:33,040 Speaker 1: or less a year, so that should be fairly progressive. Yeah, exactly. Now, 279 00:15:33,160 --> 00:15:36,080 Speaker 1: keep in mind, you know, there are some caveats. Students 280 00:15:36,080 --> 00:15:38,200 Speaker 1: early in their careers. A lot of them end up 281 00:15:38,240 --> 00:15:40,760 Speaker 1: making under eighty eight because they're in their twenties and 282 00:15:40,880 --> 00:15:43,720 Speaker 1: they're just starting out. But I don't think a lot 283 00:15:43,760 --> 00:15:50,880 Speaker 1: of people realize the amount of debt that went to 284 00:15:52,480 --> 00:15:57,160 Speaker 1: lower income households to go to programs that really had 285 00:15:57,200 --> 00:15:59,640 Speaker 1: bad track records. In short, I just don't think a 286 00:15:59,640 --> 00:16:02,480 Speaker 1: lot of people realize how much predatory lending, how much 287 00:16:02,480 --> 00:16:05,880 Speaker 1: subprime lending occurred here. At one point, when I was 288 00:16:06,520 --> 00:16:08,680 Speaker 1: really deep in the weeds on student debt, I asked 289 00:16:08,720 --> 00:16:11,000 Speaker 1: one of the major banks if they could go through 290 00:16:11,040 --> 00:16:16,160 Speaker 1: their own records and anonymize their records so that they 291 00:16:16,160 --> 00:16:19,080 Speaker 1: can tell me how many people with subprime credit took 292 00:16:19,080 --> 00:16:23,280 Speaker 1: out loans in a ten year period. I think it 293 00:16:23,280 --> 00:16:27,360 Speaker 1: was through twenty fifteen, and there was a substantial amount 294 00:16:27,360 --> 00:16:30,160 Speaker 1: of people. I think more than a third of all 295 00:16:30,240 --> 00:16:33,640 Speaker 1: bar works who took out student loans had subprime credit scores, 296 00:16:34,080 --> 00:16:37,280 Speaker 1: which was far more than the share of people who 297 00:16:37,760 --> 00:16:42,840 Speaker 1: during the housing boom were subprime, So this program really 298 00:16:43,200 --> 00:16:46,080 Speaker 1: did give out money to a lot of people who 299 00:16:46,160 --> 00:16:49,160 Speaker 1: on paper had no hope of repaying these loans, either 300 00:16:49,200 --> 00:16:53,080 Speaker 1: because they had bad credit themselves, because they had low incomes, 301 00:16:53,440 --> 00:16:57,120 Speaker 1: because they went to programs, whether it was for profit 302 00:16:57,160 --> 00:17:00,920 Speaker 1: schools or community colleges that simply had high dropout rates. 303 00:17:01,600 --> 00:17:03,640 Speaker 1: There was a lot of people who it was obvious 304 00:17:03,680 --> 00:17:05,480 Speaker 1: they were not going to pay this back, and sure 305 00:17:05,600 --> 00:17:07,480 Speaker 1: enough they added up de faulting on those loans. And 306 00:17:07,520 --> 00:17:09,840 Speaker 1: there's a lot of people like that out there. Well. 307 00:17:09,880 --> 00:17:13,280 Speaker 1: Interesting that Larry Summers, who had been sexually the Treasury 308 00:17:13,320 --> 00:17:17,679 Speaker 1: under Clinton and economic advisor to Obama, president of Harvard, 309 00:17:18,440 --> 00:17:22,840 Speaker 1: said recently that I'm quoting Summers. The student debt relief 310 00:17:22,960 --> 00:17:27,439 Speaker 1: is highly regressive, as higher income families are more likely 311 00:17:27,480 --> 00:17:31,160 Speaker 1: to borrow and to borrow more than lower income families. 312 00:17:31,520 --> 00:17:35,280 Speaker 1: Adults with student loans have much higher lifetime incomes than 313 00:17:35,280 --> 00:17:38,080 Speaker 1: those without. So if you look at the whole society, 314 00:17:38,560 --> 00:17:41,639 Speaker 1: it's a transfer of money from people who didn't go 315 00:17:41,680 --> 00:17:44,760 Speaker 1: to college to people who did go to college. And 316 00:17:45,080 --> 00:17:49,080 Speaker 1: there's different ways to cut this data. You know, in general, 317 00:17:49,440 --> 00:17:53,200 Speaker 1: if you graduate with student debt, yes, you're pretty well 318 00:17:53,240 --> 00:17:58,720 Speaker 1: off on average. The problem is at the average obscures 319 00:17:58,760 --> 00:18:03,280 Speaker 1: a lot of variation within the average. So, for example, 320 00:18:03,320 --> 00:18:05,600 Speaker 1: there's a lot of people who never graduated. So when 321 00:18:05,640 --> 00:18:08,840 Speaker 1: Larry Summer says, well, on average people, when they take 322 00:18:08,840 --> 00:18:11,080 Speaker 1: out student debt, they're the ones that have a college degree, 323 00:18:11,080 --> 00:18:14,000 Speaker 1: and they're the ones they get better jobs. That's true 324 00:18:14,000 --> 00:18:15,960 Speaker 1: if you actually got the college degree, but there was 325 00:18:16,000 --> 00:18:18,119 Speaker 1: a substantial amount of people who never got the degree. 326 00:18:18,440 --> 00:18:20,240 Speaker 1: And again, this is what I was referring to when 327 00:18:20,240 --> 00:18:21,919 Speaker 1: I said that a lot of this goes back to 328 00:18:22,040 --> 00:18:24,560 Speaker 1: the two thousand and eight recession. A big chunk of 329 00:18:24,600 --> 00:18:28,400 Speaker 1: student debt is a vestige of the housing crisis. One 330 00:18:28,400 --> 00:18:31,240 Speaker 1: of the reasons why is because when the recession occurred, 331 00:18:31,320 --> 00:18:35,880 Speaker 1: unemployment skyrocketed and it remained high even after the recession ended. 332 00:18:36,000 --> 00:18:38,760 Speaker 1: The labor market really didn't start to fully recover until 333 00:18:38,800 --> 00:18:42,240 Speaker 1: around twenty fourteen or beyond. And there were a lot 334 00:18:42,240 --> 00:18:46,440 Speaker 1: of people who were showing up to community colleges because 335 00:18:46,920 --> 00:18:49,520 Speaker 1: they had nowhere else to go. They didn't have access 336 00:18:49,560 --> 00:18:52,040 Speaker 1: to jobs at the time. And on top of that, 337 00:18:52,520 --> 00:18:54,800 Speaker 1: there were a number of people who showed up just 338 00:18:54,840 --> 00:18:56,800 Speaker 1: to get their loans and pell grants so that they 339 00:18:56,800 --> 00:18:59,200 Speaker 1: could have money to put on the table. I visited 340 00:18:59,240 --> 00:19:02,399 Speaker 1: a community college in Arizona where they were telling me 341 00:19:02,480 --> 00:19:05,439 Speaker 1: that when the housing bust happened, there were hundreds of 342 00:19:05,440 --> 00:19:07,359 Speaker 1: people who would line up every day outside of the 343 00:19:07,359 --> 00:19:10,360 Speaker 1: financial aid office, to the point where this community college 344 00:19:10,359 --> 00:19:14,520 Speaker 1: had to hire security guards because these people were getting 345 00:19:14,600 --> 00:19:17,800 Speaker 1: very agitated, and some of them were giving death threats 346 00:19:17,840 --> 00:19:19,719 Speaker 1: to the the financial aid officers if they didn't give them 347 00:19:19,880 --> 00:19:22,560 Speaker 1: one money because either they didn't qualify or fill out 348 00:19:22,560 --> 00:19:25,760 Speaker 1: the paperwork. So yes, on average, if you have a degree, 349 00:19:26,400 --> 00:19:28,160 Speaker 1: you're fine, but there's a lot of people who were 350 00:19:28,160 --> 00:19:31,040 Speaker 1: in desperate straits who took out loans, who dropped out 351 00:19:31,080 --> 00:19:33,639 Speaker 1: after a semester, or maybe they never even showed up 352 00:19:33,640 --> 00:19:35,600 Speaker 1: the class and they just needed money to live off of, 353 00:19:36,280 --> 00:19:38,959 Speaker 1: or even if they graduated. A lot of them graduated 354 00:19:38,960 --> 00:19:41,640 Speaker 1: in the twenty twelve era and they still couldn't find 355 00:19:41,640 --> 00:19:44,399 Speaker 1: a job with unemployment was so high. They are a 356 00:19:44,440 --> 00:19:47,000 Speaker 1: minority of bar wers, but it's a very sizeable one, 357 00:19:47,080 --> 00:19:49,679 Speaker 1: and I don't think people really realize how high that 358 00:19:49,800 --> 00:19:52,160 Speaker 1: number is. We're talking about mellions of people. Well at 359 00:19:52,160 --> 00:19:55,400 Speaker 1: the same time, by just sort of putting a band 360 00:19:55,440 --> 00:19:59,119 Speaker 1: aid on this. The Committee for Responsible Budget estimies that 361 00:19:59,280 --> 00:20:03,800 Speaker 1: the student cancelation would eliminate five hundred and fifty billion 362 00:20:03,840 --> 00:20:07,959 Speaker 1: dollars of federal student loan debt, but the overall amount 363 00:20:07,960 --> 00:20:10,879 Speaker 1: of outstanding federal student loaned it we'll go back up 364 00:20:10,880 --> 00:20:14,760 Speaker 1: to a trillion six hundred billion within five years because 365 00:20:14,760 --> 00:20:18,399 Speaker 1: we're not solving the underlying systems problems. Yeah, this is 366 00:20:18,400 --> 00:20:20,440 Speaker 1: one of the things that struck me about his plan. 367 00:20:20,760 --> 00:20:24,199 Speaker 1: In some ways, I think his plan risks making the 368 00:20:24,280 --> 00:20:27,080 Speaker 1: college tuition crisis a whole lot worse. And the reason 369 00:20:27,119 --> 00:20:30,960 Speaker 1: why I say that is because not only is he 370 00:20:31,680 --> 00:20:34,560 Speaker 1: calling for forgiving DAT or actually using an executive action 371 00:20:34,600 --> 00:20:39,560 Speaker 1: to forgive DAT, he's also ordering his administration to change 372 00:20:39,600 --> 00:20:42,000 Speaker 1: the rules of what's called on him based for payment. 373 00:20:42,840 --> 00:20:46,840 Speaker 1: Where basically, right now, students have the option when they 374 00:20:46,840 --> 00:20:48,720 Speaker 1: come out of college to pay ten percent of their 375 00:20:48,720 --> 00:20:52,360 Speaker 1: discretionary income toward their loans each month. Well now he 376 00:20:52,440 --> 00:20:54,600 Speaker 1: is calling for cutting that in half at least for 377 00:20:54,600 --> 00:20:58,080 Speaker 1: people with undergraduate debt, to five percent of incomes. So 378 00:20:58,200 --> 00:21:00,479 Speaker 1: what's happening now is Number one, you have a lot 379 00:21:00,520 --> 00:21:04,120 Speaker 1: of people who took on debt and it's now being forgiven. 380 00:21:05,000 --> 00:21:07,000 Speaker 1: For three years, people have not had to pay down 381 00:21:07,000 --> 00:21:09,720 Speaker 1: their student loans because of this so called pandemic pause. 382 00:21:10,600 --> 00:21:12,680 Speaker 1: And then on top of that, he's cutting in half 383 00:21:12,760 --> 00:21:15,800 Speaker 1: the amount that people going forward have to pay on 384 00:21:15,840 --> 00:21:18,840 Speaker 1: their loans. And I think this really does risk creating 385 00:21:18,840 --> 00:21:21,560 Speaker 1: a moral hazard. One of the arguments I make in 386 00:21:21,560 --> 00:21:24,119 Speaker 1: my book is that the reason why colleges have charged 387 00:21:24,160 --> 00:21:28,240 Speaker 1: so much is because they're able to because the Congress 388 00:21:28,520 --> 00:21:31,679 Speaker 1: gives families a blank check to pay for tuition, and 389 00:21:31,720 --> 00:21:34,160 Speaker 1: the colleges get to keep the money regardless of whether 390 00:21:34,200 --> 00:21:36,960 Speaker 1: the students pay it back or not. And this is 391 00:21:37,000 --> 00:21:40,879 Speaker 1: just going to further go down that road of having 392 00:21:40,920 --> 00:21:45,560 Speaker 1: no one really suffer consequences for taking on unrepayable debt 393 00:21:45,680 --> 00:21:49,280 Speaker 1: or for charging tuitions that are so high. You're basically 394 00:21:50,400 --> 00:21:54,639 Speaker 1: detaching consumers, which is the student here, from the cost 395 00:21:54,720 --> 00:21:57,000 Speaker 1: of the service that they're consuming. I know that that's 396 00:21:57,080 --> 00:21:59,359 Speaker 1: kind of economics speak, but basically it's kind of like 397 00:21:59,359 --> 00:22:02,639 Speaker 1: what's happened with healthcare. When the taxpayer comes in and 398 00:22:02,840 --> 00:22:06,640 Speaker 1: covers more and more of these services without any type 399 00:22:06,640 --> 00:22:09,160 Speaker 1: of pressure for the service provider to keep their costs 400 00:22:09,160 --> 00:22:13,560 Speaker 1: in check. It just incentivizes the schools to further increase 401 00:22:13,600 --> 00:22:15,280 Speaker 1: their tuition. So I think that that's a very big 402 00:22:15,400 --> 00:22:19,920 Speaker 1: risk here. Some people believe that this much additional government 403 00:22:20,000 --> 00:22:24,040 Speaker 1: spending in the current environment will be inflationary their arguments. 404 00:22:24,040 --> 00:22:27,200 Speaker 1: But whether it be a little bit inflationary, not inflationary 405 00:22:27,200 --> 00:22:31,080 Speaker 1: at all, or significantly inflationary, what's your instinct about the 406 00:22:31,640 --> 00:22:34,600 Speaker 1: long term inflation impact of what Biden is doing. My 407 00:22:34,680 --> 00:22:37,280 Speaker 1: instinct is I think it will be a little bit inflationary, 408 00:22:37,280 --> 00:22:40,679 Speaker 1: and I actually think it's already been inflationary. When the 409 00:22:40,720 --> 00:22:45,240 Speaker 1: Trump administration and then the Biden administration paused student loans, 410 00:22:45,280 --> 00:22:48,000 Speaker 1: they basically saved a lot of households on average, I 411 00:22:48,000 --> 00:22:49,800 Speaker 1: think it was two hundred to three hundred dollars a 412 00:22:49,840 --> 00:22:53,080 Speaker 1: month in monthly payments. We're talking about millions and millions 413 00:22:53,080 --> 00:22:56,520 Speaker 1: of households who were devoting two hundred to three hundred 414 00:22:56,520 --> 00:22:58,159 Speaker 1: dollars a month towards student loans, in a lot of 415 00:22:58,160 --> 00:23:00,920 Speaker 1: cases a lot more, and now they had that extra 416 00:23:00,960 --> 00:23:03,840 Speaker 1: cash in their hands. So my instinct is that this 417 00:23:04,040 --> 00:23:07,560 Speaker 1: pandemic pause was one straw among many that broke the 418 00:23:07,600 --> 00:23:10,880 Speaker 1: camels back, and I think going forward, when we look 419 00:23:10,880 --> 00:23:13,119 Speaker 1: at debt forgiveness. You know, you have to understand that 420 00:23:13,200 --> 00:23:15,680 Speaker 1: this price tag that these groups are putting out there, 421 00:23:15,760 --> 00:23:19,240 Speaker 1: that's over ten years, and yet I think most economists 422 00:23:19,240 --> 00:23:21,520 Speaker 1: would say there's going to be at least some effect 423 00:23:22,080 --> 00:23:24,200 Speaker 1: on inflation. Now, is it a huge effect. I don't 424 00:23:24,240 --> 00:23:26,920 Speaker 1: think so, because it's small compared to the size of 425 00:23:26,960 --> 00:23:32,280 Speaker 1: the US economy. But again, I think inflation it's risen 426 00:23:32,320 --> 00:23:34,919 Speaker 1: over the past couple of years for many reasons, and 427 00:23:35,040 --> 00:23:37,440 Speaker 1: this is one of them. So it will have some effect. 428 00:23:37,920 --> 00:23:39,680 Speaker 1: But I also think again, a lot of this debt 429 00:23:39,760 --> 00:23:41,520 Speaker 1: was not going to get repaid in the first place, 430 00:23:41,520 --> 00:23:44,240 Speaker 1: a big chunk of it. So short answer is, I 431 00:23:44,280 --> 00:24:02,639 Speaker 1: think it will have a small effect on inflation. But 432 00:24:02,720 --> 00:24:04,520 Speaker 1: I think we have a wrong model in our heads. 433 00:24:04,520 --> 00:24:09,520 Speaker 1: I mean, universities like hospitals have become essentially self serving 434 00:24:09,520 --> 00:24:12,399 Speaker 1: economic energies. They don't get up in the morning and 435 00:24:12,440 --> 00:24:14,679 Speaker 1: say how can I help the community. They get up 436 00:24:14,680 --> 00:24:17,159 Speaker 1: in the morning and say where's the money? And I 437 00:24:17,200 --> 00:24:19,920 Speaker 1: think this has been a huge challenge over the last 438 00:24:19,960 --> 00:24:22,639 Speaker 1: forty or fifty years as we've shifted from sort of 439 00:24:22,680 --> 00:24:28,960 Speaker 1: a community focused and service focused model to actually serving 440 00:24:29,520 --> 00:24:33,720 Speaker 1: the hospital staff and serving the university staff, and therefore 441 00:24:34,359 --> 00:24:37,679 Speaker 1: the students and the patients are sort of secondary objects 442 00:24:37,840 --> 00:24:40,240 Speaker 1: of the whole project. Yeah, in some ways, that was 443 00:24:40,280 --> 00:24:42,680 Speaker 1: the intent of the program. I spoke with one of 444 00:24:42,720 --> 00:24:46,919 Speaker 1: the economists who advised LBJ and other officials to go 445 00:24:47,000 --> 00:24:50,960 Speaker 1: down the path of providing student loans, and one of 446 00:24:50,960 --> 00:24:53,520 Speaker 1: the theories was that if you give students a voucher, 447 00:24:54,400 --> 00:24:56,399 Speaker 1: which is essentially what a student loan is, it's a 448 00:24:56,480 --> 00:24:59,080 Speaker 1: voucher to go to the school of your choice, that 449 00:24:59,080 --> 00:25:04,119 Speaker 1: that would stoke petition among colleges to fight over that vulture, 450 00:25:04,359 --> 00:25:09,400 Speaker 1: and that colleges would be forced to rein in their 451 00:25:09,400 --> 00:25:14,080 Speaker 1: prices and provide a very good product because they would 452 00:25:14,080 --> 00:25:17,000 Speaker 1: be competing over that student, and the student would go 453 00:25:17,040 --> 00:25:20,600 Speaker 1: to the cheaper option. But really the opposite happened. Schools 454 00:25:20,640 --> 00:25:23,360 Speaker 1: did not end up competing on price. They actually started 455 00:25:23,400 --> 00:25:26,960 Speaker 1: competing on prestige. And so they sort of flipped the 456 00:25:27,040 --> 00:25:30,199 Speaker 1: script and told students, no, you don't want to go 457 00:25:30,280 --> 00:25:32,480 Speaker 1: to the cheaper option. You actually want to pay more 458 00:25:32,520 --> 00:25:38,320 Speaker 1: for your education because higher prices are associated with higher quality. 459 00:25:38,760 --> 00:25:41,280 Speaker 1: We charge higher prices because we're such a good school 460 00:25:41,560 --> 00:25:43,359 Speaker 1: and we're going to give you such a great product, 461 00:25:43,400 --> 00:25:46,680 Speaker 1: So don't feel bad about paying higher prices. You should 462 00:25:46,720 --> 00:25:49,440 Speaker 1: actually go toward the higher prices. That means you're getting 463 00:25:49,480 --> 00:25:53,280 Speaker 1: a better education. In some ways, it was designed to 464 00:25:53,440 --> 00:25:57,560 Speaker 1: have colleges act like an industry, but they sort of 465 00:25:57,560 --> 00:26:00,280 Speaker 1: figured out a way to do. The ops that have 466 00:26:00,320 --> 00:26:02,880 Speaker 1: rained in their prices and raised their prices. I talked 467 00:26:02,880 --> 00:26:07,480 Speaker 1: occasionally to small liberal art college presidents who are caught 468 00:26:07,520 --> 00:26:12,040 Speaker 1: in this cultural trap that they can't lower their price 469 00:26:12,800 --> 00:26:16,440 Speaker 1: in order to attract students because lowering their price is 470 00:26:16,480 --> 00:26:20,840 Speaker 1: interpreted as cheapening the product. Yeah, and so they have 471 00:26:20,920 --> 00:26:23,199 Speaker 1: to compete on you know, either the quality of the 472 00:26:23,240 --> 00:26:26,359 Speaker 1: program or the football team or something. But they can't 473 00:26:26,400 --> 00:26:29,960 Speaker 1: compete by what you would have expected in a market environment, 474 00:26:30,359 --> 00:26:33,600 Speaker 1: offering a better product at a lower price. Yeah, and 475 00:26:33,680 --> 00:26:36,160 Speaker 1: let's be honest, there are cheaper options out there. There 476 00:26:36,240 --> 00:26:38,399 Speaker 1: is the option to go to two years of community college. 477 00:26:38,800 --> 00:26:41,000 Speaker 1: A lot of times community college is not completely free. 478 00:26:41,160 --> 00:26:45,119 Speaker 1: People have to borrow for living expenses. However, it's pretty 479 00:26:45,160 --> 00:26:49,000 Speaker 1: cheap and states like Florida have pretty good in state tuition. 480 00:26:49,680 --> 00:26:53,200 Speaker 1: So there are cheaper options and schools, or at least 481 00:26:53,200 --> 00:26:55,080 Speaker 1: a lot of the bigger state schools and certainly, the 482 00:26:55,119 --> 00:26:58,359 Speaker 1: private schools spend a lot of money on recruiting. You 483 00:26:58,400 --> 00:27:00,959 Speaker 1: mentioned endowments. A lot of these private schools have very 484 00:27:00,960 --> 00:27:03,880 Speaker 1: big endowments. There's some research to show that they don't 485 00:27:03,880 --> 00:27:07,679 Speaker 1: necessarily use that endowment money to ease the burden on 486 00:27:07,760 --> 00:27:10,720 Speaker 1: high tuition. They basically spend a lot of their money 487 00:27:10,720 --> 00:27:14,240 Speaker 1: and their profits on further recruiting and enhancing the amenities 488 00:27:14,280 --> 00:27:17,160 Speaker 1: on their campuses. And they basically have these sales operations. 489 00:27:17,160 --> 00:27:19,240 Speaker 1: It's one of the things I cover in one of 490 00:27:19,280 --> 00:27:21,280 Speaker 1: the chapters of my book. The Universtity of Alabama had 491 00:27:21,280 --> 00:27:24,080 Speaker 1: this huge field sales operation across the country to heavily 492 00:27:24,080 --> 00:27:26,760 Speaker 1: recruit families that were willing to pay higher prices. So 493 00:27:27,320 --> 00:27:29,399 Speaker 1: I think that's going to be a very big issue 494 00:27:29,440 --> 00:27:33,160 Speaker 1: looking at I mean, we do have this parallel crisis 495 00:27:33,240 --> 00:27:37,040 Speaker 1: and cost with both healthcare and education. If we can't 496 00:27:37,080 --> 00:27:38,879 Speaker 1: find a way out of it in the long run, 497 00:27:38,920 --> 00:27:42,000 Speaker 1: the two will manage to bankrupts. Yeah. You know, one 498 00:27:42,000 --> 00:27:45,880 Speaker 1: of the interesting things that's happened is college enrollment has 499 00:27:45,920 --> 00:27:49,159 Speaker 1: actually fallen over the past ten years, ever since it 500 00:27:49,240 --> 00:27:52,199 Speaker 1: peaked during the last recession and a little bit afterward 501 00:27:52,200 --> 00:27:56,240 Speaker 1: and peaked in twenty ten, college tuition growth has actually slowed, 502 00:27:56,280 --> 00:27:58,159 Speaker 1: and I think that's because a lot of people have 503 00:27:58,240 --> 00:28:01,840 Speaker 1: become skeptical of this idea that college is worth it 504 00:28:01,880 --> 00:28:05,360 Speaker 1: at any cost. We've actually seen the college wage premium, 505 00:28:05,880 --> 00:28:08,440 Speaker 1: which refers to how much you can expect to earn 506 00:28:08,480 --> 00:28:11,280 Speaker 1: as a college graduate above what your average high school 507 00:28:11,320 --> 00:28:14,520 Speaker 1: graduate earns. That premium has actually fallen in the past 508 00:28:14,560 --> 00:28:16,600 Speaker 1: few years during the pandemic, and I think one of 509 00:28:16,600 --> 00:28:18,800 Speaker 1: the reasons why is because as the labor market has 510 00:28:18,800 --> 00:28:21,160 Speaker 1: become tight, employers are now saying, hey, maybe you don't 511 00:28:21,200 --> 00:28:24,320 Speaker 1: need a college degree. You know, this idea that everyone 512 00:28:24,359 --> 00:28:28,199 Speaker 1: needed a college degree just to succeed in America, I 513 00:28:28,240 --> 00:28:31,440 Speaker 1: think a lot of people have realized that's not necessarily true. 514 00:28:31,760 --> 00:28:33,840 Speaker 1: I think a lot of employers are now being forced 515 00:28:34,000 --> 00:28:37,880 Speaker 1: to lower their education requirements and are finding that maybe 516 00:28:37,880 --> 00:28:40,120 Speaker 1: those education requirements should not have been there in the 517 00:28:40,160 --> 00:28:42,160 Speaker 1: first place. You know, I don't know if you're aware of, 518 00:28:42,160 --> 00:28:47,840 Speaker 1: but Washington DC has put in place requirements that workers 519 00:28:47,840 --> 00:28:51,040 Speaker 1: at childcare facilities have to get a two year degree, 520 00:28:51,160 --> 00:28:53,239 Speaker 1: So they actually are now going to start needing to 521 00:28:53,280 --> 00:28:55,640 Speaker 1: go to college. And there's a lot of people who 522 00:28:55,680 --> 00:28:57,320 Speaker 1: are like why, you know, why are we pushing more 523 00:28:57,360 --> 00:29:01,240 Speaker 1: people into college? Is it really necessary? So if there's 524 00:29:01,280 --> 00:29:04,280 Speaker 1: one sort of positive development, I think people are no 525 00:29:04,320 --> 00:29:07,120 Speaker 1: longer taking it as gospel that you have to spend 526 00:29:07,800 --> 00:29:11,440 Speaker 1: thirty fifty seventy thousand dollars or take on that much 527 00:29:11,440 --> 00:29:14,840 Speaker 1: in debt and go to the most prestigious college just 528 00:29:14,920 --> 00:29:18,680 Speaker 1: to succeed. People have questioned that in colleges are facing 529 00:29:18,680 --> 00:29:21,160 Speaker 1: a little more pressure than they used to. I think 530 00:29:21,280 --> 00:29:24,120 Speaker 1: your book is increasingly timely, maybe more timely now than 531 00:29:24,560 --> 00:29:26,840 Speaker 1: when it first came out. We're going to have a 532 00:29:26,880 --> 00:29:29,120 Speaker 1: link to the debt trap. I also want to just 533 00:29:29,320 --> 00:29:31,560 Speaker 1: put in a bid right now now that you're in Britain, 534 00:29:32,000 --> 00:29:34,720 Speaker 1: which was a country going through I think an amazing 535 00:29:34,720 --> 00:29:38,440 Speaker 1: amount of turmoil with almost no understanding in the US. 536 00:29:38,560 --> 00:29:40,520 Speaker 1: I hope in a few months we'll be able to 537 00:29:40,560 --> 00:29:43,720 Speaker 1: come back and get your reflections on what you're learning 538 00:29:43,720 --> 00:29:46,320 Speaker 1: about both Britain and Europe and what I think is 539 00:29:46,320 --> 00:29:49,360 Speaker 1: going to be a very tumultuous winter. I think people 540 00:29:49,400 --> 00:29:52,480 Speaker 1: have no idea how many changes and how much stress 541 00:29:52,520 --> 00:29:54,880 Speaker 1: there's going to be over the next sixth grade months. 542 00:29:55,320 --> 00:29:57,280 Speaker 1: I would love to come back on any time. Great 543 00:29:57,320 --> 00:29:59,280 Speaker 1: and we look forward to reading you in the Wall 544 00:29:59,280 --> 00:30:02,240 Speaker 1: Street Journalism brief all of us on what you're learning 545 00:30:02,240 --> 00:30:04,680 Speaker 1: in London. I want to thank you for joining me. 546 00:30:05,160 --> 00:30:08,120 Speaker 1: I really appreciate your taking time to talk about student 547 00:30:08,120 --> 00:30:11,040 Speaker 1: loan debt forgiveness in the student loan debt crisis. And 548 00:30:11,200 --> 00:30:13,000 Speaker 1: as I said, we will have a link to your book, 549 00:30:13,280 --> 00:30:16,800 Speaker 1: The Debt Trap, How student loans became a national catastrophe 550 00:30:17,080 --> 00:30:19,840 Speaker 1: on our showpage at Newtsworld dot com. And I really 551 00:30:19,880 --> 00:30:22,600 Speaker 1: wish you well in your brand new adventure in London, 552 00:30:22,840 --> 00:30:24,880 Speaker 1: of course, and thank you. I really appreciate you having 553 00:30:24,920 --> 00:30:30,560 Speaker 1: me on. Thank you to my guest Josh Mitchell. You 554 00:30:30,600 --> 00:30:33,600 Speaker 1: can learn more about student loan debt forgiveness on our 555 00:30:33,640 --> 00:30:37,719 Speaker 1: showpage at Newtsworld dot com. News World is produced by Gangwish, 556 00:30:37,720 --> 00:30:42,040 Speaker 1: Sweet sixty and iHeartMedia. Our executive producer is Gornsey Slow, 557 00:30:42,360 --> 00:30:46,600 Speaker 1: our producer is Rebecca Howe, and our researcher is Rachel Peterson. 558 00:30:47,040 --> 00:30:50,040 Speaker 1: The artwork for the show was created by Steve Penley. 559 00:30:50,520 --> 00:30:53,480 Speaker 1: Special thanks to the team at Gingwish Sweet sixty. If 560 00:30:53,480 --> 00:30:56,200 Speaker 1: you've been enjoying Newtsworld, I hope you'll go to Apple 561 00:30:56,280 --> 00:30:59,720 Speaker 1: Podcast and both rate us with five stars and give 562 00:30:59,760 --> 00:31:02,680 Speaker 1: us a review so others can learn what it's all about. 563 00:31:03,480 --> 00:31:06,080 Speaker 1: Right now, listeners of nuts World can sign up from 564 00:31:06,080 --> 00:31:11,000 Speaker 1: my three free weekly columns at gingwich six dot com 565 00:31:11,040 --> 00:31:15,000 Speaker 1: slash newsletter. I'm Nut Gangwig. This is news World.