Good afternoon and welcome. I would like to thank the codirectors for planning our event today, which i know you have been looking forward to. I would also like to let to acknowledge the Susan Gessner for their generous support of todays program. We are grateful for all of those engagements. Today, we will address a very important question is there a student debt crisis . In many of us are well aware of the everexpanding student loan market and the latest estimates are that nearly 40 million americans are laden with 1. 3 trillion worth of student debt. The borrowers is either in delinquency or default. Last years graduating class had in studentof 35,000 debt. The Obama Administration recently announced two policy president ial candidates have focused on a variety of alternatives of ways to lower the debt burdens. While todays seekers. Peakers are two leading voices one was recently named special adviser to the u. S. Department of education. He previously served as the assistant director of the Consumer Financial protection bureau. The secretary of treasury named him as the agencies First Student loan investment. Has frequently testified before congress on alleviating student debt burdens and private student loan performance. A colleague. She is a professor of education, Public Policy, and economics at the university of michigan. Susan is one of the countries top advocates for accessible Higher Education. Testified before congress on education and tax policy and is widely consulted on student aid reform, including a federal reserve, the department of education and treasury, and with the department of economic advisories. She also writes with a New York Times and if you are on twitter, i encourage you to follow her for an informative and witty commentary. About todays format. Each of our panelists to getting with susan will kick things off with three opening remarks. I will then have the pleasure of moderating a conversation with our experts. I will start with a few questions of my own before opening things to the audience. Please write your questions on you received and we will have volunteers circulating to collect them from you during the program. If you are watching online, please send us your questions on twitter. Lets get started. Susan, the floor is yours. Thank you, everyone. Im going to start with the data. I want to start by talking about if there is indeed a crisis in student debt, where is it . University in a school of Public Policy so we should be addressing this question with data as opposed to and thinkingtive about our own experiences or those of our friends or colleagues. Also, instead of maybe just reading the latest dramatic piece in the news about a distressed borrower, but rather by analyzing the data. Data has been a problem in this context. And it does have filled the void. If there is not a good data on the problem, the arising and anecdote will fill the void. Department of education, which is responsible for the federal loans in this country, has not been terribly forthcoming and releasing to the Public Information about who borrows, who defaults, their experiences. That is changing a bit and as of this past fall, we have some excellent data on debt to default for people who have borrowed since the late 1990s or so up until the present. What im going to say here is based on the analysis of that data. Data say . The they say you should erase from your mind if you are thinking of who the face of the student debt crisis is, you should erase it from your mind the image of a yellow graduate or nyu graduate or columbia graduate or even a um graduate. Everyone who graduate with a ba is relatively likely to default. Have a lowgraduate default rates. The default rate to drop in the schools selectivity. And harvardlike um and columbia, about 5 is what the default is. That is what it was before the recession, during. People who graduate from elite schools are pretty well above from economicered distress. Not everybody. Were talking about averages. Ofyou should also not think folks who are going to graduate school. Graduate and no you dont like debt but it is whether it is the face of the country. Everyone would rather have stuffed freedom pay for it. That is an economic sense of pull. Principal. [laughter] grad students a borrowed the least likely to default because they make good money compared to other folks. People who borrow for graduate school are unlikely to default. Graduates of select schools like um might borrow 30,000 total. A goody tend to make money so they can support a debt of 30,000 and pay it off. That is who it is not. Theng to note profiles of the people who are focused on the media. When the media focuses on student debt crises, the people they profile people at columbia, nyu, people with graduate degrees. This week am a graduate of aboutticut college spoke their experience with 200,000 in debt. That is a vanishingly unlikely amount of debt. Few people have that much debt and people who graduate with graduate degrees tend to not default. There was a lovely article in that leads meimes into writing several of shot posts from a guy who graduated with three degrees from Columbia University and subsequently defaulted on all of them and was urging others to follow his as ale and setting it up leader of a student loan revolt. These are not the victims of the crisis. Who is . The face of student loan distress is a dropout from a nonselective college. A person who spent a year or two ora forprofit College Community college or nonselective fouryear college. This is all based on the data. They are firstgeneration college students. They entered college late to improve their job market schools. Many were running away from the weak job market of the recession and went to one of these schools to get a better job. They borrow relatively little because they spent relatively little time in school. They dropped out after a year or six months. Maybe 5,000 to 10,000 a year total. In total, they borrowed 5,000 to 10,000. They are treated with low earnings. They enter poor, they left poor. Is typical loan and defaults less than 10,000. 5,000 is the typical loan in defaults. Yulia third of students who borrowed to attend a Community College or forprofit college during the recession defaulted within five years. Attending ale selective ba institution, its a 5 . The problems are at the Community College and at the forprofit institutions. So, this is who i havent firmly in mind when i think about student debt crisis. Low income, firstgeneration students attending Community College for a forprofit college. Students of Corinthian Colleges were defrauded into borrowing for a nonexistent education. A person laid off in their job who tries to pick up some skills at the local Community College and borrowed to do so and is exiting with low earnings. In my opinion, if there is a crisis of any sort, its a crisis of lower earnings in our country. We lack a safety net. We have a very large number of people earning very low earnings and who cannot handle even 5,000 in debt as a result. Thank you for having me and thank you to all of you for being here. I have recently joined the department of education and just a few days into the job. Question why do we have Student Loans . I always answer its important to remember we have Student Loans for a very good reason and that is to ensure that people who might not be able to afford to go to college can make that investment into themselves, which can payoff very big when done right. Muchthings have changed so in the past 10 years that its hopeful to think through that. Many people concerned about student debt might come from the education world. The other come from stepchild of this world, which is thinking about it from a Consumer Financial markets spective and those of us from our lens, we are really colored and shaped by the foreclosure crisis we saw in the past several years. For those of you from michigan, you probably know very well that problems in the Mortgage Market absolutely devastated parts of michigan and this was not unlike other parts of the country. Today, we have a Mortgage Market that is very different but i think some events that really change the lower the student loan market also. Crisis, thereal is no question that the financial crisis had two real big effects. One is that it really eroded family well. Actually, trillions of dollars in Household Wealth of that he waited in the form of home equity, retirement savings. Families felt distressed. At the same time, the financial crisis hit state budgets very hard and there was some very substantial cuts to public Higher Education. I want to echo something sooner said. Sue said. The Biggest Group is those who attend public colleges. Families feeling more financially stressed and higher tuition, which by the way is not just something that is recent. I understand that 40 years ago, undergraduate tuition at the 800. Sity of michigan was inflationadjusted, thats about four or five times higher. The tuition for undergraduates is well more than 45 times higher than 800. The crisis really pronounce that effect and i think we have seen substantial increases in reliance on Student Loans. Notedary of education has that Student Loans became kind of the norm at a certain point. What else happened i think is important context and i think that we forget there is a lot of talk about the rescue of the Financial System due to gambling on wall street. But there is also a huge change in our federal student loan thatm, which was a law essentially led to the Government Purchasing a huge amount of federal Student Loans. Most federal Student Loans before 2010 were originated by stampedl institutions with a government guarantee. Now much of them are owned by the government and in 2010, the president got a law passed to essentially end this bank Subsidy Program and now when you borrow, its all directly through the department of education. All of this put together more borrowers. More students relying on pell grants, Student Loans combined with the government taking the unprecedented action really has in some ways created a lot of holoceneties that the makers and the Research Community are thinking about all of the different tools that can really be used to make improvements to the system. I think that we are at a place where we need to keep helping people go to college but we need to remember that the macro environment as well as some poor performing programs are leading inpeople, many people being very high levels of distress. I cant tell you enough. What i would push you to remember is when somebody is delinquent on their Student Loans, it is often just one sign of a broader array of shocks happening in their life. Fighting to keep paying rent, struggling to make payments on their car loans, and thinking through that as an entire consumer about the trauma that they are managing is something we always have to keep in mind. That said, there is a lot policy being pursued to not only address the borrowers who are struggling but also to a nokia a few of them i will mention. There is now new repayment plans. Ofs is a broad expansion affordable Loan Modifications and free payment plan that allow borrowers to play pay a tosonable amount of income manage those times of distress. My understanding is theres about 5000 people enrolling in that per day on average. We have to figure out how we can keep them in there and manage through that. There are new ways for borrowers to get out of default on their federal loans. Rules have been put into place allow borrowers to get back on loan feet through rehabilitation and we need to make sure borrowers are not hiding and they know there are options for them. Of course there has been a lot of interest and activity on enhancements to student Loan Servicing. Student loan servicers are the companies that help collect payments and manage your loans. There is a lot of work to do to make that process work better. The president enacted a student aid bill of rights that called for a number of potential improvements to student Loan Servicing and that might be an. Mportant way there is good work being done to help borrowers go through that process. Going forward, we have to think about how to a nokia late future generations to not be deterred by low prices. A few of them, ending those bank subsidies for the old federal , money toam created invest in the pell grant program. A lot of people taking a look at the role of the creditor and state oversight agencies. The collapse of Corinthian Colleges has raised a lot of questions about the role of how we do oversight and many of you might have heard of the gainfulration employment initiatives, which is essentially a Regulatory Framework to prevent schools from graduating or even not graduating students with unaffordable levels of debt. There is a broader conversations all over. About making Community College free or more affordable. I think i would encourage all of you as you think about this not oneat there is initiative that will be a cureall. It is a series of tools to fight a discrete set of problems. Focusing on just College Affordability wont really fix issues for people struggling today. Tackle hard problems to the Big Solutions are needed. Thank you very much for helping to frame this very complex and nuanced set of issues. And are of vital importance i say that both from my perspective as a dean of a policy school and as a parent of two college students. There are many, many issues on the table. I will ask a couple of questions first to start things off but i encourage you to use the no cards for us to open things up to the audience participation. Perhaps the place to start is to more of a sense of just how worried should we be about this crisis anyway . You spoke about the Mortgage Loan crisis at the beginning of your remarks and certainly some have suggested that what is happening with Student Loans is a bubble that could be as concerning as the mortgage crisis was as we all well know. How we read should we be about what is happening in Student Loans and with student debt . Coming from the view of someone who is more of a Financial Services practitioner, a very stringent definition in my mind of what a debt crisis is. You get crisis a debt crisis likely seeee is in europe or puerto rico a very different animal. It is where there is an whichate precipice upon there will be some systemic change that will cause mast of the station vary, very quickly. The term bubble denotes an economic term that something will pop and be quick and dramatic. I do not think what were seeing in Student Loans is one that will create rapid, Systemic Risk because there is really not close interconnectedness with big Financial Institutions that could reverberate through the economy. That being said, those are technical terms. There are many people in our country and that it is a personal crisis for them that they cannot manage in this debt. I will say i totally respect what sue has a shared with the data but i wonder, are some of the borrowers who dont borrow very much but are in default, are they actually in the debt on a lot of other instruments . Did they finance their education in other ways that may not show up in the student loan data . How i would answer that is maybe that we a doomsday thought with the collapse of some of the large finance total Financial Institutions but on a personal level, i think we have to ask ourselves how can somebody who default on the student loan really recover and become someone who can participate in the economy and not be discouraged and frankly not to feel like a failure . I dont want to debate over the word about what the status is but i think we can all agree theres so much we can improve for individual borrowers and we need to know more about what the potential impacts are on the rest of the economy. There may not be something immediately by there is more to learn there. I agree with everything you just said. A bubble emerges when an asset can get flipped over and over again and its pricing gets inflated. Think of the tulip crisis in holland, think of a house that gets flipped in the price increases. You cannot flip human capital. Of cannot get the same kind crazy inflationary. What we do have is a lot of suffering. I want to mix in concrete observations about what it means when we have 8 Million People in default. What does that actually mean for individual lives . For someone in default, they have a enormous of the lot on their credit record. What does that mean . Any landlords now do credit checks before somebody can rent so they are shut out of parts of the housing market. If they want to buy a car to get to work because they are living in a neighborhood that is not aree the jobs are, they shut out of getting a reasonably priced alone for their car and they have to get a 25 Interest Rate loan, which