First things first, id like to welcome beth to the Manhattan Institute where shes recently become a fellow. Prior to joining us, she was a fellow at the Brookings Institution center on children and families, and before that she was a taffe economist staff economist at the president s council of economic advisers and worked extensively on Higher Education policy. Second, id like to welcome beth back to new york. Beth received her ph. D. In math excuse me, her b. A. In math and economics from cunyalbany and her ph. D. From columbia university. Beths here to talk about her book, game of loans. Recently published by Princeton University press and written with matthew of the urban institute. So after reading beths book, i can assure you shes going to fit right in at the Manhattan Institute [laughter] where the scholars really delight in debunking poorly argued narratives in the press and the public debate. And beths book does just that. Its a timely corrective to the wildly exaggerated student debt crisis that persists in the media. Her thesis is that theres no broadbased student loan crisis that the New York Times and others would have us believe. And she makes a powerful, datadriven case that i think while also giving the reader a really broad and full accounting of the Higher Education finance and how it works. In light of beths analysis, i think its safe to say that Hillary Clinton or Bernie Sanders proposal to make college free is an indulgent solution looking for a problem. Beths book, i think, will be of enormous value to lawmakers, to policymakers, to university administrators, to parents, Prospective College and graduate students and concerned taxpayers and citizens because it explains things simply and clearly. Even if theyre things that not all of us or not Everyone Wants to hear. And ill take my own case. In our culture today, obsessed with selfesteem, no one likes to be told that theyre average. Well, from reading beths book, i learned that, well, i was average. [laughter] like other prospective students, young people from families of modest means, i made a decision to invest in my own future and took out what turned out to be, i learn now in retrospect from beths book, the average amount of Student Loans required to attend a selective new England Liberal Arts College in the eve 90s. I had little sense of how much id actually borrowed at the time or from whom. Then that woman, sallie mae, started sending me all these letters. [laughter] however, like other average borrowers, i also had little difficulty actually paying back the loans to my own surprise because it had seemed quite daunting at first. So much for the media narrative that all undergraduate borrowers are in deep trouble. I also learned another hard truth from beths book. When it came to graduate school, i learned that i was, in fact, well, below average. You know, taking i was below average in the especially is of the amount in the sense of the amount of loans it took me to complete my ph. D. In this case, fortunately for me, being below average actually turned out to be a good thing, and this is because as beth shows one of the most disturbing elements of the world of Higher Education debt is the amount thats taken out by graduate students. So, look, i could go on about the virtues of beths book which are many, but let me just end by encouraging all of you to pick up a copy at the book stand. I gather that theyre for sale outside, and if you dont pick one up there, i suggest amazon or the equivalent online, and as i say, i think theres a lot to chew on in the book, so without further ado, let me welcome beth akers. Beth . [applause] well, thank you, dan, very much for that generous introduction. Im thrilled to be here, meaning here at the Manhattan Institute and part of this great organization, but also here today to be able to put some of my ideas into your ear and hope that they stick. So thank you so much for giving me the opportunity to speak to you today. So it sounds like, you know, you already heard what the book was about, but ill do my best to fill in a little more of the detail and kind of sell you on some of my argument here. Ooh, i think you took the first page of my notes, which is going to make it [laughter] i was going to say, thats not the first idea i wanted to talk about. [laughter] so i think its helpful when talking about the book to start back before the book started and give you a sense of why i wrote the book, why i embarked on this agenda of research in the first place. So i joined the think Tank Community about five years ago. I had just finished graduate school, and i was studying economics in a pretty theoretical department. So i had this new experience of having reporters call me, and i had to pick up the phone and answer whatever questions they threw my way which was a fun and daunting exercise. One of the questions that i found that i was asked almost daily through that process was is a student loan crisis on the horizon. As i just said, i had come out of graduate school at this point, so i was intimately familiar with the academic literature on the financial returns to investments in education. I was somewhat familiar with the headlines that were pervasive on the issue of student debt, but it wasnt as obvious to me why the media was really obsessed with this question about a student loan crisis. We were just a few years out from the mortgage crisis, and i believe a lot of people were drawing parallels between what could happen in Student Lending and what we had seen happen in student mortgages. So using the economic lens that i had been given in my training, i was imagining a Higher Education in the lens of it was an investment that pays off over the course of a lifetime. The estimates that we have on the academic literature suggested if you think of education that way with and aggregate across all the experiences americans have had over history, over the past decade the financial returns to this investment have held steady at about 15 . Okay . So a 15 rate of return, and i knew full well that the federal government was making loans at sub subsidized Interest Rates which range at least currently about 46 . So if you think of it in this way, think of it again in the lens of a longearned investment, youve got students making an investment with a pretty decent margin, a large margin of return at least for the typical borrower. So it seemed obvious to me that there was a huge dissonance between the way people were talking about student loan debted in the popular media, in the policy world and the evidence that we had to support that conversation. And so this really inspired me to embark on this agenda of research that was aimed at, one, reconciling this dissonance that i saw, but also just giving more descriptive evidence to what was happening in the student loan market more generally. So what does it look like. Just for a bit of an overview. So the first thing we know that more people are borrowing today than have ever borrowed in the past. Is so only only some of the most recent data tells us among young households, 40 are currently holding some form of student loan debt, and thats up drastically from two decades earlier when just 14 were. We also know that people are borrowing more than, so during that same period of time, over the past 20 years, the average debt has more than tripled for these same young households who are holding some level of student debt. And the statistics that weve all heard over and over and over is those two things have amounted to an outstanding student debt burden for this nation of 1. 3 trillion. Again, we heard the statistics over and over, but the discussion generally stops there. So instead i say lets consider applying a different lens to this. Think of, we think of investments in education as paying off over the course of a lifetime. We can think of these increases in debt, in fact, as a symptom of increased investment in education which we know pays dividends both to the individual and to society. For instance, when we talk about the 1. 3 trillion in student loan debt, we rarely talk about the increases or estimated increases in gdp that will result from the increased productivity from the investments in Human Capital that have taken place. So this is the right way to be thinking about investments in Higher Education and what needs to be done, if anything, with our Student Lending situation. So what else do we know . In contrast to the general understanding, the outstanding the very large outstanding student loan balances are, in fact, exceedingly rare. Only 7 of households have more than 50,000 in student loan debt, and just 2 have more than 100,000 in student loan debt. And, in fact, the large balances are held by the folks who have very lucrative graduate and professional degrees and also have high incomes. Of course, there are individuals who do not have high earnings who have high incomes, but generally speaking, this is the trend we observe in the data. Among bachelors degree holders, less than 40,000 is the norm, and less or greater than 60,000 is largely unheard of for individuals who have just attained a bachelors degree. So its easy to understand why the media has focused on these very high balance borrowers, in contrast to the more typical experiences that are far less newsworthy. I sometimes imagine what the headline would look like if instead these stories or were accurately portraying whats happening, and i think it would look Something Like student borrower gets well paying job after college and faces affordable Monthly Payments. [laughter] it sounds a little bit like an onion article headline, in fact. So i think the problem is that the truth in this case is not as catchy of a headline. And weve been able to quantify this, in fact. So in 2014 someone did a study looking at the popular Media Coverage of student loan debt. They looked at a hundred recent articles, and the average borrowing for those individuals was in excess of 85,000 which is three times the actual average for borrowers. So if youre getting your information about what student borrowing in this country from the newspaper articles, youre going to have an inappropriate understanding of the issue. So burdens are not as large as we imagine them to be, with but the question remains, are they squeezing borrowers . On a transitive monthly basis, what does the squeeze look like for individuals . This is an important question to dig into empirically to really get understanding of what this looks like. What we find when we look at the data is that the average Monthly Payment that a borrowers facing is under 300, so 276 a month. That amounts to 7 of their income, and the median is even lower, 4 . And that has actually declined or held steady over time, so the monthly squeeze of these types of debt has actually declined or held steady depending on if youre looking at the mean or the median. So this is actually an incredible finding, largely in contrast to what i think most people believe. Things are not getting worst, at least on a worse, at least on a monthly basis, for this borrower. The other thing that we uncovered with this work is that the struggling borrowers are not who you think they are. Again, the newspaper covers these stories of these high balance borrowers, and were all led to believe these are the folks who need help. The highest rates of default are amongst borrowers who have less than 5,000 in debt. At least statistically speaking, we know those pay off with large dividends. So the problem is not where we believe it to be. So generally speaking, i draw the conclusion that, in fact, we do not have a crisis in Student Lending in this country. At least not the crisis that a lot of folks have been talking about. And what i like to say is that instead we have crises. There are places where there are very Serious Problems with our federal lending and Student Lending system more broadly, but it is not appropriately characterized with this notion of a student loan crisis in which the sky is falling on all borrowers and every dollar of debt makes an individual necessarily worse off. So who are the people who we need to be worried about . It is the people who have made these investments in education but do not see those returns i have been talking about repeatedly. There are people who are upside down on their Student Loans, okay . A and individuals have a very difficult time accessing the benefits that are currently available to them and as a result we have millions of people in this country who are in default on their Student Loans despite a very robust system that does exist. We also have an information crisis. So we expect in this country consumers to access the entire Education Market but we want them to make savvy choices and to cost analyst unfortunately we dont give them the information thats necessary to do that so the government is Holding Information on the financial returns to every institution in this country but because of its lack of Data Availability consumers are not able to use this to assess the options that are available to them. Also we know the information problem exists after citizens are in school with the borrowing issue as well so in survey data we know that if you ask people who are enrolled in school how much they are paying to be enrolled in school only half of them can tell you within a reasonable margin of error. If you ask them instead how much they have borrowed only about one third of them can tell you within a reasonable margin of error and the people we know that our borrowing again the survey, 28 will tell you that they have no doubt at all. So these are earning facts especially if we wish for this Higher Education system to look like the market because we know that the market cannot exist if the consumers are not operating with information. So not to criticize the narrative at this book if you do believe there are crises are issues in the Higher Education financing space is why be dismissive of the notion of a crisis . At least its being bringing attention to the issue. The argument is clear that ms. Characterizing the problem that exists in the state will lead us to the wrong solution and solutions that do not provide relief to people who needed the most. As an example one of the most prominent policy reforms has been discussed in this space is refinancing about due to loan debt reducing Interest Rates on all of the outstanding volume of debt that folks are holding. This sound like a great idea off the bat for providing relief to the people who are struggling the most but in fact if you take a second look at it we know again that the bar worse who have the most debt are the most welloff, at least on average so the positive relationship between income and debt means that this is a largely regressive policy and does not succeed in helping people who are really struggling with those debts. So in general the popular discourse on this issue is missing the necessary nuance that is needed in order to create reasonable and appropriate policies. Generally we are missing the point that not all debt is bad debt. Debt in which the bar were ends up upside down is concerning and debt that enables an education that pays off of the positive return is less concerning. We need to capture that in our policy discussion. In order to characterize what we should be thinking about it being the conversation needs to shift away from the number of dollars people are paying for tuition and the number of loans people are borrowing to pay for tuition and this is an investment that amounts to a gamble. Some people are going to win and some people are going to lose. We need policy to be focused on helping the folks that would rather gamble to lose than propping up with an general. I will stop there and i think we are going to open up to some questions. [applause] i have been asked to help out with some questions so lets start right up here with this gentleman. Please wait for the microphone. What are the default rates currently on Student Loans . Its a difficult question to answer unfortunately again to two Data Availability in this space. We can measure to year and three year default rates. I dont know the specifics off the top of my head but currently we have about 8 million u. S. Borrowers who are in default on their Student Loans today. Many of them if we could shift them into a payment which they are eligible for but again the information barrier people are unaware of the benefits that are available to them. [inaudible] i dont know the total number of borrowers off the top of my head. Was go to this gentleman here on the left. Im just curious whether you look at your data in the context of the majors that they take . Increasingly on campus as we refine measures like median studies, black studies, gender studies usually the argument you hear at least that ive heard and im an academic is that if you are medical school or Computer Science and its another thing quite different if you are in a field that doesnt pay very much in the world work for starbucks and never paid off so the question really is is there any effort to align that with what they are studying and if they look at it what has to be paid if you are majoring in media studies. Yeah, sure. My research has not looked at this but others have looked at it and of course the financial returns to different degrees are exactly what you would have imagined. The returns im much greater for s. T. E. M. Said engineeri