Sept. 24, 2020

How to solve the student debt problem

Whether it’s a crisis or not (check out our last episode for the answer), the student debt load in the U.S. is something worth addressing. After all, we didn’t reach $1.6 trillion in debt overnight. It’s a systemic problem, and it’s one that needs solving sooner rather than later.

Today on Business Casual, we’re attempting to do just that—solve a $1.6 trillion problem. Our guest is Jeff Selingo, a higher ed expert who’s written about the student debt load for as long as some of today’s borrowers have been alive.

That gives him loads of insight into the student debt situation. On our journey to a solution for the debt load problem, we’ll walk through everything from the groups most impacted by borrowing deficiencies to the roles of higher education institutions. And we’ll get a final answer on the age-old question: is college still worth it?

Jeff’s proposals aren’t exactly orthodox or old school by any stretch of the imagination, but he’ll give you plenty to think about. One example to whet your appetite: should college students get more or less in student loans based on their majors?

Listen now.


Kinsey Grant, Morning Brew business editor and podcast host [00:00:09] Hi, everybody, and welcome to Business Casual. It's your host, Kinsey Grant. And we don't have much time to waste because today, we have a big problem to solve. So, let's get into it. [sound of a ding]

Kinsey [00:00:21] Last time around, we got the full rundown of what makes the student debt problem a problem, regardless of who's borrowing, where, and when. How about a quick refresher, though? Forty-five million borrowers collectively owe nearly $1.6 trillion in student loan debt in the United States. Student loan debt is the second-highest consumer debt category behind only mortgage debt. And it's higher than both credit cards and auto loans. So that's a problem that warrants solving. 

Kinsey [00:00:45] But there isn't a clear path to resolution. We've got a seemingly endless array of concerns to keep in mind, from students to graduates to institutions to the government. And $1.6 trillion is a number that just keeps growing. Suffice to say, solving the student debt problem will not be easy, but the worthwhile pursuits never are. So today, to help us understand how we fix the student debt problem in the United States, Jeff Selingo, the resource for anyone who wants to learn more about post-secondary education and its costs and the student debt load. Jeff, welcome to Business Casual. 

Jeff Selingo [00:01:18] It's great to be here. Thanks for having me. 

Kinsey [00:01:20] Well, thank you so much for taking the time. You are busy writing all the time. You've written about higher education for two decades, authored two New York Times best sellers. You've got a new book coming out as well. Definitely got good grades in college. [Jeff laughs] [crosstalk]

Jeff [00:01:34] But no, it's great to be here. It's a fascinating subject. A big part of the economy. I don't think people think of higher education as a big part of the economy, but it is. And so, it's been a great run in terms of writing about higher education. 

Kinsey [00:01:48] Absolutely. So with that, it is a big issue. Let's try to get to the bottom of it. Are you ready? 

Jeff [00:01:53] Yup, let's go. 

Kinsey [00:01:54] All right. So you have been on the record saying that, quote, we have to figure out a way to reduce student debt, end quote. Tell me why. 

Jeff [00:02:02] Mainly because colleges and universities continue to raise their prices. Students are having trouble getting to college. They're having trouble completing college. Only about 50% of students who start a bachelor's degree finish it in four years. Even fewer finish it in six years. So we have a number of students starting a degree and not finishing it. There's many reasons why students drop out of school, but debt and paying for college is a huge piece of it. 

Jeff [00:02:29] The other thing is that I just finished a book about a year inside the college admissions process. I saw it from both sides. I saw from schools accepting students. But I also talked to seniors who were going through the admissions process. And for most people, it's about fit. It's about their academic fit and their social fit. But for too many families, they're not thinking about the financial fit of college. And as a result, they end up at these places that are not a great fit financially. 

Jeff [00:02:54] They end up stretching the family mortgage and the family budget way too far to pay for college. And they either get out and they're underemployed and they can't find a job that equals their education. They're unemployed in some cases. Or they've carried on this massive amount of debt, both the students and the parents, and they have trouble paying it off. And so we really have to figure this out. 

Kinsey [00:03:17] So a lot of this, I think, has to do with, you know, the college that you choose is more than just what major you really want to major in or where you think you could fit socially. This is a huge concern—the financial fit to your point. And I want to talk more about that. Before we do that, though, can you help me understand the historical context for this? I think that's something that I've kind of been missing in this conversation. When did this become a problem? Has this always been a problem, or is the student debt problem new? 

Jeff [00:03:44] So what's fascinating to me is that, as I said, I worked on this book about college admissions, and so I looked back at the history of admissions. And what's interesting was we never had financial aid offices at colleges back in the '50s and '60s. College was, first of all, not a lot of people went to college and even when they did, they could afford to pay for it. In the late '60s, the federal government passed something called the Higher Education Act that first set up federal financial aid, including student loans. And a couple of years later, something called the Pell Grant that gave out money to students. 

Jeff [00:04:13] But again, even in the '70s and '80s, most families were able to pay for college. And then something happened starting in the 1990s. The federal government started to pull back on the federal Pell Grant. So the buying power of that grant was not as good as it used to be. States started to get out of the business of higher education. They really cut back the amount of subsidies they were giving, mostly to public universities, and 80% of American students go to public universities. 

Jeff [00:04:40] And then colleges, private and then eventually public, started using financial aid not as a tool to help students afford college, but much like the airlines do as a way to fill seats. And so what they ended up doing was started to use that money as leverage to get people in the door to fill seats, because especially starting in the '90s and then even the last couple of years, we started seeing demographics go down. And so they had all these dorm rooms and all these classroom seats that they had to fill. 

Jeff [00:05:08] And so they started to move away from financial aid as a tool to help students afford college and more as their internal tool to get them to fill seats. And so all of those things started to happen, and the end result of it is that students and families got stuck with more of the bill. 

Kinsey [00:05:25] Right, because so often financial aid packages are great, but don't give a family or a student everything they need to actually afford the entire four years of a college education. There are a lot of costs beyond just tuition. 

Jeff [00:05:36] And even when they're given money and tuition, because of the way the federal formulas work around financial aid, students are stuck with what they call a gap. There's always a gap at the end, where college costs this much, they get this much financial aid, and they have to make up the difference. And that's where families, I think, stretch way too often and they end up mortgaging the house. Parents take out student loans as well—Parent Plus Loans—or students take on much bigger loans than they really should be. 

Kinsey [00:06:05] Yeah, absolutely. So, Jeff, we're going to talk some about solutions in just a little bit. But before we do that, I want to take a moment to think about the ways that we should be approaching student loan debt based on where we are in life. And I'd like to frame this as kind of applicable to all of us, not just students, not just students who took on debt, not just people who have paid it off, not just parents. 

Kinsey [00:06:25] So let's kind of parse through this thinking a little bit. Let's say, before college, it seems like a logical place to start. I'm 18 right now. What makes getting a college degree worth it, besides being on the right side of the economy? What makes it a worthwhile investment? 

Jeff [00:06:40] Well, college is a staging ground for the rest of life. It's where you're going to meet a lot of your friends, the beginning of your network. In some cases, it's where people meet their spouse. They meet mentors that really help them get started in careers. People make a lot about, you know, Bill Gates and Mark Zuckerberg and others dropped out of college, but they all started. 

Jeff [00:07:00] And if you think about Mark Zuckerberg in particular, Facebook would have never started if he were not at Harvard. So, yes, he eventually dropped out. But that set the stage for everything else that he did. And I think that's really critical—is that it's helping you set that stage, connecting you to mentors. It's also at the age of 18. You not necessarily mature enough to kind of go into the workforce to start a company. 

Jeff [00:07:22] The four years of college helps set that stage for you. And that's why it's more critical than just getting a degree. It's building those relationships, those partnerships, those mentorships, that network that's so critical to life. 

Kinsey [00:07:35] Right. You think about who you were when you started college versus who you were when you graduated. I like to think [chuckles] I was a vastly different person, and that's a good thing to me. So what about this burden that so many students are graduating with, with so much money and debt? And sometimes it's a manageable payment every month. But in other cases, we hear these horror stories that it's not. Is that still worth getting the college education? Say, if you have this, quote unquote, crippling debt that we hear about so often? 

Jeff [00:08:02] Well, I think the crippling debt for some people is an outlier. 

Kinsey [00:08:05] Right. 

Jeff [00:08:06] For the most part, students who borrow, borrow something that's reasonable. And when I say reasonable, people are all over the place. But I think you should not borrow more than what you expect, at first, your salary might be. So $40,000, $45,000, if you're kind of an average bachelor's degree in a basic field. You should not be borrowing more than that over four years of college in order to get that bachelor's degree. Maybe you have to go a little bit more. 

Jeff [00:08:30] But this idea that you have to borrow $100,000-plus to get a bachelor's degree—if you do, or you and your parents combined need to do that, you really should be looking somewhere else. There are options for less expensive institutions in state. You could start at a community college, take some courses, and then transfer them in. So there are options to do college less expensive. And so, if you're going to end up borrowing too much—meaning north of $50,000—in some cases, I think might be too much depending on your degree program. I think you'd need to start to look for other options. 

Kinsey [00:09:03] Right. All situational. So that's the things we should think about before we start college. Now let's think about during college. So we're getting ready to graduate. I'm thinking about applying to graduate school. What is the student debt situation look like for graduate school? It's pretty stark, no? 

Jeff [00:09:19] It's even worse. [laughs]

Kinsey [00:09:20] Yeah. 

Jeff [00:09:21] Yeah. I mean, graduate school—there's not a lot of help from either the institution—I think a lot of students take on because they feel like the bachelor's degree is the new high school diploma. And so they go on and go on and get that graduate degree and pay more for it. 

Jeff [00:09:36] The job market is changing on this front. My advice is, unless you have to go to graduate school immediately, and maybe you want to become a doctor, you're going to go to medical school or law school directly, or maybe you want to become a Ph.D. and there may be certain programs that you're going to go in directly out of undergraduate. My advice is to go out into the workforce. Maybe not right now. I know it's kind of a tough economy right now, but go out into the workforce, kind of figure out what you want to do. 

Jeff [00:10:02] You may get connected with a company that's going to pay for a lot of what you need. Number one. Or number two, you might find that you don't need a traditional graduate degree, that you might need more short-term programs that are being offered by a number of colleges, universities, but also other alternative education providers. Those types of certificates might be good enough for you at this moment. And so I wouldn't rush into graduate school unless it's something that you absolutely need for that first job. For most first jobs, you do not need a graduate degree. 

Kinsey [00:10:34] So, now we have gotten through college. Let's talk about after college. What does the ideal, let's say, debt payoff program look like? Is there any sort of best case scenario? 

Jeff [00:10:47] You mean currently or in the future? 

Kinsey [00:10:50] [laughs] Let's talk currently now. We'll get to in the future a little later in the conversation. 

Jeff [00:10:54] There are now options for students to have income-contingent repayment plans. If you're in public service, there's a lot of programs that are run by the federal government. So I think the problem is, is that students don't pay enough attention on the way out the door. And most colleges, universities are required to provide financial services, financial advice on the way out of the door. So make sure you get that if you're a college graduate and look at those options. 

Jeff [00:11:20] But we need to really rethink the whole repayment plan idea in the United States. We've come up with this idea of a 10-year payoff right after college. And that was built into the system when student loan debt was much lower and the job market was much different. And so what I hope going forward is that we're more innovative about the types of things that we can do from a student debt standpoint. Not only do I hope that student debt is reduced, but income-contingent repayment, this idea of income-share agreements where people are buying—essentially people are buying shares of students in terms of their future income. So it's the private market that is really helping students. 

Jeff [00:12:04] There's all these other ways of thinking about how to fund higher education that I think we're going to need to do in the future in order to keep the system going. Otherwise, it is going to collapse under the weight of the current student loan debt that we have. And I can't imagine, given this economy, that it's going to get any better on the other side. 

Kinsey [00:12:23] OK. So one more question before we get to all of those future resolutions for this problem. How does the student loan debt problem affect different groups in different ways? I'm thinking racial groups, gender, ethnic groups. How does this affect us all differently? 

Jeff [00:12:38] Well, we know that, for example, that first generation students, students of color, in particular, take on an enormous amount of debt to fund higher education because they do not have the family resources to pay for higher education. The other thing that happens, particularly in African-American families, is that parents take on large amounts of loan debt as well through the Parent Plus Programs. 

Jeff [00:12:59] And in fact, during the Obama administration, they tried to cut that back because they didn't want African-American families even doing that. But then a lot of colleges pushed back on that because that was the only way those students could enroll. And that creates what I really worry about, this idea of intergenerational debt in families that historically have not gone to college at very high rates. And low-income students also take on a tremendous amount of debt as well. 

Jeff [00:13:26] So it's all the groups of people that higher education has not served well and that do not have the resources after college to help pay off those loans. Those are the people that are taking on the biggest loans. There are some elite colleges that have huge endowments that have no loan policies for students like that, but they enroll a tiny fraction of American college students. And as a result, the students that are most in debt are students that can least afford it. 

Kinsey [00:13:58] Yeah, the college I went to has a program like that, and they claim 10% of every incoming class gets to go to college free of charge. That's 40 people. [laughs] Like it's a dent in the problem. 

Jeff [00:14:09] Exactly. 

Kinsey [00:14:09] We can even call it that. All right, Jeff. We have a lot of problem-solving to do still. We've identified the problems well. We're going to try and solve some in just a minute. But quickly, a short break to hear from our sponsor. —

Kinsey [00:14:23] And now back to the conversation with Jeff Selingo. Jeff, let's start talking about some solutions here. I want to start by talking about the most important entities participating in this problem. I think that maybe identifying the weak spots will kind of help us figure out how we go about fixing it. Let's start with colleges, the institutions themselves, the roles that they're playing. We've talked about the enormously high costs of higher education. But over the past two decades, public college tuition has increased at a price more than any other good or service besides hospital care. Why? How? How did that happen? How is it getting so expensive? 

Jeff [00:14:58] It's people. It's very people-intensive. And we want that. We want our small classes. And even if they're online now, that is just as expensive for a teacher or professor to put together a class. We also, in the residential experience, want all the amenities. We want the climbing walls. We want the great food and the dining halls. We want these beautiful residence halls. So we want all these amenities that come along with that classroom. All that stuff costs money. 

Jeff [00:15:26] Now, the question I have is whether this generation that's coming into college now, which is much more aware of the debt that their predecessors, for the last 20 years, have taken on, whether they will start to push back on that, and whether their parents will start to push back that. Colleges react to the market. And so if the market starts to shift and colleges say, hmm, there needs to be a low-cost option now, or a lower-cost option, colleges will run after that. 

Jeff [00:15:54] But students and parents are going to have to start demanding that. They're gonna have to start walking away from those colleges that are spending money on things that they don't think are worth it. So that to me is where this starts. It actually starts with the parents and students basically saying, you know what, we're not going to pay that amount of money anymore, and we're going to walk and go somewhere else. And once colleges start losing enrollment, that's where we're going to start to see this happen. 

Kinsey [00:16:17] Right. I just have to wonder how many 18-year-olds who could afford to go to this college are going to turn down, like, a climbing wall, and a lazy river, and a Michelin-star dining hall. Like, how do we ensure that this happens in a widespread manner? That we actually can make action come of this conversation instead of just hoping that everybody kind of grabs hands and says, we're not going to deal with this anymore? 

Jeff [00:16:40] Well, I think that we have to have leaders out there that are willing—college leaders out there willing to come up with alternatives and to show students there's something better out there. Most higher education moves in a big herd. And they all follow each other. And so when you actually go to see a college campus, yes, the dining halls look different, the dorms look different. But for the most part, most colleges, universities, at the four-year level, residential colleges are very similar. 

Jeff [00:17:05] And so if you have—and we're already starting to see this—big publics, like Arizona State University and Georgia State, a number of privates like Denison University in Ohio, they're starting to look different around their programs. They're starting to design programs that are very job-centric. They're starting to rethink their residential programs so that students are more engaged in them and are paying less money. We need a lot more of that. I can name, on one or two hands, how many colleges are out there trying new things. I think if parents and students had alternatives, they would move in that direction. 

Kinsey [00:17:38] So let's talk about the, you know, this is the student and parent perspective. What about the institution perspective? We have some of these larger institutions, that you mentioned before, that are actually making this change, trying to pare things back a little bit. Focus on really what matters and what students want. 

Kinsey [00:17:52] But when you think about college as a marketplace or the university system as a marketplace, it's hard to imagine that all universities would opt in to saying, OK, we'll pull back on the spending that we're doing on all these amenities because we need to really focus on what matters. If Harvard is never going to have trouble bringing people in the door because it's Harvard, how do we convince every school that this is what needs to happen? Or I guess, every school administrator? 

Jeff [00:18:16] I think that coming out of this pandemic, we're going to see that immediately, because a number of colleges had very thin margins. They were operating on very thin margins before this pandemic. Now they've lost a semester, two semesters of residential students. That's a lot of cash that they've lost. Yes, Harvard can easily afford that. Harvard could close down probably for a couple of years and still maintain everything they're doing just based on their endowment. Most colleges, universities can't do that. 

Jeff [00:18:43] So there will be a reckoning, a financial reckoning coming in the next year, where college and university presidents are going to look at the bottom line and they're going to say, we have to stop trying to be Harvard. We have to start being something else. I think that financial stress is going to be a wakeup call to a lot of universities, because the other choice is to go out of business. And I don't think many college presidents want to do that. 

Kinsey [00:19:06] Definitely not. Do you think that lowering the cost to go to college will impact the value of a college degree? 

Jeff [00:19:12] I don't think so. I think there's a lot of costs associated with higher education that has nothing to do with the quality of the degree on the other side—the quality of undergraduate teaching, the mentorship, the other services that we talked about. You can actually skinny all that down and really focus on what matters to students. Take all that other stuff out and you would still have the same value that you have today. Now, at some institutions, you're really just literally paying for the piece of paper. A lot of people go to Harvard, not necessarily for the education, they don't necessarily go for the amenities. They go for, as we were talking about earlier, they go for the network and the people. And so you can actually [chuckles] kind of do away with everything else, just bring all those students together. Let them spend four years together and give them a piece of paper. 

Kinsey [00:19:55] Right. [laughs]

Jeff [00:19:55] And they would actually find that valuable, most likely. That's not going to fly at most colleges and universities. But there's a lot of things that colleges and universities do that I think they can cut out and still have a high-value product. 

Kinsey [00:20:07] OK, Jeff, I want to talk a little here about the government's role in all of this. This is an interesting hypothesis that I came across when I was preparing to talk with you today. The Bennett Hypothesis. So this is from Education Secretary William J. Bennett in 1987. It essentially states that increases in financial aid in recent years have enabled colleges and universities to raise their tuitions. 

Kinsey [00:20:31] This, to me, suggests that we might be in some sort of endless [chuckles] cycle here, an unvirtuous cycle, that if the government says we can give you more money, students and families will take that money so they can pay for a more expensive college tuition. And the colleges will keep raising prices because the government keeps giving people money for them to pay. Is this a viable hypothesis? What are your thoughts? 

Jeff [00:20:54] So this hypothesis got a lot of credibility when it first was put out during the Reagan administration. Some economists have supported it. Most haven't — 

Kinsey [00:21:04] OK. 

Jeff [00:21:04] Supported it. So I think there is a group that believe it and will always believe it. But to be honest with you, we have really slowed down the amount of money spent on higher education per student. Overall, it's gone up because enrollment has gone up. But we have really slowed down, both in the state and at the federal level. The amount of money spent per student and college costs continue to rise. So I think in some ways that's been proven not worthy just by that. 

Jeff [00:21:29] Higher education is such a key component of the innovation economy. I am not defending colleges here, and saying they are too expensive. I do think they are too expensive. But we also have to invest in our next generation. And I think federal and state governments have to start putting more money toward higher education. They can put a lot of restrictions on college costs. 

Jeff [00:21:54] With that money, they can tie, you know, they have the power of the purse strings and they can say to colleges, we're gonna give you more money, but you have to start doing X, Y, and Z. You have to start controlling costs. They can do that if they wanted to. And that, to me, is the perfect partnership between government and higher education. We'll give you more money, you have to start controlling costs, and we'll support your students because we think they're the future of—and they are the future of—this country, and we believe that higher education is critically important to them. 

Kinsey [00:22:25] All right, Jeff, the age-old question: where does the money come from? [Jeff laughs] Taxes? [laughs]

Jeff [00:22:31] Well, I, I—[Kinsey laughs]—this is where I think we're going. I think this is going to be a generational conversation. 

Kinsey [00:22:39] OK. 

Jeff [00:22:39] I'm Gen X, my kids are Gen Z. My parents are part of the silent generation. We are spending—I love my parents, and trust me, I'm not saying let's cut Social Security out and let's cut Medicare—but we spend a lot of money on our oldest generation. And I know this is not popular to say. Is there something we can do to drive some of that money to the next generation who are going to be supporting us right there? 

Jeff [00:23:05] This younger generation, they'll be paying for our Social Security one day, for example, and things like that. That, to me, is, we have to have a conversation about where we put money in this country and do we spend it on the oldest generations or do we spend it on the younger generations? And I think, because of who votes, I think that's been out of whack for too long. 

Jeff [00:23:24] And what's interesting to me about this, especially among college officials, the average college president today is in their late 60s. For the most part, they went to college when it was free or close to free. They didn't have this student debt. And to be honest with you, when you talk to them about it, they don't think this is a very big deal. They think it's a good investment. And as a result, they think college students and families should take on this debt, and because they grew up in that generation, where they didn't have to pay for college or pay as much for college. 

Jeff [00:23:54] And that to me is, I think once we start to see a younger generation start to get into college leadership, we may start to see a sea change around this. Because they will remember how tough it was for them to pay for college. To me, this is a generational question, though, about who leads our colleges and how much money we spend on different generations for education. 

Kinsey [00:24:15] And of course, that Gen Z [laughs] and younger are going to be aging into voting age soon, and that matters. Where are the people who are supposed to be fixing this student debt problem? Are they in government? Are they in private sector industry? Are they in college administration offices? 

Jeff [00:24:32] I think they're in a mix of all. I come across a lot of innovative ideas from the think tanks, from staff members on Capitol Hill, within colleges and universities who understand really how things work. The problem is they're all segmented out there and they're not all coming together. And there's not a large coalition of the willing willing to change this. And because there's so much money caught up in this and people are making money off of this—the federal government, colleges, and universities—there's not a lot of incentives to change. 

Jeff [00:25:04] And until the coalition of the willing, who have new ideas, come together and push this—and again, I think this starts at the voting booth. It starts with people voting much more in their interests around student loans, because right now, it is that generation that, if they went to college, they went to college largely for free or close to free. They don't think this is a big deal. And it's amazing to me. 

Jeff [00:25:30] For example, every time I read a newspaper article about student loans, if you ever look in the comments, it's all these people who say, well, when I went to college, it wasn't a problem. Why is it such a problem now? Just go and work it off. I don't think anybody realizes just how tough it is for young people today around the loans they get and then the jobs they get to pay off those loans afterwards. And again, until those people become the leaders in our government and our universities, unfortunately, I don't think much is going to change. 

Kinsey [00:25:59] What are your thoughts on entirely canceling student debt? 

Jeff [00:26:03] I'm not a big fan of it. I think people they knew what they were getting into. And, you know, I had student debt and I get it. I'm now kind of the oldster here from Gen X saying, it's student debt, and I paid it off. I just don't think it's politically viable. And there will always be student debt, even after this. And so where do you start canceling it and where do you stop canceling it? There will be a group that benefits from it. And there will be a group that doesn't benefit from it. And so for that reason, I'd much rather focus our energy and our money on lowering the amount of debt in the future. 

Kinsey [00:26:36] Do you think that most 18-year-olds, though, know what they're getting into, like you did, when they signed on the dotted line? 

Jeff [00:26:42] No. And that's unfortunate, right? And we need to do a much better job at the high school level and at the college level of educating students. And again, I think it goes back to parents not wanting to stretch too much for their kids' education. 

Kinsey [00:26:54] Right. All right, Jeff, we're going to go more into solutions in just a second. Really quickly, a short break to hear from our partner. — Now back to the conversation with Jeff Selingo. Jeff, one of the big questions I had coming into this was what role private sector industry should be playing in this conversation. We've talked a lot about the government and institution side of things. When we hear about startups like SoFi, CommonBond, Gradifi, these companies that are trying to either simplify or eradicate the student loan process, how do you view them? 

Jeff [00:27:25] I think that anything that we can do to have private sector competition in the student loan market is a good thing. I think that there needs to be some more competition in the student loan market. Really, where this starts is lowering the cost of higher education, because if all we do is have private sector or public sector solutions that provide more money to students, we're not necessarily going to lower the overall debt burden going forward. And there is going to be no incentive for colleges to reduce the debt of these students and to reduce their cost. I really think that this still starts with colleges and universities kind of rethinking their business models. 

Kinsey [00:28:03] Yeah, and if you think about profit-minded businesses, they would want to employ people who—or make sure people are in the private sector who don't feel that they're burdened by debt. If you do have a ton of debt, you are less likely to take a risk like start a business, like go work for a startup that may or may not fail [chuckles] in the next six months. 

Jeff [00:28:24] And I think that's really important. When I did my last book, "There Is Life After College," one of the things that we found is that students who really struggle after college in terms of finding jobs—but also entrepreneurs—people are much less likely, as you mentioned, to start companies if they're deep in debt. And students who then go into the job market make a lot of their decisions based on how much debt they have. So they're less likely to move to a new city, for example, or they're less likely to take a lower-paying job that might have better promotional opportunities for them, better career opportunities down the road, because they have to pay off that student debt. 

Kinsey [00:28:58] So we've covered a lot of ground here, we're rounding the corner on a solution—I can feel it coming. You said in the LinkedIn Post, though, there are three fixes to this problem. One, limit a student's ability to borrow. Two, extend the timeframe for repayment. And three, make loan limits consistent by year in school. Can you talk to me a little bit more about those? Let's start with limit a student's ability to borrow. 

Jeff [00:29:20] Yes, we should limit the ability of students to borrow beyond what the federal government already does from the federal policy. So you can only borrow so much money from the federal government, but you can basically borrow anything you want outside of that. I also think we need to start to limit the ability by major. We know how much students make by major. This is not a popular proposal out there, but there is no reason that somebody who is majoring in English should be able to borrow as much as somebody who is majoring in the engineering. We just know they are going to make different career choices and we know they're going to make different amounts of money over time. 

Kinsey [00:29:53] But if you switch majors? I switched majors. 

Jeff [00:29:56] You could do that. Well, then, you could borrow more money. 

Kinsey [00:29:58] OK. [laughs] So should we all start out as finance majors? [laughter]

Jeff [00:30:02] I think that we could have a little flexibility with that. 

Kinsey [00:30:05] OK. 

Jeff [00:30:05] And again, I know that's not popular, but that's the only way we start to put some control on this problem. 

Kinsey [00:30:10] OK. Sorry, all the art majors out there. The cold, hard truth. [laughs]

Jeff [00:30:15] I was a humanities major. I get it. 

Kinsey [00:30:17] All right. So extending the time frame for repayment—what you mean by that? 

Jeff [00:30:21] This kind of old-school, 10-year time period is just terrible. We pay off a home over 30 years. Now car payments are five, six, seven years in some cases. There's no reason we should not extend or rethink the horizon. Why should students, or college graduates, when they're really making the least amount of money coming out of college at the age of 22 or whatever—that's really when they're paying back their loans. There's no reason why we can't push that out a little bit or extend it. 

Kinsey [00:30:49] All right. And finally, make loan limits consistent by year in school. 

Jeff [00:30:53] So you're allowed to borrow more money depending on what year you're in school. And again, this goes back to what I was saying earlier, changing how much you borrow, depending on your major. But we want to encourage students to graduate, so the more we can do with loan limits to get them through school as fast as possible, the better off we're gonna be. 

Jeff [00:31:18] So we should be tying loan limits to getting them out, because the worst thing that can happen is that somebody doesn't graduate, but they have student loan debt. Because they have no degree and money now they owe, and they can't get that job that was almost guaranteed to them if they had a college degree. 

Kinsey [00:31:36] So that means making the amount of money you can borrow larger as you age. 

Jeff [00:31:41] Exactly. 

Kinsey [00:31:41] OK, cool. So, Jeff, these all sound like great proposals. The big question for me is, is it realistic to expect that we can experience change in the coming years and decades? 

Jeff [00:31:53] I think so. And I think the coronavirus really has accelerated that potential for change. I thought it was going to happen anyway at the end of this decade because we were going to start to see a demographic falloff in the number of high school graduates, which will force colleges to think differently. I think now they're going to have to start thinking differently coming out of this pandemic. So, I'm actually more confident now than ever before because I think colleges are going to have to figure out new business models. 

Kinsey [00:32:18] This has certainly been a season of reckoning for higher education in a lot of ways from technology, to the cost, to you name it. So, thank you so much for taking the time to come on Business Casual and to help me understand how we move forward from this. I think that it's really important when we talk about something that we often characterize as a crisis, like the student debt load issue right now, that we talk about solutions too. 

Kinsey [00:32:40] We can't just spend all of our time talking about this $1.6 trillion number ticking upward and upward. So, Jeff, thank you so much. I am looking forward to checking out your book, "Who Gets In and Why." I appreciate you taking the time. I really enjoyed the conversation. 

Jeff [00:32:56] It was great to be with you. Thank you very much. 

Kinsey [00:33:06] Thank you so much for listening to this episode of Business Casual. Student loan debt was one of the most widely requested themes that we've been hearing from all of you since we started this show. And it should be proof that we actually do hear your ideas and make episodes out of them. So send us more ideas. We are all ears, and we are everywhere. On Twitter, we are @BizCasualPod. On Instagram, we are at BusinessCasualPod, and in the inbox, we are I cannot wait to hear your ideas and I'll see you next time. [sound of a ding]