0:00:01.182,0:00:06.778
Today 14 million Americans are indebted[br]for their passage to the new economy.

0:00:08.194,0:00:10.307
Too poor to pay their way through college,

0:00:10.307,0:00:14.649
they now owe lenders more[br]than one trillion US dollars.

0:00:15.880,0:00:18.202
They do find what jobs they can get

0:00:18.202,0:00:20.687
to pay off a debt that is[br]secured on their person.

0:00:21.330,0:00:23.537
In America,

0:00:23.537,0:00:29.669
even a bankrupt gambler[br]gets a second chance.

0:00:30.559,0:00:33.177
But it is nearly impossible

0:00:33.177,0:00:37.382
for an American to get discharged[br][their] student loan debts.

0:00:40.604,0:00:42.186
Once upon a time,

0:00:42.186,0:00:43.390
in America,

0:00:43.390,0:00:46.292
going to college did not mean[br]graduating with debt.

0:00:47.593,0:00:52.775
My friend Paul's father graduated[br]from Colorado State University

0:00:52.775,0:00:54.563
on the GI Bill.

0:00:55.999,0:00:57.401
For his generation,

0:00:57.401,0:01:00.248
higher education was free or almost free

0:01:00.248,0:01:03.198
because it was thought of[br]as a public good.

0:01:03.907,0:01:05.486
Not anymore.

0:01:06.378,0:01:10.558
When Paul also graduated[br]from Colorado State University,

0:01:10.558,0:01:14.406
he paid for his English degree[br]by working part-time.

0:01:14.406,0:01:15.520
30 years ago,

0:01:15.520,0:01:17.439
higher education tuition was affordable,

0:01:17.439,0:01:18.435
reasonable,

0:01:18.435,0:01:22.127
and what debts you accumulated[br]you paid off by graduation date.

0:01:22.127,0:01:23.464
Not anymore.

0:01:24.025,0:01:27.425
Paul's daughter followed in his footsteps,

0:01:27.425,0:01:28.725
but with one difference:

0:01:28.725,0:01:31.167
when she graduated five years ago,

0:01:31.167,0:01:33.087
it was with a whopping debt.

0:01:33.475,0:01:36.750
Students like Kate have to take on a loan

0:01:36.750,0:01:41.329
because cost of higher education[br]has become unaffordable for most --

0:01:41.329,0:01:44.084
for many if not most American families.

0:01:44.594,0:01:46.415
But so what?

0:01:46.415,0:01:49.743
Getting into debt to buy an expensive[br]education is not all bad

0:01:49.743,0:01:51.715
if you could pay it off

0:01:51.715,0:01:54.849
with the increased income[br]that you earned from it.

0:01:55.465,0:01:57.944
But that's where the rubber[br]meets the road.

0:01:59.851,0:02:05.352
Even a college grad earned[br]10 percent more in 2001

0:02:05.352,0:02:07.852
than she did in 2013.

0:02:08.191,0:02:10.033
So ...

0:02:10.033,0:02:11.602
tuition costs up,

0:02:11.602,0:02:13.112
public funding down,

0:02:13.112,0:02:15.574
family incomes diminished,

0:02:15.574,0:02:17.767
personal incomes weak.

0:02:18.368,0:02:22.850
Is it any wonder that more than[br]a quarter of those who must

0:02:22.850,0:02:25.613
cannot make their student loan payments?

0:02:27.048,0:02:30.188
The worst of times[br]can be the best of times,

0:02:30.188,0:02:34.066
because certain truths flash up[br]in ways that you can't ignore.

0:02:34.589,0:02:37.167
I want to speak of three of them today.

0:02:37.770,0:02:41.661
1.2 trillion dollars of debts for diplomas

0:02:41.661,0:02:44.086
make it abundantly obvious

0:02:44.086,0:02:47.824
that higher education is a consumer[br]product you can buy.

0:02:48.468,0:02:53.200
All of us talk about education[br]just as the economists do now,

0:02:53.200,0:02:57.680
as an investment that you make[br]to improve the human stock

0:02:57.680,0:03:00.142
by training them for work.

0:03:00.142,0:03:04.693
As an investment you make[br]to sort and classify people

0:03:04.693,0:03:07.804
so that employers can[br]hire them more easily.

0:03:08.460,0:03:11.944
The U.S. News & World Report[br]ranks colleges

0:03:11.944,0:03:15.318
just as the consumer report[br]rates washing machines.

0:03:15.318,0:03:16.725
The language is full --

0:03:16.725,0:03:18.046
peppered --

0:03:18.046,0:03:19.118
with barbarisms.

0:03:19.118,0:03:22.333
Teachers are called service providers,

0:03:22.333,0:03:24.546
students are called consumers.

0:03:25.666,0:03:29.491
Sociology and Shakespeare[br]and soccer and science,

0:03:29.491,0:03:31.836
all of these are content.

0:03:33.400,0:03:35.017
Student debt is profitable.

0:03:35.017,0:03:36.434
Only not on you.

0:03:38.060,0:03:41.765
Your debt fattens the profit[br]of the student loan industry.

0:03:42.282,0:03:44.665
The two 800-pound gorillas of which --

0:03:44.665,0:03:46.865
Sallie May and Navient --

0:03:46.865,0:03:51.889
posted last year a combined[br]profit of 1.2 billion dollars.

0:03:52.730,0:03:55.418
And just like home mortgages,

0:03:55.418,0:03:58.374
student loans can be bundled[br]and packaged and sliced and diced,

0:03:58.374,0:04:00.325
and sold on Wall Street.

0:04:00.639,0:04:02.207
And colleges and universities

0:04:02.207,0:04:06.247
that invest in these[br]securitized loans ...

0:04:06.247,0:04:07.894
profit twice.

0:04:07.894,0:04:09.378
Once from your tuition

0:04:09.378,0:04:12.254
and then again from the interest on debt.

0:04:13.330,0:04:15.689
With all that money to be made,

0:04:15.689,0:04:21.275
are we surprised that some[br]in the higher education business

0:04:21.275,0:04:23.305
have begun to engage in false advertising,

0:04:23.305,0:04:26.803
in bait and switch ...

0:04:26.803,0:04:31.098
in exploiting the very ignorance[br]that they pretend to educate?

0:04:32.311,0:04:33.921
Third:

0:04:33.921,0:04:35.853
diplomas are a brand.

0:04:35.853,0:04:38.313
Many years ago my teacher wrote,

0:04:38.313,0:04:40.853
"When students are treated as consumers,

0:04:40.853,0:04:44.283
they're made prisoners[br]of addiction and envy."

0:04:48.017,0:04:52.359
Just as consumers can be sold and resold[br]upgraded versions of an iPhone,

0:04:52.359,0:04:56.028
so also people can be sold[br]more and more education.

0:04:57.490,0:04:59.046
College is the new high school,

0:04:59.046,0:05:00.538
we already say that.

0:05:01.639,0:05:03.079
But why stop there?

0:05:03.079,0:05:06.434
People can be upsold on certifications[br]and recertifications,

0:05:06.434,0:05:07.572
masters degrees,

0:05:07.572,0:05:09.220
doctoral degrees.

0:05:11.611,0:05:15.324
Higher education is also marketed[br]as a status object.

0:05:16.826,0:05:17.854
Buy a degree,

0:05:17.854,0:05:21.123
much like you do a Lexus[br]of a Louis Vuitton bag,

0:05:21.123,0:05:23.042
to distinguish yourself from others.

0:05:23.042,0:05:26.607
So you can be the object[br]of envy of others.

0:05:26.963,0:05:29.163
Diplomas are a brand.

0:05:29.163,0:05:35.990
But these truths are often times[br]hidden by a very noisy sales pitch.

0:05:36.662,0:05:38.195
There is not a day that goes by

0:05:38.195,0:05:41.931
without some policy guy[br]sitting on the television

0:05:41.931,0:05:43.449
telling us,

0:05:43.449,0:05:45.423
"A college degree is absolutely essential

0:05:45.423,0:05:48.140
to get on that up escalator[br]to a middle-class life."

0:05:49.061,0:05:52.870
And the usual evidence offered[br]is the college premium:

0:05:52.870,0:05:57.839
a college grad who makes on average[br]56 percent more than a high school grad.

0:05:58.492,0:06:00.588
Let's look at that number more carefully,

0:06:00.588,0:06:01.913
because on the face of it,

0:06:01.913,0:06:05.215
it seems to belie the stories we all hear

0:06:05.215,0:06:09.766
about college grads working[br]as baristas and cashiers.

0:06:10.773,0:06:15.720
Of 100 people who enroll in any form[br]of post-secondary education,

0:06:15.720,0:06:19.117
45 do not complete it in a timely fashion

0:06:19.117,0:06:22.183
for a number of reasons,[br]including financial.

0:06:22.478,0:06:24.349
Of the 55 that do graduate,

0:06:24.349,0:06:26.467
two will remain unemployed

0:06:26.467,0:06:29.439
and another 18 are underemployed.

0:06:30.440,0:06:31.720
So,

0:06:31.720,0:06:33.921
college grads earn more[br]than high school grads,

0:06:33.921,0:06:36.913
but does it pay for the exorbitant tuition

0:06:36.913,0:06:39.304
and the lost wages while at college?

0:06:39.897,0:06:42.491
Now even economists admit

0:06:42.491,0:06:47.622
going to college pays off[br]for only those who complete it.

0:06:48.343,0:06:52.429
But that's only because high school wages[br]have been cut to the bone

0:06:52.429,0:06:53.869
for decades now.

0:06:55.504,0:06:57.491
For decades,

0:06:57.491,0:06:59.926
workers with a high school degree

0:06:59.926,0:07:03.943
have been denied a fair share[br]of what they have produced.

0:07:04.782,0:07:07.651
And had they received as the should have,

0:07:07.651,0:07:11.697
then going to college would have been[br]a bad investment for many.

0:07:11.697,0:07:13.027
College premium?

0:07:13.027,0:07:14.090
Eh,

0:07:14.090,0:07:16.381
I think it's a high school discount.

0:07:16.879,0:07:21.547
Two out of three people who enroll[br]are not going to find an adequate job.

0:07:21.756,0:07:24.891
And the future for them doesn't look[br]particularly promising,

0:07:24.891,0:07:26.550
in fact downright bleak.

0:07:26.897,0:07:30.630
And it is they who are going to suffer

0:07:30.630,0:07:33.777
the most punishing forms of student debt.

0:07:34.225,0:07:35.270
And it is they,

0:07:35.270,0:07:36.697
curiously and sadly,

0:07:36.697,0:07:40.100
who are marketed most loudly[br]about this college premium thing.

0:07:42.257,0:07:44.618
That's not just cynical marketing,

0:07:44.618,0:07:45.995
that's cruel.

0:07:47.468,0:07:48.944
So what do we do?

0:07:49.375,0:07:54.888
What if students and parents treated[br]higher education as a consumer product?

0:07:56.325,0:07:58.209
Everybody else seems to.

0:07:58.766,0:07:59.765
Then,

0:07:59.765,0:08:01.295
like any other consumer product,

0:08:01.295,0:08:03.639
you would demand to know[br]what you're paying for.

0:08:03.639,0:08:04.820
When we buy medicines,

0:08:04.820,0:08:06.737
you get a list of side effects.

0:08:06.737,0:08:08.851
When you buy a higher educational product,

0:08:08.851,0:08:10.467
you should have a warning label

0:08:10.467,0:08:12.760
that allows consumers to choose --

0:08:12.760,0:08:14.513
make informed choices.

0:08:15.053,0:08:16.244
When you buy a car,

0:08:16.244,0:08:19.037
it tells you how many[br]miles per gallon to expect.

0:08:19.332,0:08:20.802
Who knows what to expect

0:08:20.802,0:08:24.726
from a degree say, in Canadian Studies.

0:08:24.950,0:08:27.234
There is such a thing by the way.

0:08:29.100,0:08:31.570
What if there was an app for that?

0:08:34.664,0:08:39.935
One that linked up the cost of a major[br]to the expected income.

0:08:40.286,0:08:42.899
Let's call it Income Based Tuition or IBT.

0:08:42.899,0:08:44.494
One of you make this.

0:08:44.675,0:08:45.682
(Laughter)

0:08:45.941,0:08:47.799
Discover your reality.

0:08:47.799,0:08:48.804
(Laughter)

0:08:49.919,0:08:51.449
There are three advantages,

0:08:51.449,0:08:54.444
three benefits to Income Based Tuition.

0:08:55.420,0:08:57.324
Any user can figure out

0:08:57.324,0:09:00.528
how much money he or she will make[br]from a given college and major.

0:09:01.318,0:09:02.641
Such informed users

0:09:02.641,0:09:06.519
are unlikely to fall victim[br]to the huckster's ploy,

0:09:06.519,0:09:07.796
to the sales pitch.

0:09:08.120,0:09:09.779
But also to choose wisely.

0:09:09.779,0:09:12.030
Why would anybody pay more for college

0:09:12.030,0:09:15.304
than let's say, 15 percent[br]of the additional income they earn?

0:09:17.160,0:09:19.940
There's a second benefit[br]to Income Based Tuition --

0:09:19.940,0:09:22.370
by tying the cost to the income.

0:09:22.994,0:09:27.406
College administrators would be forced[br]to manage costs better,

0:09:27.406,0:09:29.745
to find innovative ways to do so.

0:09:29.745,0:09:30.751
For instance,

0:09:30.751,0:09:34.722
all of you students here pay roughly[br]the same tuition for every major.

0:09:35.719,0:09:39.875
That is manifestly unfair[br]and should change.

0:09:40.501,0:09:44.310
An engineering student uses more resources

0:09:44.310,0:09:46.718
and facilities and labs and faculty

0:09:46.718,0:09:48.668
than a philosophy student.

0:09:49.670,0:09:50.965
But the philosophy student,

0:09:50.965,0:09:51.974
as a consequence,

0:09:51.974,0:09:54.040
is subsidizing the engineering student.

0:09:54.300,0:09:55.300
Who then,

0:09:55.300,0:09:56.304
by the way,

0:09:56.304,0:09:57.729
goes on and earns more money.

0:09:57.729,0:09:59.837
Why should two people[br]buy the same product --

0:09:59.837,0:10:00.945
buy the same product --

0:10:00.945,0:10:01.945
pay the same,

0:10:01.945,0:10:05.033
but one person receive half[br]or a third of the service.

0:10:06.584,0:10:07.855
In fact,

0:10:07.855,0:10:08.910
college grads,

0:10:08.910,0:10:10.615
some majors,

0:10:10.615,0:10:14.292
pay 25 percent of their income[br]servicing their student debt

0:10:14.292,0:10:16.568
while others pay five percent.

0:10:17.630,0:10:22.937
That kind if inequity would end[br]when majors are priced more correctly.

0:10:23.172,0:10:24.364
Now of course,

0:10:24.364,0:10:25.360
all this data --

0:10:25.360,0:10:27.323
and one of you is going to do this right?

0:10:27.323,0:10:29.194
All this data has to be well designed,

0:10:29.194,0:10:31.391
maybe audited by public accounting firms

0:10:31.391,0:10:32.880
to avoid statistical lies.

0:10:33.467,0:10:35.312
We know about statistics, right?

0:10:36.973,0:10:38.296
But be that as it may,

0:10:38.296,0:10:42.526
the third and biggest benefit[br]of Income Base Tuition,

0:10:42.526,0:10:47.871
is it would free Americans from the fear[br]and the fact of financial ruin

0:10:47.871,0:10:50.214
because they bought a defective product.

0:10:51.044,0:10:52.368
Perhaps,

0:10:52.368,0:10:53.423
in time,

0:10:53.423,0:10:55.428
young and old Americans may rediscover,

0:10:55.428,0:10:57.717
as the gentleman said earlier,

0:10:57.717,0:10:58.720
their curiosity,

0:10:58.720,0:10:59.849
their love of learning.

0:10:59.849,0:11:01.317
Begin to study what they love,

0:11:01.317,0:11:02.495
love what they study,

0:11:02.495,0:11:04.762
follow their passion ...

0:11:04.762,0:11:07.181
getting stimulated by their intelligence,

0:11:07.181,0:11:10.618
follow paths of inquiry[br]that they really want to.

0:11:11.087,0:11:13.026
After all,

0:11:13.026,0:11:15.511
it was Eric and Kevin,

0:11:15.511,0:11:17.662
two years ago,

0:11:17.662,0:11:21.093
just exactly these kinds of young men,

0:11:21.093,0:11:23.114
who prompted me and worked with me --

0:11:23.114,0:11:24.674
and still do --

0:11:24.674,0:11:28.575
in the study of indebted [br]students in America.

0:11:29.551,0:11:31.256
Thank you for your attention.

0:11:31.256,0:11:32.556
(Applause)