Solving Student Debt - YouTube

Student loan debt a national crisis

I’m in debt $70.000

Student loan debt keeps growing!

The last administration blamed

greedy bankers taking big profits

Unnecessary middle men

in administering student loans.

So government would take over student loans

We take the middle man out!

We take the banker out of the picture.

Because they’re taking a profit.

We’ll save American taxpayers 68 billion dollars

But instead, the cost to taxpayers went up,

and student debt increased

13 years ago the average new college graduate

owed $20,000 in student loans.

Today, that number has jumped to $37,000

What are you guys doing to help us with this

student loan debt?

Some politicians are still so eager to blame

banks they don’t even know that they

kicked banks out of the loan business

Who would like to answer first?

Uh we stopped making student loans

in 2007 or so.

Mr. Dimon?

When the government took over student lending

in 2010 or so we stopped doing all student lending

If actual private lenders,

people with skin in the game made college loans,

they’d care about being paid back.

They’d tell students which majors often

lead to higher paying careers—

and warn them that majoring in say sociology,

art history or gender studies,

might make it tougher to get out of debt.

if I'm a young person going to college,

the federal government doesn't

tell me that the amount that I'm borrowing

is probably going to be unaffordable for me,

because I’m on a path

towards a low earning occupation.

Beth Akers of the Manhattan Institute

is the author of Game of Loans.

Under the government program, no

student has a reason even to think about,

"Will I earn money?"

That’s right

We charge everyone the same interest rate,

and we give them the same caps

on how much they can borrow.

Currently, many students are really dumb

about their loans.

28% don't even know they have a loan?

It's not because they're dumb,

it's because we've made a system that's really complex.

Enough is enough, pay us back!

Today, activists say,

just make college free

Forgive all the loans.

It ends up giving very large benefits

to people who probably don't need it.

It would be welfare for the rich.

It sure would.

A better solution, says Akers,

is something called an ISA:

an Income Share Agreement

So you want to be a web developer?

Sign up, pay nothing up front.

That’s right, nothing.

Some private computer-education boot camps do that.

That gets them into a career, most often in coding.

Those people were getting jobs.

Yeah.

The ISA was a way for the school to say to them,

"You're only going to pay us,

if we help you succeed."

Now some colleges offer ISA’s.

Graduates who get jobs repay the loans

by paying the college a percentage of their income

in the past five years,

people are starting to get excited,

and try to implement income share agreements.

At first, I had no idea how I was going to move forward

and pay for my education.

Engineering student Paul Laurora was thrilled

to learn that Purdue would help him get an ISA loan.

So was Andrew Hoyler,

who’s just started working as a pilot.

[Plane sounds]

Now that he has a job,

he must pay the university 8% of his income

for 104 months.

So after that 104-month term ends,

if you still have money that you owe,

it's forgiven, it's forgotten, you don't own another penny.

Now, if I find myself in a six figure job tomorrow,

there's a chance that I'll pay back

far more than I initially took out.

But you're okay with that?

I'm okay with that.

The security of knowing that I’ll never

pay back more than I can afford every

month was enough for me.

If it's so good for you,

I'd think it would be bad for the investor?

It's a risk that they take.

Just like an investment

It conveys information to the student,

about how lucrative a different major’s going to be

English majors must pay 4 1/2% of their

income for 116 months

Math majors pay 4% for just 96 months

Some people think that's unfair,

but really that's just a way that they can recapture

the amount of money,

that they've put up in the first place.

This is new,

useful information about what professions pay.

Not only what they pay, but how

stable it may be, what the future is like,

It may even sway students away from going

into majors that don't have job prospects

post-graduation.

The English major has to pay 116 months.

Your loan is over 30 months sooner!

It's definitely something to look forward to,

that I can stop paying people quicker.

We should think about investing in students

the same way that we invest in startups.

Share equity in their company.

Basically, put the students in touch with rich people.

It may be that there are rich investors

feeding money into that funds.

But it's not an individual connection,

between students and investors.

We don't know who the investor is, but I'd

love to give him a hug or buy him a beer or something.

The institutions are saying,

"Hey, if I'm operating as the middleman,

in a sense, I can make sure that no one's taking

advantage of my students.

Still, some call ISA’S “predatory.”

This is like indentured servitude.

You're locked into paying for all these months.

If you're graduating and you don't have a job,

you're not paying anything.

So where's the servitude in that?

It’s a brand new industry.

The public’s still learning,

the investors are still learning.

They really care about the students

It is a win-win situation for everyone involved in it.