WGBH Radio; The Callie Crossley Show

I'm Cally Crossley This is the Cali Crossley Show. Today we're talking about the cost of a college education. Today's college grad on average carries twenty three thousand dollars of student loan debt. And time is running out for lawmakers to come up with a way to keep student loan rates from going up. If Congress doesn't act by the end of June interest rates on student loans will double. Millions of Americans are crushed by the weight of their student loan debt debt that cannot be forgiven by bankruptcy debt that can get in the way of buying a home. Debt that could leave many newly minted grads wondering if it was worth it. Aristotle said education is the best provision for old age. These days it could guarantee a debt ridden old age. This hour we'll look at the costly consequences of taking on student loans. Up next punk in these economic circumstances. First the news. From NPR News in Washington I'm Lakshmi saying President Obama

is fending off criticism over his energy policies and rising gas prices this election year with a visit to a pipeline storage yard near Cushing Oklahoma today. NPR's Scott Horsley reports. Mr. Obama has ordered an expedited review of a proposed pipeline linking Cushing to oil refineries on the Texas Gulf Coast. This is the second day of the president's energy tour in which Mr. Obama is defending administration policies in the face of rising gas prices. The president announced a new executive order intended to speed pipeline development and relieve the bottleneck that's developed at this important oil crossroads. The problem in a place like Cushing is that we're actually producing so much oil and gas in places like North Dakota and Colorado. That we don't have enough pipeline capacity to transport all of it to where it needs to go. The Southern Keystone pipeline is backed by the same company that wants to build a pipeline from the Canadian tar sands to the U.S. the Obama administration has blocked that

project at least temporarily. Scott Horsley NPR News near Cushing Oklahoma. Meanwhile new U.S. intel projects lack of fresh water supplies will be at the center of conflicts around the globe in the coming decades. A report released today suggests political instability and threats to food and energy development could arise. Leaders in Sanford Florida have given their embattled police chief a vote of no confidence following the shooting death of an unarmed black teenager there last month. Phil lats min of member station WRNI in Miami reports protests continue. Palin faced more than. Two hundred people showed up to support the family of Trayvon Martin at a rally in Miami's Liberty City neighborhood yesterday not far from where the teenager lived. Protesters held signs calling for the arrest of shooter George Zimmerman. Meanwhile a couple hundred miles north city commissioners in the Orlando suburb of Sanford where the shooting took place were meeting to take a vote of confidence in their police chief in a 3 2 vote they voted against Chief believes been under fire for not arresting Zimmerman. The commission can't fire or leave because the police

chief reports to the city manager who said late yesterday that he's quote looking at all the circumstances and will take the commission's vote into consideration. For NPR News I'm Phil last min in Miami. More details surfacing about the standoff in Toulouse France between police and the gunman accused of killing seven people in the last two weeks. And France 24 A French prosecutor Francois Milan paints a vivid account of the final moments before the suspect was killed this morning. He says for himself and the team you Response Squad shooting with a Colt 45 moving forward by jumping from the balcony of them until he is in a boat hit in the head by a bullet. Live from the scene of response squad in France while Milan France 24. This is NPR. Good afternoon from the WGBH radio newsroom in Boston I'm Christina Quinn with some of the local stories we're following. A federal judge today froze the assets of mobster James Whitey Bulger's girlfriend Catherine Gregg. The Boston Herald reports that U.S. district court judge Douglas Woodlock has put Greg's

savings in Quincy home in lockdown to keep them from being depleted and sold off before she's sentenced for helping Bulger evade law enforcement for 16 years. According to court filings from the U.S. attorney's office last night Greg's twin sister Margaret McCusker had emptied out the balance of Greg's bank account in December. Six months after the two fugitives were captured in California and transfer the money to another institution. Today's order also prevents McCusker from selling her own house in south Boston. Joseph Kennedy the third has one less Democratic opponent in the redrawn 4th Congressional District. A resident Paul Herro announced on his website today he's quitting the September primary race. Kennedy entered the race last month to succeed retiring Congressman Barney Frank. Public health officials in Springfield have approved a ban on tobacco sales in drug stores and grocery stores with pharmacies in them. The Republican reports the ban takes effect in two months and applies to at least 18 stores at least 25 other communities statewide ban tobacco sales in pharmacies Rhode Island lawmakers are continuing their work on the state budget. The House and Senate Finance Committees have

scheduled hearings today on Governor Lincoln Chafee as recommended budget for the fiscal year beginning July 1st. The House committee is set to review spending on higher education. The Senate panel plans to review recommended spending on public education. Historic Preservation and arts programs. The state faces an estimated budget deficit of one hundred seventeen million dollars in the next fiscal year. In sports the Red Sox play the Yankees in Fort Myers tonight while the sale Celtics take on the Bucs and later on tonight the Bruins play the San Jose Sharks. We have beautiful clear conditions right now in Boston and a balmy 76 degrees and the temperatures are expected to climb into the lower 80s this afternoon tonight will be mostly clear in the evening that becoming mostly cloudy lows in the mid 50s Support for NPR comes from the skull foundation supporting social entrepreneurs and their innovations to solve the world's most pressing problems at ESC aol dot org. I want to six at Seventy six degrees in Boston. Good afternoon I'm Kelly Crossley. More than one trillion dollars that's what

Americans owe in student loan debt right now. Today we're talking about that gigantic debt and the long term consequences that come from the costs that millions of graduates in America are carrying in student loan debt. I'm joined by Laurence Kotlikoff a William Fairfield Warren distinguished professor and a professor of economics at Boston University. Laurence Kotlikoff Welcome back. Hey thanks. Thanks for having me. So I'm looking at the Wall Street Journal article yesterday in which they reported this trillion dollars saying this estimate is startling to a lot of people because it happened at the end of last year and for the first time they sought out private lenders to get a sense of what they thought was happening in the marketplace as opposed to consumer reporting and were shocked that the trillion dollar mark had been reached already or really over the trillion mark. You're not though. Well I'm even shocked. Apparently it's a larger amount than all the credit card bills outstanding which is huge. So we're talking about as you said at

the top of the hour that the typical undergraduate. Who who finishes college is a college ends up with about $23000 on average in student loans which is about two thirds of what the average wages in the country so receive average college wage might go a bit higher but it's a big number. And then you've got that's just the typical student and we've got other students who are coming out of college with 40 50 hundred thousand you know if you're going to a university that's expensive it's $50000 a year. And if your parents have said hey just go take out loans you'll make a mint in college after you know after graduate. That could be a you know as much as a $200000 bill. So given those numbers the question I ask is why all of a sudden the students have had debt and now we know that tuition has gone up but it can't be tuition increases alone that have caused this great leap in student

loan debt. I think that it's probably the pressure on the parents and they may have lost some money in the market they may have just decided that with with the government's assistance out there being what it is maybe their students their kids should take out loans Raish should put the money in themselves they're press for themselves for bills. And I think that what we have sold to this generation of young people is that college is a ticket to a really good income. That's what the College Board advertises when they were of course trying to sell their test test so they were conflicted. But that's what they say on their site. And that's the message the politicians are getting out. We need to have more people go to college and that this is the core. This is the path to economic prosperity but you know the kids are being left on their own to handle this and a 17 year old is not in a

good position to be told to go borrow a lot of money to engage in a risky venture which is what it is to go to college because at the end of the day you there's no guarantee of a job. Now as we've said the the change is still startling is this big number this trillion more than a trillion in student loan debt. But the fact that it exceeds credit card debt and Americans are notorious for running up the credit cards. So we have the point where we're talking about student loan debt great for then the accumulated credit card debt. This is a serious issue for not just students but as you say the economy. Exactly. By the way the students typically have about four credit cards each and they're sitting there on average with balances of around $7000 so in credit card bills outstanding. So the whole idea of borrowing to pay for current consumption and education is a current consumption. And then make it up in the future. That's.

That's not working out too well for our country and a whole lot of different levels so that we are going to have kids saddled with this debt they're not going be able to buy houses at the same price as would otherwise been the case they're not going to be able to buy them as soon they're going after accumulate a bigger downpayment because they have to delay. Because they don't have the money to put toward buying a house and also the you know you know people that have one too. So homebuyers have been burned through this financial crisis so the conditions for getting a loan are much stricter these days so that's going to have an impact lasting impact on the housing market and that of course affects older people who are trying to sell their homes downsize and retire. Maybe in Florida or somewhere if you're living in the northeast. So this is an interconnected problem if one group depends another group in that other group gets into bad shape then both

sides suffer. Well what's interesting is that you've written and really asking the question whether or not this college education is worth it now. You're a college professor as you point out and not just a college professor Laurence Kotlikoff you're a William Fairfield Warren distinguished professor and professor of economics at Boston University. It almost seems like heresy to ask the question is a college education worth it given these numbers though. You've had to ask that question. Yeah I was I was referring to Boston University brought Boston University is definitely worth it. OK. All right well the other thing we're talking about Harvard Yale Penn all these other places that are $50000 a year. And so I did the following analysis with some financial planning software a little company that I have. It has produced and what I did as I said let's think about a 19 year old who decides to go to medical school and goes to four years in college a college he borrows the money to do that he goes to

medical school for four years Barzan money to pay for that tuition and stipend living expenses. And then he has to be an intern for a couple years a low pay and then a resident for a year and then he finally becomes a general practitioner in Ohio. It was in Ohio and then he gets a pretty good salary and gets hit with a progressive income tax because he's treated like he's rich over a lifetime. But he's actually just has you know high earnings over a few relatively small number of years and he's been borrowing money at 7 percent beyond the federal. A mouth that can be barred at low rates. So then let's compare that person in terms of his lifetime spending power with somebody. The same person but he decides to become a plumber and he spends no money for college because he doesn't go to college. And so when the doctor gets out there into the workforce he's making three times what the plumber makes but the Plumber actually has almost the same lifetime spending power as the

doctor because of all the costs of going to medical school. And I also looked at that 19 year old becoming a B.A. in education and going to teaching and that B.A. in education turned out to have a lower living standard than the plumber. And then I said OK what about an MBA in education. The M.A. an education. So somebody goes not just a 4 years of undergraduate school and gets a teaching degree but then spends two more years getting an MBA that I may get so he hasn't actually actually a lower living standard than the B.A. in education. So they get an education has the lowest living standard and significantly lower than the plumbers and that's all traced back to the debt carrying that debt which is the debt to live with who had to incur the debt to go to school have to try to pay that off and live a lifestyle. It's the high interest rates that these kids are forced to pay beyond a certain small amount of borrowing to to go on these loans and it's also the fact that you're not working for this period time when you're when you're

true. Getting education and then obviously the cost of tuition is very high. So I mean we joked a little bit about be you being worth it but you are suggesting that that there needs to be a different frame for parents and students as they approach getting a college education. Yeah I mean I think that the model for education may may change in a way that really won't be very much fun for people like me. But you know MIT now is offering courses that you can take online. I think perhaps for free and get graded so it could be that 10 years from now people who are taking courses in different universities online getting graded and then they put together a their own kind of transcript that's verified by these different institutions you can take a couple courses at MIT a couple Be you a couple of Yale and send a transcript to a employer and you can do all this basically at

a very low cost with a few teachers in the different places. And then the entire university marketplace could kind of disappear at some level I mean that's an extreme vision but you can see that possibly more and what I'm really getting at is how do universities overprice themselves here. Are they the next bubble. And you think yes I think the answer is yes to some extent you know. So given that we have another set of statistics that are every time if this comes up this question comes up. We go right to these other documentation which suggests very strongly suggest that if you don't have anything beyond a high school education then you're likely just not to do as well. Out here in the economic world. So how do you balance both both realities we know that the debt is crushing but the college debt is crushing but at the same time you don't go beyond high school with rare exception. You're just not going to earn as much.

Yeah it's very tough to get a well-paying job in the unemployment rates higher than the layoff or it's higher for if you're not a college grad. So. I would say the way to go is to try and get a college degree but to do it on the cheap. Try and think about does it really pay to go to a $50000 year school 40000 for tuition plus 10000 for room and board vs. an in-state school you know a state school that might be 10000 for tuition so it might be you know half the cost or two fifths of the cost. One really has to look at this very carefully this is an economic decision it's not just four years of fun and games because if your parents are paying for it it's one thing if your grandparents are paying it's one thing. But if you're paying it yourself you have to think about this very carefully. As an investment. At 17 years old people are very poorly prepared for making that choice but there are you know I've been fortunate enough to be invited to a lot of colleges around the country there are 3000 colleges and universities and some are much less

expensive than others. And the quality is just as good. You know I want to give you an example went to a place called Barry college I never heard of Barry colleges and if you ever heard of it you know where is it. It's in northwest Georgia. It's actually the largest physical campus in the world. So beautiful campus it's. It was founded by a lady named Mrs. Berry around 1800 I believe she was friends with her. Edison and other rich folks and they contributed a lot of money and they have this beautiful campus and the education is first rate as far as I can tell the kids are very serious and you can get a find education there. And at very low cost compared to going to the northeast a place like let's say Williams College. OK well how do you factor in though that the reason that people strive to get into some of the places that we're not mentioning here is some of the elite schools is that they get access to resources such as yourself. I mean I don't know who teaches at Barry College but

I'm guessing it's probably not a William Fairfield Warren distinguished professor like yourself. So that's why people that's why parents sacrifice that's why kids sacrifice because they want to get access to you and others like you. Well you know they are the very college students had access because I was invited down there I was happy to go down there and talk to them so they had some access you get my point. Yeah yeah I get your point but they do have very good faculty OK that was the other thing that I was very impressed by the faculty and the students Wake Forest is another example over and I'm not sure what the price tag of Wake Forest but it's a place like Wake Forest always shows up on the list of you know under rated schools that are very excellent education. You know it's on one of those lists. So what does it mean then that we are now at a place where student loan debt has exceeded credit card debt where students as a rule as you pointed out are 17 18 making decisions for their lives that they're perhaps not equipped to make and taking

on really the word the correct word is crushing debt that's going to be with them the rest of their lives. How are we as a society. Because I'm looking ahead thinking we've probably unless something changes of last like a couple of generations of people who are just saddled with this that's how I look at it and I'm not an economist as you are. Yeah. Well one thing is the government should. You know consider taking steps to. To come up with programs you know with the idea that you can't go bankrupt you can't get out from underneath this obligation discharged through bankruptcy that's. That's really putting into perpetual debtors prison. So I think that needs to be changed. I think we need to you know other countries like Chile have programs where there's some ceiling on how much as a percent of your salary you have to pay back to. To go to college you know they basically front you the money to go to college and then they take a certain fraction of your earnings. I think we need to

think out of the box on the stuff I think at the high school level we need to have personal financial planning courses that teach them economics not just personal finance. The economics of of making lifecycle decisions and and make college choice and financing a key part of those courses. I think that would be helpful I think we need to have politicians stop necessarily stop talking higher education as the end all be all of your future and that. Because that's like the president choosing winners pickers picking winners and losers and in the energy area or you know in in one of these areas sure the president should the should the government be choosing winners and losers it's just not for sure and we don't have the expertise. These ex politicians don't have the expertise to make those. Give that kind of advice. So I would

say. Making clear that there's a lot of paths to happiness and economic prosperity even if you don't get a college degree and you become a plumber. And if that's a job that a robot can't take over that might actually be this the safest path. Let me give you know another example I in my little company I hire a couple of first rate fat fabulous computer engineer software engineers. These guys work for a digital corporation in the 80s which was the top you know computer company in this area at the time. And they can't find jobs in this industry anymore. But if you've gone back to the early 80s everybody would have said go into computer science this is a great career well-paying But of course all the jobs moved to India. And even though these people are fallible SLI talented It just didn't pay out. So it's paid off in the long term for them. And the very Fortuno I think they were

thankful for the fact that they got this somewhat lower paying job in my company. Right there's a lot to consider with this conversation we're talking about student loan debt in the long term effects of carrying this financial burden in a few minutes we'll be discussing how to avoid huge debt and how to get a degree without going into the red. You can join the conversation at 8 7 7 3 0 1 89 70 8 7 7 3 0 1 89 70. If you carry student loan debt we want to hear from you. Was the degree worth it. Have you been able to pay off your debt. Parents What does the situation look like from your point of view. 8 7 7 3 a one eighty nine seventy eight 7 7 3 0 1 89 70. You can write to our Facebook page or send me a tweet at Kelly Crossley. You're listening to WGBH Boston Public Radio. Right. Funding for our programs comes from you. And Bank of America lending and investing to help strengthen local communities and support the people who call Massachusetts home.

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When you sign on as a sustainer you break down your gift of support into monthly installments that automatically renew when WGBH can count on your support. That means fewer fundraisers so even though WGBH is in the middle of a very important fundraising campaign this program is coming to you today. Fundraiser free fundraiser free sounds good to you sign on a sustainer online org. On Monday April 2nd WGBH radio brings you complete coverage on the question of federally mandated health care. Three days of oral arguments before the U.S. Supreme Court uncut only here on eighty nine point seven. Welcome back to the Calla Crossley Show. If you're just tuning in we're talking about the cost that comes with a college degree. Today's college grad on average carries twenty three thousand

dollars of student loan debt. Joining me to talk about how we got into the situation what can be done to get out of it are Laurence Kotlikoff a professor of economics at Boston University. Lynn O'Shaughnessy a financial blogger and the author of the college solution and financial blogger Zack benefit Benson it offer of debt free you how I paid for an outstanding college education without loans scholarships or mooching off my parents. You can join the conversation at 8 7 7 3 0 1 8 9 7 0 8 7 7 3 0 1 89 70 was the student loan worth it did the degree get you a better job and has student loan debt immobilised you 8 7 7 3 0 1 89 70 8 7 7 3 0 1 89 70 and you can write to the Facebook page or send us a tweet. Lynn O'Shaughnessy let me start with you in this way. Here's what we know right now. More than a trillion dollars in student loan debts is what the experts say.

It is out there now. Some of it because there's increase the number of people going to school because they don't can't get a job. The tuition increases that schools have had to make colleges have had to make because they've lost state funding and older loans that folks have had from the time back they can't keep up with the payments so they've gotten behind. And you've got more bad news for them because if nothing changes by the end of June one of the key loans that a lot of parents and students have relied on the interest is doubling would you talk about that please. Right. Well they they loan it you're just talking about is the subsidized Stafford loan and for I think part of the problem with white families going in so much trouble is they don't know what loans to pay QQ because there are there's so much focus on getting into school right that that takes a lot of psychic energy when they finally decide where they're going to go. The loans are having to pay for that as a second thought. And yet they have very little time to come up with how they're going to pay for it because often times students

aren't finding out where they're going to go in till April you know or May 1st is when they got to put down their deposit. So they spent a lot of time getting into school and they spend very little time figuring out where they're going to find the money. But the loan that you were referring to is the Stafford and I tell everyone if you're going to borrow for college that is the number one loan to get the federal Stafford loan. Now there's two kinds of Stanford. There's the subsidized Stafford which is what the one that the interest rates going up. And then the unsubsidized Stafford and kids who are middle income low income can qualify for that subsidized Stafford which is typically had the lower interest rate and now it's going to double to 6.8 percent. It's just one though. Just just so people understand is currently at three point four percent so that's a huge difference. Yes but it's still this is still the very best loan because the subsidized Stafford what's cool about it is that when you're in school and if

you have a subsidized if you are not paying the interest as long as you stay in school the federal government picks up the tab. So that's going to continue to happen. What the change though is once you've graduated and you have to start paying off the Stafford then you will have to pay at that higher interest rate. Now why is it going up. Why is it doubling. Well I guess you can blame the Republicans on that because when the when the Democrats controlled Congress that's when they passed legislation that allowed the Stafford the subsidized Stafford to have this lower interest rate it's been actually declining every year. And now with the rope publicans in office they aren't real wild about you know keeping this subsidy going. So they did. The legislation is is expiring and now there's little interest in. Congress to continue this

lower interest rate that's the problem. So this is one of the many efforts to reduce the debt. America's debt overall and this being a program that has to take some of the some of the weight I guess where I talk about how much a priority is how much pressure do you have on helping children go to college and afford it. All right I want to get Zach's voice in here. Zach is it as I've said you wrote the book Debt-Free you and in fact you went to school without debt. We've been asking the larger question also was it worth it it seems now with people really burdened with this crushing debt and its increase in this subsidized loan and in terms of interest rate that for you the answer was No it wasn't worth it. But you still went to college. So talk to us about right now being a graduate of a college but with someone who is debt free and looking at many of your classmates struggling. Sure I mean I think the you know question of whether it was worth it is the self-reported data on that question is really unreliable I think there was a new study out of Pew

that found that about 84 percent of people who graduated from college with loans say that it was worth borrowing that money. The problem with this data is that people will do anything to convince themselves that the situation that they're in was sort of worth that I mean you know you can look at there's research that shows that most people who've just been in serious car accidents consider themselves above average drivers. So you know the self-reported data on whether it was worth it is not reliable. But are you are you in a situation where you are talking to friends and former student fellow students who are now grappling with a lot of debt. I mean absolutely I mean you know I mean you've seen the data on this and you know Lynn knows as well as as well as I do that you know a large percentage of recent grads are not finding jobs I think it's you know less than half of recent college grads are employed in jobs that require a college degree and you know and you're talking about a generation of people has more debt than anyone's ever had for college. And so for most of them I mean a huge percentage of people are struggling with the debt and that's one of the reasons

that the amounts increasing as fast as it is is I think it's around half of people who have student loans are actually actively paying it back most of those debts being deferred. All right. Let's take some calls Kathleen from Wilmington Please go ahead please with Kelly Crossley Show WGBH. Hi Kelly great show. All right and I have two points to make and I think. Love the air as a single parent. Ten years ago I had to further my education because I was working two part time jobs and wasn't going to be able to afford raise my kids and that income. So I went to law school because I didn't own do so it would have been a dream of mine anyway so I did it and am $90000 in debt. I'm 45 years old have a B. Unfortunately leaving this legacy to my kids because they probably won't be able to pay off the loan before I. I passed my second point as a kid in high school and my 14 year old son said to me recently what's the point of going to college I don't want to be in debt when I get out and that I'm able to put them through college. I mean it's

like they will have to take out loans I've got my 14 year old are you thinking that way. Trying to convince my kids to go to a technical high school but they want to stay in public high school. That's fine but I think you know I hate to say that I'm. And every them from going to college to furthering their education in that way. And like I am one hundred twenty thousand dollars in debt it did for me it was worth and I had to I had to do eventually. And we're better off because of it. But in the long run it is going to be painful for all of us. So are you using your law degree now or are you are you able to do that. Oh yeah. Yeah I've been practicing once again looking to change careers. But yeah you know I use that I use and I'm very grateful I have a wonderful business partner and we do we do fairly well. But again it's not enough to help me put my kids through college. OK all right well we'll get some response or thank you. Thank you very much for the Congo. I got a response. Go ahead Glenn. One thing that might actually help her is her federal loans. She should come to look into possibly using it. Well it may or may not

work but she has such a high debt maybe income based repayment plan which can be usually more for people who have made less money I'm not sure how much she's making but she probably has some private student loans. And in that case I would suggest that she'd look towards credit unions which are actually some new players in the. On the. Education Loan field and they have a website. The student loans dot org and you can go through it now. This is very new that they're offering is consolidating private college loans. Wow. Which is really this isn't this has not been available because private lenders why should they want to give you know former students a lower rate when they've got them on the higher rate. But now this credit unions are offering consolidation loans for as little. You know you have to have really good credit but three point forty three point four three percent all the way up to nine point four three percent which can be a heck of a lot

better than some of these private loans today they can be you know loans can be 12 13 14 percent interest. Plus you might be able to if she has a house you might be able to refinance her house take out some some of the equity and use that to pay off some of these loans and lower the overall rate she's paying. Just to be clear for everybody Lynn I wonder if you would speak to and maybe Zach wants to also address this because he avoided it a long time people thought government loans best way to go and you did mention the Stafford as you thought you always you say you always recommend that. But is there any circumstances when it's better to have a private loan. Now you know now because of the oh so I'm sorry Zach if I jumped in I know you said what I was going to say OK OK. You know it's the best because there are. They have built in advantages. For instance it's got a fixed rate. Everybody gets the same rate regardless of what their are their parents credit scores are.

They also have this really super valuable repayment plan based on the grad current salary which I just mentioned briefly before thinking based repayment plan. And so if you're struggling with your loan see that you are underemployed which a lot of kids are when they get out of school. You can use a sinking base. Plan and you get to pay based on what you can afford rather than what you owe. So the federal loans that Stanford is always going to be about Bettas. OK let's take a call. Michael from tip to Burton Rhode Island Go ahead please you're on the callee Crossley Show eighty nine point seven Hey and thanks for having me. You know I would I would just like to talk about about being a 20 to 20 year old about $20000 of student debt and and and what I've seen first hand experience from all of my friends in the community that I've grown up with and not just my friends but just the everybody in the community that I've seen go off to college and do this and you know everyone's got their own different path and I think the ones that I've seen

so far that have been most successful. And but I actually I went to a semester at a four year university one semester and it cost me $15000 and I you know you do the math and you and you realized what sort of trouble you're getting yourself into. I went to take out a loan for my second semester. And the Rhode Island student loan authority which is you know the thing that the state run to a lot of authority and they give out the best mixed race. Loans and all that they stop lending to students who go to the Berklee College of Music which is the college I was going to because the default rate was so high it's student baiting and that spoke so much to me that I knew that what I had to do was I didn't get a choice I dropped out of college you know before university moved back in with my parents found a full time job as a kitchen as a kitchen cafeteria cook and I'm taking online classes and classes at a

local community college for two years until you know I can go on. I'm ready I think to move up to just a level in the tuition and then from there you know I do have I do have plans of getting a doctorate and masters and a doctor furthering my education but I'd like to go. I'd love to nurture my brain but I think I got it. Yeah I see I see where you're going Michael I want to get I want to let that respond to you. Zach in fact you wrote about this default rate for the Huffington Post back in 2010. Yeah I mean. It's a really important you know in the way he's thinking that is exactly right which is that if you think that you want to go on for masters and then a doctorate you have to realize two things. One if you get all these advanced degrees no one really cares where you're undergraduate degrees from and to in order to get those advanced degrees you need to be debt free after you have your bachelor's degree. If you have a bunch of student loans after you get a B.A. you're not going be able to get a master's. I mean you might be able to but it will ruin your life. Well I just want to say how did you actually get your

degree without borrowing money. Well I had been working since I was very young and I had a plan which we're going to let him go into a little bit more in just a second. We're talking about student loan debt in the long term effects of carrying that financial burden. Is it worth it. Does the degree pay off by lending you a better high paying wage job. 8 7 7 3 0 1 8 9 7 8 7 7 3 0 1 89 70. You're listening to WGBH Boston Public Radio. Home. WGBH programs exist because it is you and the Harvard innovation lab a university wide center for innovation where entrepreneurs from Harvard the Austin Community Boston and beyond engage in teaching and learning about entrepreneurship. Information at I lapped at Harvard dot edu and Thomas Mosher cabinetmakers handcrafted in Maine by men and women dedicated to crafting furniture that celebrates Woods natural beauty. You can visit their back bay show room at 9000 Arlington Street

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them matched dollar for dollar by their employers to find out if your employer will join you in supporting WGBH radio and television. Visit WGBH dot org slash matching gifts morning essentially. Help to get your brain to go. You're listening to MORNING EDITION from NPR News. Bobbsey and MORNING EDITION I hear on WGBH Boston Public Radio a good Wednesday here on Jeopardy. GBH. Welcome back I'm Kalee Crossley. If you're just tuning in we're talking about student loan debt. It's now over one trillion dollars. I'm joined by Laurence Kotlikoff a professor of economics at Boston University. Lynn O'Shaughnessy a financial blogger and the author of the college solution and financial blogger Zac Bissonnette author of debt free. You you can join the conversation at 8 7 7 3 0 1 8 9 seventy 8 7 7 3 0 1 89 70.

Zach you have two. In a brief way let everybody know how you were able to get out of college without debt because that's the essence of your message. Sure well the truth is that you. The discussion of college costs has been kind of hijacked by these discussions about very expensive private colleges but the truth is that if most people in California by the way just want to throw that out there. This does not apply in California none of the stuff I did will work there because the colleges are so expensive. But if you go to an affordable in-state public college or has as Lynn's written about you're able to find a private college that offers you a very good financial aid package. It doesn't end up being an insurmountable amount of money and you talk about the average student loan debt. You know it works at about twenty three thousand dollars over four years which per year is not that much money so what I did was I was very young I started working I was saving money I worked throughout college and I was able to pay cash for it. You know I didn't drive a new car or anything. And so you know it's not insurmountable to do right now if college costs keep going up the way it will it will become that way. But right now I think people can work their way through college it's not easy but it's worth it.

But Zach you know what you have and I've always been impressed by this is at a very young age because this is something that Professor Kotlikoff is saying that sometimes at 17 you know it's hard for a kid to think long range about what this debt will mean to me. I mean to me in my life. And you were thinking about that then you were thinking about making choices. You have lots of options but you made the choice. Right. And I think that that's why you know because I just had a parent the other day you know me and I actually called her back to talk about this that her son you know wanted to go to this $40000 a year college and she didn't really feel like it was her place to tell him that he shouldn't do that. And I'm like yes it is. If ever there was an issue to be a really tough old fashioned parent the college choice one is one of them and you have to grab your kid and tell them you know I'm older than you I'm smarter than you. This will ruin your life if you're 17 years old you don't know what you're talking about and you have to you have to push your kid into making the right decision about it you know because parents all the time say well my kid wanted to go to Northeastern borrow $50000 you know and you

parents have to take a very very active role in that. All right let's take a call me c from Jamaica Plain you're on the Calla Crossley Show. Eighty nine point seven WGBH Hi. Thanks for putting on the show that it's important discussion topic. Yes go ahead. OK so I want 25 year old female I graduated when I was I think twenty three from a four year college with a degree in philosophy about first degree in philosophy and I was really convinced because I had a solid like 8 month experience working a nonprofit through Habitat for Humanity and the America program that I would like you know be able to go into the nonprofit sector like immediately after college because I already had work experience and I had a four year degree and I was in Boston and and I know I spent about a year applying to jobs and temping before I realized that I should just do something that is not directly in my career path which is working at Trader Joe's which is an action. And company to work for.

And you and you made a decision to do that so that you could pay back your loans or so I could live. Basically yes I think putting that my credit card that I could have you know of food and you know I figured out and that's two things are involved like they can't turn off your heat if it's connected to electricity. So I just didn't pay my electricity. I couldn't I couldn't. What do you wish that you had understood when you were making the decision about getting this loan. Going into debt now then that you know now I just like I wish I understood and understood and I think that like college was like the ticket to like getting a job in your career like right away that you would be making making money doing what you want to do like that's what I always heard about you know the Smiths I was about. How would that really get you going to a career that you want to be doing that you will be earning you a reasonable amount of money that you doing something right now that doesn't require me to have a college degree at all.

How much you are earning if I can ask. I know I'm earning between 10 and 12 dollars an hour. OK that's a Laurence Kotlikoff. He's the William Fairfield Warren distinguished professor one of them and professor of economics at Boston University thank you so much for the call. The reason you ask I know Professor Kotlikoff is because your overall message here is that this is not about student loan debt this is about your life. You know this is about a lifetime planning and what are you going to get back on this very significant investment it's a risky investment it's not all that different from borrowing money and going to Las Vegas. And we just heard it on the radio as sad as that is so you know it's it's access is it's true you have to be very very strong with your kids to say look this is something I can pay for if I can't pay for you you've got to think 40 times over about incurring these kinds of liabilities. Let's do it a different way.

OK what do I have. Could I. Yes I have it because I get emails constantly from parents and kids through my blog the college solution dot com. On these very two and one of the things that I write about a lot of my blog and in my book is that you have to make intelligent decisions about if not go to college or not go to college. It's making smart decisions about finding schools that are going to be affordable and it's a little tricky because the price tags are completely irrelevant. But that said there are some schools that are incredibly generous with kids who have needs and there are some schools that are awful and in the Northeast there's plenty of examples of both if you have a lot of financially and you get into one of the elite schools like one of the Ivy League schools if you can't the education lottery these schools are going to give you everything you need of course is very hard particularly for low income. Kids to get into these schools Ivy League because they're mostly a magnet for rich kids. On the other hand you've got a lot of

expensive schools in the northeast that aren't is to elect him as those Ivy League schools that are horrible with financial aid like north like and like NYU is horrible. Correct American. George Washington get in those schools and you're going to graduate with hideous debt. And so that's something that I really emphasize on my blog is you need to know how to evaluate schools before you ever ever a comparison shop. Exactly and what is now the federal government has actually given families a fantastic tool to evaluate schools and that is a net price calculator. And no one should put any school on their list until they have used the net price calculator that is posted on every school's Web. But as you know a federal mandate. Excellent. Kathleen from Webster you're on the Kelly Crossley Show eighty nine point seven. Go ahead please. Hi I was just calling actually because I heard one of your guests talking about not being able to get a masters if you get out of your bachelor's let a lot

of that and I actually just finished my masters in early childhood education and master's and Boston and I actually now have over a hundred and fifty thousand dollars of college debt. We're going to go home. Well I went for undergrad I went to Stemmons which does not have a beginning. And I want it that way. Yeah I want that one really for my masters. I started college at age 16 and I had my parents didn't help me with the fast or any of that so I had no idea what I was doing and did you get a job now or what's the deal on that. I'm actually working as a nanny because there are not a lot of teaching jobs right now especially for early childhood educators. Well so you're going to be how much with federal loans or yeah private loans about $90000 of that is better a low brow but paying 6 percent or six and a half percent very high interest rate.

That's what they're raising it up to that's given the information I mean you should put all the federal on the income based thing if you haven't already you know that that is what that is what I'm doing and like I think $37 a month which is fine. But like when I look at the numbers I just start to cry because your parents to take out a bigger mortgage on their home and told to give you the money to pay back your loans and then you pay them back to make you make a loan to you. Maybe they will do that. That's right because interest rates on home mortgages are much lower than the percent right now. Well I would also for their private loan try to go to the credit unions and try to consolidate your your you know private Well I don't think she'll have the income to get a consolidation. Yeah that's probably true but you know one guy recently wrote most of the private loan companies I've spoken for them and they will not let you know. Yeah well that it's only the credit unions that are really consolidating privately not if you are going to want to and I think we should also mention that with one of the

Sallie Mae loans that if you do a forbearance which you put off paying it that that interest keeps growing so you end up with more so you've got to be clear about that too. Yeah right and some of my private loans when I asked them about forbearance and they say that they don't do that for the kind of private loan I have. Yeah and I think another interesting point Kathleen you're a textbook case we're glad you called and good luck to you. Go ahead Jack. You know can I just you know I mean this story obviously breaks my heart. And you know I just want to say to everyone listening I mean one hundred fifty thousand dollars and attached to a degree in early childhood development is crazy. Absolutely I mean you can never ever ever do that. And you know it I don't think there really is no good. I hate to say this but that situation is a disaster and I don't I I don't see what you know and this is why this breaks my heart and I don't know what the hope would be I mean I don't even know what to say I

want to marry her. That's what you said. There. Kathleen thank you very much for the call. But Zach I do have a question for you a serious question for you. I was in preparation for this show reading a piece that a lot of some of the students that take on the loan they've decided they're going to they've made the choice all right. I don't understand how the loans are going to affect them not in the long term but they don't know how it how they have to pay it back. They don't understand the interest I don't understand the difference somehow or another there is a a lot a big gap in terms of understanding what they're getting into. They don't understand that the chance of not getting large does not. Go ahead. You know they don't understand the problem of not getting a job or a job that's much above the minimum wage. I mean look at the two callers there. There are ones working Trader Joe's once a nanny. This is not a college the college income that the College Board is advertising on the website. So full disclosure requires saying what fraction of our

graduates got jobs at these different levels of earning so I think the government should be requiring that kind of disclosure and I think and I'm down I mean I think brought out you know because the College Board has been making these claims about the income associated with college for years and they finally moved their website like a year ago and did a great piece on it. And what fascinates me about this is that if you made the claims about the investment return that the College Board make if you made those about any investment other than college you'd end up in federal prison for securities fraud. And the College Board goes and makes in the private colleges and public colleges to make these outrageous claims about how much you're going to get benefit from college than the kid can pay back the loans. No one suffers except the kid. It's just that. Let me let me just say one last thing of which I think's interesting fact here which is that Carl even if you borrow money to go to a you know Ivy League school the correlation between what school you go to and your future earnings is very low. So that every week that's no guarantee that you're going to make higher earnings even if you go to Harvard.

I mean that is the essence of that for you exactly what one Len has said. Make sure that people pay attention to the tool that is going to be available to them in looking at some of the loans. But so much of what you did was really financial literacy you know hit your head at your age really but what would you suggest to people who are now looking at thinking about taking out a loan pondering all the possibilities. And that is what is the biggest thing and I think it's what Lawrence kept saying it was so great is that don't get caught up in the hype. This is not a guarantee of everything. I think it's absolutely worth going to college because if you start a community college or you start an in-state affordable public college or you do what Lynn teaches people how to do which is find an affordable private college. You can do this with little or no debt. And that's worth doing. But don't buy into the hype when people are saying you know I remember when I was in high school guidance counselor said to me no matter how much money you borrow for college it will be worth it because you'll earn more money and I'm like how do you calculate the return on investment of whatever. Like you need an actual number there so you have to be

rational about it. You have to see through the hype and you cannot let this turn into an emotional thing that it will ruin your life. Have we lost a couple of generations of people who are burdened by this debt now I ask that question of Lawrence in the first segment wondering what you think. I think that there is a large you know and I hate to be such a pessimist on this. There is a large percentage of people who are recent graduates from college who unless we have some kind of change in the bankruptcy laws their lives are basically ruined by this debt would you agree with me on that Lawrence. You know I think we need to do something to help these people out. And I think we need to. Yeah. You know I just wrote a book called the clash of generations that just came out with MIT Press which talks about the burdens we're putting on young people not just in this area but on the business side and relieving them of the really of the economy. I mean people should college grads should be able to do better than Trader Joe's at this point. Len last word I know that you mentioned that there are 130000 people have signed a petition

trying to reach out to their congresspersons to reverse or not allow this doubling of interest on the Stafford loan to happen right. And you know I hope that they succeed whether they do or not. I don't know but I mean I do think it's important you know to really evaluate schools ahead of time to know what and to to pinpoint schools are you going to get good financial aid packages. So you are going to have to borrow less. I mean pray. A third of the students graduate today without any student debt right there. Do. But you know the averages Jack that is acceptable. Twenty three thousand which is not unreasonable if it's the federal well right. So there are disaster stories and I do feel sorry for them but most people seem to be far away with functionally All right we have the resources connected to all our guests on our website. Check it out. We've been talking about student loan debt I think all of my guests I've been joined by Laurence Kotlikoff and William Fairfield Warren distinguished professor and professor of economics at Boston University. Leno Shaughnessy a financial blogger and the author of the

college solution. And Zac Bissonnette a financial blogger and author of Debt-Free you you can keep on top of the kallah costly showing WGBH dot org slash Calla Crossley follow us on Twitter I've become a fan of the Kelly Crossley Show on Facebook. We are a production of WGBH Boston Public Radio.