- Welcome to noon Wednesday.
I'm Marisa Wojcik, multimedia journalists
with HERE and NOW on PBS Wisconsin.
Recently governor Tony Evers signed an executive order
creating a task force on student loan debt.
He cited a $1.6 trillion in student loan debt nationally.
The rate of this debt is increasing rapidly.
It disproportionately affects vulnerable populations
and all of this could have a negative impact
on Wisconsin's economy.
We're joined by Nick Hellman, the director of student
success through applied research lab.
He says it's generally true,
but there is a serious lack of data on this issue.
And so that's making it hard to sort out
the impacts and next actions.
Nick, thank you so much for joining us.
- Of course, thank you for the invitation.
- You've been studying this for years
and you say there's a lot that we don't know
about student debt.
Like how can that be.
- Not to just kind of kick the can on these issues,
to say there's just nothing out there.
I mean, I think we're putting the puzzle together
on sort of the magnitude of student loan debt.
The implications of student loan debt.
And I'd say in the past few years,
maybe three or four,
have we really been able to start to make some
good end roads to understanding the causes
and consequences of that.
But we're very limited with respect to data access,
research designs and really making definitive statements
about student loan debt that make it kinda hard
for academic research to kinda keep pace
with policy conversations that are happening right now.
- Where is that data?
Why don't we know it?
- With student loans,
the federal government is the primary provider
of student loans.
And because of that,
the federal government also keeps track of your payments.
I dunno if you have a loan,
but the federal government will keep track
in a transactional way,
all of those transactions to know
if you're behind on your payments,
if you've switched repayment plans,
how long you've been in repayment
so you know when to stop paying your loans.
The federal system is really designed
for just those purposes to keep accountability,
keep account of all those transactions.
It's not really designed for research and planning.
We've had a federal student loan system
since the 60s and now today it's like you said,
$1.6 trillion enterprise
and our data infrastructure and data systems
just aren't quite aligned with that
rapid growth that we've seen over the past few years.
I think that's part of it.
- It's interesting cause it just seems like
it's a federal agency and there's many other federal
or state agencies where data like that is widely available.
And so it seems counterintuitive
that some of that isn't around.
And of that 1.6 trillion,
you said most of it is federal.
Is any of it private student loans?
- Yes, credit unions, banks for example, will loan,
education loans to students and families.
And that accounts for probably about 10%
of the total volume of student loan debt.
It's there, but not a big proportion.
- In context, in that 1.6 trillion total,
is that a high figure when we're talking about debt?
- It's hard to say what to compare it to.
It's a high figure compared to where student loan debt
was a decade ago.
It's increased rapidly,
two to three times since past decade or so.
But the tricky part is that we don't know
how much of that is principal versus
how much of that is interest.
We see that $1.6 trillion figure floated around.
A lot of that's interest that's just been accumulated
and growing over time and we don't have a good diagnosis
of how much of that outstanding debt is one of the other,
principal or interests.
That's part of it.
- You say it's growing rapidly over the last 14 years or so,
that rate of increase has been 230%,
which is alarming a lot of people.
Do we know what is causing this balloon?
- Compared to other types of consumer credit,
like credit cards and auto loans, for example.
People like to point at these trends
where those lines of consumer credit are kind of like
tapping back down to pre-recession levels.
People aren't borrowing as much in those forms of credit,
but student loan debt keeps rising
sort of unlike any other type of debt.
Some people would argue,
that's good that means the people are investing in education
and there is a return on that investment
both for private individuals but also for society.
Some people might say,
what's the problem with growing student loan debt?
That means people are going to college.
And that's probably a good thing.
Other people would say,
not so fast, it depends on what type of college you go to.
It depends on whether you finish college and so on.
There's a lot of nuance to student loan debt where
student debt might be a very good thing for some people,
but it might be very, very troubling for others.
That's what we're trying to understand with this growth.
Why is it different from other types of consumer credit?
and what does it mean for people the average borrower?
And the more I learn about this,
the less I am convinced there is an average borrower.
- When we're talking about taking on debt,
It can be a good thing to have debt.
People are in debt all the time
and it can help your credit score all of these things.
But it's a different thing when people
can't make their payments and this executive order says that
one in five students in Wisconsin
are behind in their payments.
How do default on payments factor into this?
Is it creating a ticking time bomb?
- Student loan default is a big problem
with our student lending system in general
and a student loan default,
it's basically if you haven't made a payment in a year,
it's pretty much how this is measured.
You'll go into default
and that'll show up on your credit scores.
You possibly could have some public benefits withheld
from you if you're not making progress on your payments.
and unlike those credit card, I'm sorry,
unlike auto loan or a home loan,
there's not collateral with the student loan,
they're not gonna take your education away from you.
That makes this a very unconventional type of credit
for a lot of young borrowers.
Sometimes their first time engaging with the lending system
as 18 year olds are entering into arrangements
where there's no collateral, it's non collateralized debt.
and it's just a really strange system to be able to navigate
and so I think because of these things,
student loan default is especially challenging
in higher education because there is no collateral.
It's not something you could take away from a student.
They can't discharge this generally in bankruptcy.
- You can have your public benefits taken away from you.
- Possibly.
- Does the rise in student debt and potential default,
Is that creating any sort of worry that we saw
a weakening of the economy in 2008 with subprime mortgages?
Is this on that level at all
or are we really far away from there?
- I don't know, I'm not enough of an expert
in the subprime mortgage area to know how to compare this.
but I would say the student loan default is a significant
problem for individuals who have those credit blemishes now
following them for potentially a lifetime.
'Cause they can't discharge these debts
in bankruptcy generally.
But also for communities, you see the student loan defaults
tend to be concentrated in communities
that are already economically depressed.
Communities where a large portion of population
are people of color.
You see some real inequalities that are really baked
into our fabric of society.
That student loan debt just makes even more unequal.
People might say,
we know we don't have a student debt problem.
We have an inequality problem
and student debt is just a symptom of it.
And I think that there's something to be said about that.
- And kind of targeting that specifically,
Senator Cory Booker requested specific information from
the federal reserve about majority minority neighborhoods.
And Milwaukee was one of those cities that came up
and showed some of these alarming rates.
What can we learn from what those results showed?
- I think they're probably three takeaways, brief.
I'll try to be brief with them.
I think one is to the data point.
The data that Senator Booker requested
had to come through Equifax consumer credit reports.
So our senators and our public officials are getting records
from Equifax and from credit card companies to be able
to answer these questions about student loan debt,
which should be a red flag on the data quality
and data infrastructure we started this conversation.
That's one piece of the puzzle.
The second piece of the puzzle is that
I think it really demonstrates that community based
collective efforts are really gonna be priorities for trying
to resolve some of the debt problems that we have
right now in our country.
And it's not just for student lending and student loan debt,
but you think about housing and other access to public
things that we believe are in the public interest
that are just incredibly unequal.
and I think that's the second bucket.
The third is that we've got to also think about
the institutions that are producing the debt.
Students don't just randomly get a debt.
It's because their institution that they're enrolling in,
Isn't providing them enough financial aid.
Possibly it's because maybe the housing expenses
in their community are just too expensive
and they need loans to be able to pay for housing.
It could be a number of things.
And so the institutions, I think are really important
and trying to be part of the solution to these problems
and they're highly unequal along the lines of geography.
- If we do know, to some degree that this issue is impacting
low income, communities of color, vulnerable populations,
potentially more than the broader public,
do we know at all how that might be impacting
people's decisions to go into higher education
or what decisions they're making
when they leave higher education without a degree
or if they leave higher education with a degree.
But with a lot of that.
- That's the big question, and that's the one where,
I think if you would asked me that question a few years ago,
I probably would have been more willing
to have an opinion on it.
but the more I've learned about this and the more
that I think about the advances in social sciences
that we're really trying to like detect causality,
does this cause that,
the more I learn about these social science standards
and the more I apply those to the research that's out there,
the more dissatisfied I am
that we have a really good answer.
I don't think, at least the current state of research
that I'm familiar with has been able to answer
those questions convincingly about cause and effect
when it comes to student loan debt.
I mean, we don't randomly assign people a student loan,
but that would be the best way to find out a causal effect
as if we randomly assign things.
We don't do that.
And so we have to kind of work around
and find sort of other ways to get at causality.
And I'd say most studies don't do that.
And so it's hard, if I'm looking at the research evidence,
it's hard to use that evidence to say convincingly
that debt is causing people to not enroll
or it's causing people to delay family formation
causing people to not start a business or not buy a home.
I think when there's smoke, there's fire,
all those things could be true.
But the research evidence is not convincing enough
at this point to have a consensus within the academic
community that there is cause and effect.
- Can we say that,
an increase in debt could be an issue for the economy
'cause that is one of the points that this executive order
is trying to make.
- It could be, I think pinpointing it would probably be
the best way forward.
So here's just an example, think about the doctors
and lawyers who take out student loans
to be able to pay for their residency or pay for their,
post-baccalaureate training.
About 40% of all student loan debt today
is dispersed for graduate school, students.
So people who already have a bachelor's degree
in pursuing post-baccalaureate education.
And there's certainly can still be problems here.
I'm not trying to dismiss them.
but, I think that there is good reason to believe that
the people who are borrowing in those programs are probably
gonna be able to weather the changes in the economy better
than somebody on the other end of the distribution
who may be enrolled in just a semester or two.
Took out just a couple thousand dollars in loans,
maybe didn't even know they had a loan.
'Cause it's actually really complex to really navigate this
and oftentimes that borrower is the one struggling the most.
So the knee-jerk reaction say
lots of debt is a big problem for the economy.
Let's pinpoint that problem
and I think there could be some truth to it,
but we might be surprised that
just the opposite is also true.
- As this task force is starting to get to work,
what do you think is kind of the most important
thing to focus on?
- Pinpointing the problem I think is a good next step.
I think that the state's interest
in student loan debt is warranted.
I think the next step is now to say A, B and C
are the top priorities when it comes to student loan debt.
I don't think that the state and most states actually
are really in the position to to answer what A, B and C
are because of the data infrastructure.
I think there's gonna be a weird
kind of a give and take here.
We gotta do some more research
and do some more data analysis
and really get a comprehensive measure of the extent
of the problem and then start to answer
and identify ways to solve it.
I think you're going to have a little bit
of a push and a pull there.
Of course I'm an academic, I'm a researcher.
We want more data, we want better data,
but I really do believe that in this particular case,
that's a fundamental first step in the process.
- Thank you very much.
- Of course, Thank you. I appreciate it.
- For more from Here and Now in PBS, Wisconsin,
you can visit PBS, wisconsin.org
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and thank you so much for joining us for noon Wednesday.