When College Breaks the Economy

$1.5 trillion in student debt is breaking students backs, but it could also break the U.S. economy.

Steven and Faith Rothberg who join Chad and Julie for a look at how College affects the workforce and our economy. Is college too big of a business to fail? Are all colleges treated the same? Why aren't more companies driving the talent conversation through investment?

All this and more on When College Breaks The U.S. Economy podcast.

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Announcer: Hide your kids, lock the doors, you're listening to HR's most dangerous podcast. Chad Sowash and Joel Cheesman are here to punch the recruiting industry, right where it hurts. Complete with breaking news, rash opinion and loads of snark. Buckle up boys and girls. It's time for the Chad and Cheese Podcast.

Chad: All right, hey, this is Chad. We have a cheese-free, that's lactose intolerant people are going to love this one.

Julie: Or everyone.

Chad: Cheese-free podcast. I have the Rothbergs, our favorite couple who obviously listen to the podcast. Faith Rothberg, the brains, and then we've got a Steven Rothberg, the, I still don't know yet what, what the, the brawn, the comedic, the, the comedic sidekick of,

Steven: Of all the Rothberg couples that you know, we are definitely your favorite.

Julie: Number one.

Chad: Definitely. No. Yeah. And then we also have my beautiful wife Julie Sowash, the cohost of Crazy and the King podcast.

Julie: Hey everyone.

Chad: So that being said, here's how this goes. Our favorite couple, the Rothbergs, love us for our podcast, obviously.

Faith: We do.

Chad: And they said, you know what, we've got something that we want to talk about. So can you pull the mics out? Can we have a conversation? I said, hell, why not? I mean it's, it sounds like a good time. So we'll see how this turns out. You guys want to talk about college and we'll talk about some of the mess that we're currently in. Not to mention, start talking about some of the disparity pieces. So Steven, Faith what are you saying? I mean this is, this is actually your space.

Steven: Yeah, so it's, it's definitely, it's an area of real concern for, so our business, College Recruiter, is a job search site for students and recent grads. And one thing that we've seen a lot since we went live way back in 1996 is just the incredible change in financial abilities and problems that students and recent grads are having. And a lot of it is due to the rapidly increasing tuition and student loan burdens that they're facing. And like you said, there's a huge disparity. So schools like Harvard that you mentioned, their endowment is so large that they could make every student, they could allow every student to go for free to Harvard forever.

Chad: Yeah. Ridiculous, right?

Julie: And Harvard is not cheap.

Steven: Yeah, and it's exactly, Harvard is definitely one of the more expensive schools. And then on the flip side, and Faith pulled together some numbers, you've got historically black colleges and universities, HBCU as most people would refer to them as when they don't have 14 minutes, to where they're just literally struggling to keep the lights on.

Chad: Right.

Steven: You've got broken windows, letting in pigeons and shit like that.

Chad: Yeah.

Steven: And the, the disparity is incredible. And then we wonder why people who graduate from certain schools graduate making $120,000 a year and others are graduating making $22,000 a year.

Faith: Yeah. I mean, absolutely. When we looked at some of the statistics, it's mind boggling. First of all, in general, there's $1.5 million of student debt right now.

Steven: Trillion.

Faith: $1.5 billion. Sorry, $1.5 trillion, which is just a number that I can't even fathom. I mean, how do you put your arms around $1.5 trillion in student debt?

Steven: I could put my arms around $1.5 trillion dollars.

Faith: The thing that's crazy is also like we said, how fast, not only tuition is growing, but how fast that debt is growing.

Chad: Right.

Faith: And when it comes to HBCUs, 70% of the students at HBCUs do get Pell Grants, which, which help a lot. But because of the increases in tuition, there's still a need for loans to fill the gap between what the school can help with and what those grants cover.

Chad: And these aren't interest-free loans, either, in most cases right?

Faith: No, in most, the interest rates are much higher than mortgage loans for us to have our own house. Right. I mean 6%, 6.8%.

Julie: I mean the, the debt on my, or the interest rate on my student loans, which are set by Congress, the interest rates are twice of what my car payment or car interest loan is, more than twice what our house payment is, or our house mortgage. Yeah. And I'm really looking at a student loan payment that may actually be larger than our house payment.

Steven: And if you were to file for bankruptcy, you could get rid of your car loan. You could get rid of your home loan and you could get rid of your credit card debt, but you can never get rid of your student debt. So that is going to hang over your head forever.

Julie: Yeah, and I think there's a misperception too that if you have student loan debt that you don't want to pay it back, and that we're looking at political candidates who want to do student loan forgiveness and do all those kinds of things. And I think that's a misnomer. I don't have any problem paying back the debt that I borrowed. I do have a problem funding Congress and funding spending that I don't have any benefit to at a rate that's not reasonable.

Julie: I mean we were talking really about, you know, the HBCUs and everything with black students coming out with substantially more debt than white students. You can't start to make up that wealth gap and that generational wealth gap that continues to happen with black and brown students until we start to put some parameters and some minimizations around how much they have to borrow. Because it's just like being a first time college grad in my family. I have more debt than my kids are going to have, but we're still, they're still going to have more debt than people who've been able to go to college and have less than loans for a long time. And it's just this cycle that never ends .

Steven: Faith, you had some numbers on the indebtedness by students from HBCUs versus overall.

Faith: How disparate it is. So for non-HBCU students, there's a, 55% of those students have student loans. But for HBCU students, 80% of the students-

Julie: Wow.

Faith: Have those loans. So it's definitely disparate. Right now, it says that black grads owe an average of $7,400 more than their white peers. And that's expected to triple over the next few years to $25,000 difference.

Julie: Difference?

Chad: Difference, yeah. Higher. So we talk about disparity, right? And this is the thing that really pisses me off, is that first and foremost, I understand that we want to ensure that colleges and universities are being run well. And you take a look at a lot of the research money that's going in. I believe Johns Hopkins actually receives more research money than all the HBCUs. Right. So I mean, so that, so that, I mean, just that piece of disparity in itself, where the money's actually being thrown to this one university, and well-known university, totally get it. But all these HBCUs are very well known as well. So I mean that's the thing is that we have this, the cycle of disparity and it even in the educational system.

Faith: Oh yeah. We're totally perpetuating it by not having, they don't get the federal funding for research, like you said. And then, therefore their students don't get as involved in that research and they're not building... Many of the other universities can use that research money and give a better education to their students. And these HBCUs are just, they're basically just getting enough money to keep the lights on. And that's not the same thing.

Chad: Right? Right. Yeah, they can't, they can't build on the actual, really the college, the university on the programs. Any of that right?

Faith: And the curriculum, exactly.

Chad: Yeah. I mean dropping football, dropping sports because it, it costs too much, right?

Faith: Yep.

Steven: Yeah, so when I graduated from law school way back and I'm hopefully a fully recovered lawyer, Faith will disagree with that most of the time, and the rest of the time she's sleeping. But when I graduated, the tuition at the school that I went to, University of Minnesota, top 20 law school, the in-state tuition was $3,500 a year and the out-of-state tuition was $7,500 a year. So fortunately I qualified for in-state, they made it pretty easy to get residency. But a friend of ours was just looking at going to, well, a friend of one of our kids is looking at going to law school and he told me that that law school now is $38,000 a year.

Chad: Holy Shit.

Steven: So it's gone up tenfold from what I paid.