$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.
Steven: You've got broken windows, letting in pigeons and shit like that.
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.
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.
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-
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.
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?
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.
Chad: And the salaries, the starting salaries have not gone up tenfold.
Steven: Correct. I mean lawyers, lawyers who come out of the University of Minnesota are certainly not generally going to be struggling to put food on the table. But when I graduated it was very, very common for somebody making $50-60,000 a year upon graduation. None of them are graduating, making 500 or $600,000 a year. They might be making 80, it might be, it might have gone up by 50%, but it certainly hasn't gone up by tenfold. And Faith pulled some numbers that in 2006, so 13 years ago, the total student indebtedness was about 480 billion, four eight zero, and then eight years later it had more than doubled to 1.2 trillion. And then just a couple of years later, in 2016, it was at 1.4 trillion.
Steven: So as bad as it was a decade ago, 15 years ago, it's just, it's escalating. It's becoming exponential.
Faith: It's accelerating.
Steven: It's accelerating, thank you. It's becoming exponentially more difficult year over year over year. You know the mayor from near where you guys live, Pete Buttigieg, which he, and he and his husband have a hundred-
Faith: I'm glad you can say that name.
Steven: A lot of practice, a lot of practice, a lot of bourbon. He and his husband have $130,000 in student loan debt and if they're paying at 5% which would be pretty normal, but not on the cheap side, that would just be sort of in the normal bracket range of a 10 year loan. I think I figured that that was something in the neighborhood of like 40 to $50,000 that they would need to make a year to finance that debt.
Steven: Yeah. An average student debt is like $40,000 a year at 5% over 10 years. That's $6,300 a year that they need to make because then you take taxes out of that and then $5,000 a year goes to your loan points. So if you're graduating in two, the average college grad makes about $45-46,000 a year. Right. And $6,300 of that right off the top is going to your student loans, and then you've got housing, which very normal in a second tier city, like in Indianapolis where you guys are, Minneapolis where we are, it's very normal for housing to be 1000 bucks a month. So that's another 12 grand. Before you know it, you've lost half of your income to student loans and housing, and then we wonder why people are living in their parents' basements.
Faith: Not making it, yeah.
Steven: It's because they're below the poverty line if they don't.
Faith: Yeah. I think a lot of people that are older that went through college when we, when we did, they don't, they don't realize, unless their kids are in college and they're seeing these tuition firsthand.
Chad: They didn't have this crippling debt.
Faith: No, they don't really understand how impactful it is. Many of many of these young people assume they will never own a house because they're always going to have a student debt payment of $1,000 a month. And so it's really changing the, sort of the view point of what it's going to be like to live as adults, having families, making all these major decisions.
Chad: So we see this impact. We saw the financial crisis right and, I mean this is, this is a crisis. This is literally could easily cripple our economy.
Faith: This is the next boom bust, right? Like we had credit card debt. The only difference that makes it even worse and more scary is that you cannot discharge your debt.
Faith: So right now there's like 7% of, what was it, 7% one in seven people that have student loans are in default right now. When they're in default, these poor students in grads that can't pay for right for it, they end up getting bad credit ratings. They maybe can never buy a house, buy a car, get a mortgage, whatever. So it's, yeah, it really impacts all the way through their lives.
Steven: Yeah, if you want to get an apartment, if you want to get a job, then landlords and employers are going to run a credit check on you. That's become very common. It's now, it's now unusual when a professional position does not require a credit check, and if you're in default on your student loans and your credit rating is four 80 or whatever, right? That employer's going to say, "Well, you must not know how to manage your money. I don't want you managing whatever it is that you're going to be doing here."
Steven: And so we're not going to give you a job, and then that just makes that worse. It compounds the problem. I want to go back to something that that Julie was saying too about the discharging of debt and it's something that I just don't think that most people appreciate, that for almost the entire, for almost the entire history of this country, bankruptcy was designed to be a fresh start and it was designed to encourage the entrepreneurial spirit for people to take chances and, because overall that benefits society,
Steven: Yes, there are going to be some people who go into bankruptcy who really shouldn't, but that's what courts are there for. And the creditors, the banks etc. certainly are well-represented by their attorneys. So I think the number of people who are really getting away without paying debt, that really shouldn't, is incredibly minimal. But when you have your home mortgage, your car loan etc., and you're paying two, 3% on those, and you're paying very often 8% on your student loans and those are risk-free to the federal government, then where is that money going? And I think your point, Julie, if I, if I understood it correctly, is you know, charge me the 3% that I would be paying on a home mortgage or a car loan and it's kind of within the realm of reasonable is, but when it's 8% what you're doing is you're having students subsidizing the federal government, or the it's, it's a tax on education.
Julie: Yeah. And you think about too, another example is I work for a not-for-
profit. So right now student loan debt forgiveness exists. If I make it 10 years at my nonprofit potentially, and so I've taken that risk that I will get to 10 years with that company and that puts me in a lower payment bracket. But the interest, I'm paying more in interest every year in that student loan, that income driven repayment plan. Then you know, my interest is more than my payment makes in a year and that's money that's not going into my retirement. That's money that's not going to fund my kids' college. And we've got, we've got one in college now and another couple potentially on the way in the next couple of years. And so we've got this kind of sandwich generation going on too where we're going to be paying off our college debt until I'm probably 60 if student loan forgiveness doesn't go away.
Chad: Wait a minute, you didn't tell me that. Wait a minute.
Julie: Yeah, no shit. Right? Yeah, I kept that one right under the covers til it was necessary. [crosstalk 00:17:14].
Steven: Wait a minute.
Julie: And I'm going to be paying on my student or my kids going to-
Steven: Why are you trying to take the ring off of her finger, Chad?
Julie: It won't even get close to student loan debt. It's a beautiful ring, but it's not going to get up there.
Chad: No, no, no. Not to mention, I'd like to keep my life.
Julie: But yeah, I think that the overall, one other thing I was reading this morning when we were talking about this is that women have two thirds of the total college student loan debt. And so, it adversely impacts black and brown people, and the institutions, but it also adversely impacts women. And it keeps us from being able to start our own businesses, to put money into our retirement, to invest in ourselves and our families. And there's not a lot we can do about it, you know? I mean, I was a single parent while I was in college and I know I have more debt because I needed help with childcare. I needed help with expenses to keep the lights on at our house so that I could go to college. Even though I worked full time the entire time I was in university.
Julie: And so you create this, it's just a trap. It feels like a con game, right? Because Congress has us, no matter what, we can't get rid of the debt, we have to pay whatever loan it is that, or interest rate they give us. And if we try to refinance, for example, to a private loan that would have an interest rate that would be half of what I'm paying now, I'm not eligible for any type of different payment plan. I'm not eligible for student loan forgiveness for my public service or anything. So you lose all of that opportunity to live today versus being able to pay off your debt and no one teaches you that when you get to university.
Chad: No. Well, and pretty much what I'm hearing, go figure, the disparity
piece, is that, you know, we want to try to again lift women up. We want to be able to lift brown and black people up. We want to be able to, to be, but this again, part of the cycle is pushing them down further because they're receiving more debt than white dudes like me. Right? I mean seriously, it, and again, we talk about how we want to have a level playing field and these are individuals who are trying to, they're trying to get that education so that they can go and make more money. The problem is they get this crippling debt right out of the gate, and they get more then the white dude like myself, I mean.
Julie: It's just another great example of institutional inequity and I think most white people who appreciate their privilege, and you know, I'm white so I recognize that I have some privilege, but white men in particular who have the most privilege don't want to recognize that these institutional inequities exist. That the system is just what the system is and we just keep going and you suck it up, right? Pull yourself up by the bootstraps, be a good American and get it done.
Chad: It's a hell of a lot harder to pull yourself up by your bootstraps if you're not a white dude.
Chad: And Julie, last, because we're always talking about endowments and how there's so much money that's there. And this is ridiculous and there was no fucking reason for this. Not to mention you talk about all the kids at Harvard could go to school for free. Fuck that. They can actually take a lot of that money and help subsidize a lot of these other colleges and students, right? So I mean, this is, this goes beyond that of that one institution, that wealth begets wealth. This needs to be infrastructure that actually feeds itself.
Chad: Not to mention one last thing. I really believe that companies need to be putting money directly into and help building some of these, these skills gaps, types of programs for development or bio-engineering or whatever it is. They need to be putting their own money into that because the talent that they're getting is going to be creating wealth for them, right? They shouldn't just be sitting there waiting for these guys to pop out and then bitch because they're not getting the, the skills gap right, right? If that's the case, put some fucking money into the Goddamn institution and start building pipelines that will help you get where you need to go.
Steven: Yeah, one of our former US senators used to say that it's really hard to pull yourself up by your bootstraps when you don't have any boots.
Faith: Exactly. The other thing that I just wanted to point out from what Julie was saying too, is that the whole, the whole social inequity, it just keeps the cycles of a lot of, more of our socioeconomic issues. So when you say women have more student debt and black and brown people have more student debt, then you look at those women, many of them are like you were Julie, a single parent trying to make it and trying to better themselves by going to college, by getting that degree so they can have a better income when they come out. And yet it's a vicious cycle because now they're strapped with all this extra debt.
Faith: And then they're just stuck in the same place. Even though they're-
Chad: And the big question is, is it worth it?
Chad: Literally, is it worth it? Could I perspectively go to a tech college? I agree. I agree. Yeah. But could I go to a, a different type of a certification or something of that nature and not be strapped with this crazy debt that I'm going to be paying off my, you know, pretty much my entire damn life.
Steven: A ton of the for-profit schools where tuition tends to be the highest, the loan default rates tend to be the highest. A ton of them, the programs are exactly the same or worse than what you see in community colleges. And you'll pay $40,000 for a culinary degree at a for-profit school and you'll pay $4,000 at a community college.
Steven: So why do people go to the for profit schools? Well, one is they are much more aggressive in marketing. Why do most people drink Pepsi or Coke rather than rather than Shasta?
Steven: You know, it's, they're all colas and the Shasta is going to quench your thirst, but, they're the marketing dollars. The aggressiveness of the for profit schools is far greater than the community colleges and the community colleges are so grossly underfunded that there simply aren't enough seats. I hear these people, they tend to be people who are highly educated themselves and whose kids are going to USC and Harvard and whatever.
Steven: And they say, oh, well then don't go to school. Don't go to college. Like that's the answer. Like everybody's going to be like a software developer in San Francisco where you don't actually need a college degree. It's like, um, yeah. The reality is, is that if you don't go to college, you are almost certainly destined to living either in poverty or one paycheck away from poverty for the rest of your life. So people who say, just don't go to college, that's your own fault. Fuck that. Unless you, unless you want to be a plumber or an HVAC today, and those guys are making some damn good money because there aren't any around anymore, right? And, and, and AI is going to be, have a very hard time taking over plumbing jobs.
Chad: Yes. Okay guys. Well, I again, I appreciate you taking the time and if listeners want to learn more about you guys and what you do, where, where should they go?
Faith: They should go to CollegeRecruiter.com and they can learn more about us on the about us page. They can email us at firstname.lastname@example.org or email@example.com if they want to engage in the conversation. It's something I'm extremely passionate about and you'll continue to see more from us about on the topic for sure.
Chad: We are too. We are too. Thanks. Thanks for joining us.
Faith: Yeah, thank you
Julie: Yeah, thanks guys. See you soon.
Chad: We out.
Ema: Hi, I'm Ema. Thanks for listening to my dad, the Chad, and his buddy Cheese. This has been the Chad and Cheese podcast. Be sure to subscribe on iTunes, Google Play, or wherever you get your podcasts so you don't miss a single show. Be sure to check out our sponsors because their money goes to my college fund. For more visit Chadcheese.com.