Angel Ed, The $1 Trillion Problem: Student Debt Crisis, Root Causes & Alternate Paths Forward

THE $1 TRILLION PROBLEM: STUDENT DEBT CRISIS ROOT CAUSES & ALTERNATE PATHS FORWARD

Angel Ed Student Debt Forum University Club of Boston

Frank F. Britt, CEO Penn Foster

May 15, 2013

$1Trillion

Direct impact = 38 million people

Indirect impact = EVERYONE

$150B PRIVATE

LOANS

$864B FEDERAL

LOANS

MASSIVE CHALLENGE…

67% UNDER AGE

OF 40

33% OVER AGE 40

Private For-Profit:

$32,700 per graduate

(96% have loans)

Community College:


(13% take out loans)

Public Non-Profit:



Private Non-Profit:



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4% OVER $100k

Avg $26k

“30% of borrowers over 90 days behind and at risk of default”*

* not including loan deferment or forbearance, Federal Reserve Bank of New York, 2013

13% Over 50k

Amount Age Balance Institution

THE ROOT CAUSES ARE COMPLICATED

HIGHER TUITION/STATE BUDGET

CUTS TO HIGHER EDUCATION

UNEMPLOYMENT/COLLAPSE OF

HOUSEHOLD INCOME

• Rising tuitions due to

state budget cuts for

public schools

• Lack of federal student

loan awareness in

private schools

• Tuition is growing

(104% in 10 years)

income is shrinking (7%

in 10 years <$50K)

• College degree required

be “employable”; yet ½

college students

graduated without a job

• Retirement age is rising,

fewer jobs opening up for

grads

• Many laid off employees

going back to school;

accruing more debt

• General lack of understanding on financial aid and

loan processes and programs are complex; difficult to

understand: 9 federal, 605 state and 16 military

programs

• Federal loans less risk than private but still high cost

(Stafford 6.8% rate); but students not maximizing

FINANCIAL AID LITERACY AND INNOVATION

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MANY CONSTITUENTS LOOKING FOR A SOLUTION

Path Forward?

GOVERNMENT

ACADEMIC INSTITUTIONS

FINANCIAL SERVICES

STUDENTS

• Hybrid delivery

• Pay-as-you go Online

Education (Penn Foster)

• New Payment Options

• Slowing rates of tuition

increases

• Accelerated Graduation in three

Years

• Associate Degrees, Career Certs

proliferating

• Reconsidering Middle Skills career

pathways

• Consumer Financial Protection Bureau

• Pay as You Earn Caps: Obama Program

• FAFSA & Fee for Service Student Aid

Services proliferating (ReZolve Group,

etc)

• Stafford Loans

• Donation, crowdsourcing like

options such as % future earnings

of individuals (Pave), alumni

investment (SoFi alumni) and peer-

to-peer (Lending Club)

• Loan portfolio & restructuring

(Tuition.io, Student Loan Hero) and

centralized auction-like

marketplaces for selling private

loans

• New/old providers entering such as

credit unions enabled by LendKey

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AN INNOVATIVE APPROACH HELPING TO SOLVE THE $1TRILLION

PROBLEM:

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