One Trillion Dollars, Student Debt and Higher Education: Greg Gottesman at TEDxSeattle



you one trillion dollars one trillion that's the amount of student debt that we now have in the United States that's more than all the auto debt more than all the credit card debt and just to give you a sense for how big of a number one trillion dollars of student loan debt is if you stacked one trillion $1 bills on top of one another it would reach 1/4 of the way to the moon the way in which we finance higher education in the United States is unsustainable and it requires us to rethink how we deliver education and how we finance it going forward now these are my grandparents don't they look great on the big screen this is them at their graduation Mary and Harry Brown at their graduation from the University of Washington in 1932 for my grandfather in 1936 for my grandmother they were the first in their families to go to college and I remember them telling me at my graduation from college that this was one of the proudest moments of their lives I know it would make them especially proud that I now teach entrepreneurship at their alma mater the University of Washington you're getting a college degree since my grandparents days has been that great equalizer it's been part of the American Dream the one thing that you could do that allowed you to fulfill your promise meet Kelsey Griffith she graduated last year from Ohio Northern University with a hundred and twenty thousand dollars in student loans she pays roughly a hunch pays roughly a thousand dollars a month and she'll be doing that for the next several decades she works two jobs recently moved in with her parents but what stuck out to me about her story was that her mother recently took out a life-insurance policy on her own daughter telling the New York Times that she was fearful that if anything happened to Kelsey she didn't know how she'd be able to pay for and she had co-signed on her loans Kelsey is not alone two-thirds of students in the United States now take out loans to go to college the numbers higher for minorities 81% of african-americans take out loans to get a college degree the numbers are scary the average loan is about $27,000 that's up 58% just since 2005 there are well over a million students that have over $100,000 in debt 35% of students under 30 who are repaying their loans are seriously delinquent on those repayments meaning they're 90 days or more overdue well how do we get here tuition is the major culprit no expenditure in the United States has risen more over the last several decades it's up a thousand percent since 1978 and just to give you a sense for how that compares that's four times the rate of inflation that's significantly more than housing prices have risen and we talked about health care costs spiraling out of control crazy health care costs they've risen 250% during this time period versus a thousand percent for tuition now one could justify this incredible rise in tuition if wages could compensate for that rut that increase but that just simply hasn't been the case of late you see here this is a look at public four-year universities tuition versus graduate wages of graduates from public four-year universities and you see that while tuition has risen 72 percent since 2000 wages in real terms for graduates from public four universities have declined in real terms so the idea that you could compensate for this massive increase in tuition with higher wages just hasn't been the case it's interesting during the break I talked to my father had told me that when he went in 1963 to the University of California Berkeley it cost him two hundred and three dollars for the year and he thought that was a lot of money and he was like I don't know how I'm gonna pay for this well at that point the wage is more than justified that is harder that's a harder case to make today so where does someone like Kelsey or someone who has a couple hundred dollar payment where does that money come from to pay off these loans I want to take a look at a budget of an average college student the average college student today makes forty-five thousand dollars a year that's the average salary coming out of culture if you can get a job and then I took out taxes being conservative 25% typical rent utility food card just average expenses and what you're left with at the end is roughly breakeven and so the idea of putting an extra thousand dollars an extra couple hundred dollars a month is very difficult for most college graduates and so what do they do well they move back in with their parents they or they don't pay off their loans as I've showed you from the 35% doing Qin CE rate and that's a problem for them because the reality is is that the student loan is the worst kind of loan that you can take on in the United States the worst it's the only kind of loan that you can't get rid of in bankruptcy and so that's why lenders are so willing to give loans to students who clearly can't afford them because they know they can never get rid of them you can't escape a student loan chases you down for the rest of your life and it makes sense to why an 18 19 20 year old might accept more money than maybe he or she should because you're 18 19 or 20 years old you're not thinking about 10 20 years hence and then there's no natural market force on colleges and universities to keep the cost of tuition reasonable because students have such easy access to money and so you have this vicious cycle and we saw this once before we had Sky Rob skyrocketing prices easy money and a housing bubble that burst to disastrous consequences in 2008 why am I so passionate about this this topic as a venture capitalist for the last 15 years it's my job to find the very best graduates and invest behind them and hopefully build the next great company to build the next great innovation and the reality is we know from surveys that students that have significant college loans they don't start new businesses they can't afford to we know from surveys they don't buy cars they don't buy houses as often they're less likely to get married they're less likely to start their lives and so this isn't just a problem for for these students over here who have these big loans it's a problem for all of us for our economy so what's the answer less education can't be the answer not in a world where we're competing against the very best from around the world and and folks are getting more and more educated and we expect that legislation I think is a small part of the solution recently the president passed an executive act that allowed students to cap their student loan payments to a percentage of their of their income but that only applies to government loans not the hundred and fifty billion in private loans that make up a significant percentage of those with large loan balances you know right now Congress is vigorously debating whether or not to allow interest rates to double on student loans as of July 1st and this is an important debate but it's still a band-aid on a much larger problem our challenge is how do we educate more students for less money I think there are two components to it first is we need to redefine the America the educational component of the American Dream it used to be that when I went to college and and my parents went my grandparents went the idea was you get into the best school you could get into and you'll figure out a way to pay for it but college is so much more reasonably priced then and I've talked to dozens and dozens of students who have large loan balances and what I've heard consistently is that I wish I knew then what I know now I would have made different educational choices the second piece is that colleges startups we need to get into the act and some are the University of Washington MIT Harvard Stanford have been experimenting extensively with online courses MOOCs he's massively open online massive open online courses and I think there's possibility there one of my favorite examples is Georgia Tech in combination with Udacity which is a startup in this space is now offering a master's degree in computer science for seven thousand dollars that's an 80% discounts online it's an 80% discount to the traditional degree and that's I think a step in the right direction what am I doing about it I'm going to change the course I teach entrepreneurship and focus it in on the lecture component try to give more online the lecture component and try to save the in classroom component for the things that can be best done in the classroom because your critics have argued that there's no way you can compare an online degree with an offline degree these the close student interactions the the small seminars the the college experience but online is getting better it will continue to get better over time and their hybrid approaches and their ways to get the cost of education education down I'm experimenting myself with online courses encourage you to do that I'm taking some programming courses with my kids I'm looking to make investments in this space because I know that it's part of the future 20 years from now 20 years from now higher education will dramatically different because it has to pass to we've allowed an entire generation of students to be placed under an unfathomable amount of debt and I don't have a great solution today for those for those students but I know that we can't afford to let I get another generation we can't keep going down this path not another generation of students to be placed under this grand experiment to see how much debt we can load on top of them as someone who teaches college students and as someone who's looking for the next great innovation I'm confident that within this upcoming population of students as the next Bill Gates the next Jeff Bezos the next employer in your community of next innovator and are we going to allow them to fulfill their potential if you are a parent or a student think about the educational choices that make sense in light of the debt burden that you would have to take onto to get those degrees and does it make sense for your future if you are a university president this is the major problem facing your customer the student this is the major issue that they're they're grappling with shout from the rooftops start a debate about this topic let's figure out how we can get the cost to be more reasonable in college more accessible for more students going forward if you're an employer like I am are we willing to look at new types of online courses and online degrees in this with fresh eyes or are we going to continue to put a stigma on on them and let's be honest that's that's what these courses and these degrees have can we afford to continue to do that going forward or do we have to now look and keep an open mind at the way in which College has to change there's a role I think for all of us to play in solving this important problem I hope we have the courage to embrace the challenge thank you very much

23 thoughts on “One Trillion Dollars, Student Debt and Higher Education: Greg Gottesman at TEDxSeattle”

  1. Awesome video!! The simple is answer is to only go to college if you are pursuing a career that requires a degree: medicine, law, engineering or teaching. If not, then screw college. Learn a trade. Hustle. Start a business. Create something. Learn how to make money….
    But don't go to college!!!!

  2. The real problem is these government subsidized loans. College was affordable 40 years ago because the government wasn't involved, once the government decided to start handing out low interest loans to people who couldn't afford them, thats when the colleges started jacking up tuition prices. People need to start paying for college out of pocket and get the government out of the mess they've created and then maybe college will be more affordable again, not to mention everyone's incomes wont be tied up in debt.

  3. Can we talk about the fact the fact one of the reasons the books are so expensive is that they reprint a new edition to ensure they cannot be used secondhand? How about how they pay people who bearly had any interaction with the book for their "merit"? How about how the more expensive courses like laboratory work is absorbed in the easily manipulated "studies" students' fee costs? How a student with a "studies" course may not have anything worth while economically? How about the major mark up in price, funds four or five times the actual costs of running the university? Or how the media and students are more concerned with the PC side of things than the students' actual futures. I am not American, we have free third level education here, and few "studies" courses overall, I can't say much as very culture is different, but America seems so illogical …. it's like you guys think with your emotions all the time. No offence.

  4. Why not simply return consumer protections to student loans? If student/Parent Plus loan borrowers have the same rights as all other borrowers–including statutes of limitations, bankruptcy protection, the option to pay off student loan debt with lower-rate loans, honesty in lending practices, etcetera, then lenders will have to be HONEST, fair, and offer negotiable terms. Further–why can't the USA offer low or no interest student loans? WHY are the rates, and terms, so PUNISHING…WHY is Congress standing by while predatory student loan big biz financiers are capitalizing and compounding kids' balances? WHY the loan sharking at this level? Because our kids, and their desperate families, are easy targets? Because Congress is in bed with the lenders and the higher education industry? This is DESPICABLE.

  5. Life insurance on your child? Good idea actually. Cosigning in the first place, very bad idea. Don't do this, not ever, no matter what.

  6. I am glad that student loans are treated like regular debt in my country. You can declare bankruptcy and it will be forgiven in the end.

  7. the central problem is the laziness and outdated thinking of employers. College degree requirements allow them to slash 50,000 applications to 10,000 applications with the snap of the finger. Which is actually costing them too seeing as data science would allow them to analyze ALL applications and no longer miss out on star employees just because they chose not to spend 4 years learning stuff which is really not that more advanced than what they already learned in HS. The irony is an 18 year old kid today choosing not to buy into a bubble is automatically smarter than the rest who can't recognize the trap

  8. The answer is simple…..elementary school is the equivalent of two bachelor degrees in duration. So, instead of babysitting in elementary school, start teaching instead; children would have subject mastery by the time they get to high school age, and then trades, technical universities and the academic university could start earlier. This shorter pathway would allow the government to fund the latter streams, and education would be free and equitable for all income levels.

    Some European countries have used this model for a very long time. It would require a major shift in thinking here, as teachers would be needed in the elementary school with expertise in a particular subject rather than the present requirement of only general knowledge.

    We have created an elongated childhood, with students finishing their education sometimes in their late 20s or even early 30s with huge student debt, and this pathway is both unsustainable and egregious.

  9. Thank You Greg Gottesman, you seem to really care and if so, please focus more on ending this action that should be a crime (the robbing of those who are merely trying to earn an honest living) … this talk was 5 years ago … the changes required are still not forthcoming … because the required discussions and the required actions are still not happening. Part of the reason is that those who profit (oh so very much) from student debt … do not want change and they have a lot of influence and power (because they have so much money). Greed is the core problem … and lack of responsibility when it comes to making money … students have become a target for exploitation … and most folks do not care. Many of those directly involved do not even understand how they are involved … everyone is just so busy, making money. Love & Peace to All

  10. Nothing more captivating than a good train wreck. Even better when it’s in slow motion. A college degree is a waste of money if you want to get into IT.

  11. Somebody earning $3700/mo should not be spending $1500/mo on rent/utilities. That's way too high. Hard to justify spending more than HALF that amount. You're young; get a roommate/housemate.

  12. My university is going to be raising tuition costs for all current students who are not freshman. It's 2018 and the tuition is being hiked AGAIN. I'm thankful I'm out in a semester, but I'm morose at the fact that I now have a hefty financial shackle 'till the day I die.

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