Conference Presentation, Fireside Chat, Panel
The Indentured Class: The Social Costs of Student Debt (KPCC Forum Series)
Milken InstituteDebbie Cochrane, Maureen McRae Goldberg, Devon Graves, Perry Wong, Melanie Sill, Matt Horton, Adolfo Guzman-Lopez, Shane Bush, Inez Bush, Dustin Davis, Michael Hopper, Rabbi Jason Rosner, Caroline, Jennifer Childress, Bob Deutsch, Amber Carter, Ramon
- A series of three affordability forums is underway, with the second installment scheduled for November 10th at the Milken Institute in Santa Monica to address workforce impacts on the Southern California market, while KPCC intends to utilize the resulting policy recommendations for direct policy leadership in Sacramento in 2016 and beyond.
- Federal Perkins loans face potential expiration, and since 2008, alternative loan sources have dried up significantly, leading to a reduction in borrowing levels that is more effectively controlled by availability than by demand.
- Education costs have risen by over 800% since 1990, exceeding the rate of increase for healthcare costs, while recent federal actions have ended subsidies for graduate student loans, leaving the entire cost of graduate education to be covered by non-subsidized interest-bearing loans.
- New professionals face debt burdens ranging from $20,000 to $200,000, which is expected to hinder their ability to purchase homes, start families, or save money, particularly as the creative class in Southern California faces high debt relative to income instability and the prevalence of contract work over salaries.
- California risks a long-term loss of investment in young people if educated talent migrates to regions with higher pay relative to the cost of living, a trend that may accelerate as economic conditions for graduates shift over the next 10 years due to rapid technology and global market changes.
- High-income earning potential for specific degrees in major global hubs like New York, Hong Kong, or London may not be achievable in the current market, even for individuals currently earning between $600,000 and $800,000.
- The "ostrich phenomenon" persists in educational funding, where families wait until the senior year of high school to address costs, incorrectly expecting full-ride scholarships which occur in less than 1% of cases, while the reality for the overwhelming majority of schools is that financial aid does not cover the full gap regardless of parental ability to pay.
- Taxability of discharged student loan balances depends on the discharge type, with public service loan forgiveness remaining non-taxable while income-driven repayment plan forgiveness is taxable, though a legislative fix regarding taxes on forgiven debt for income-sensitive plans remains uncertain.
- Emerging concepts of "risk sharing" for colleges may impose penalties on institutions if students default or fail to repay, but these measures are often not targeted toward the borrowers most in need of assistance.
- Some colleges are ceasing the offering of federal loans to discourage borrowing, which may force students to seek private loans instead, a shift that disproportionately affects African American and Latino students.
- The emotional and cognitive toll of student debt is expected to restrict graduates' ability to make future plans, with communities of color being particularly disadvantaged if cost concerns discourage attendance at elite schools while institutions fail to meet full demonstrated need.
- Unique solutions are suggested for the creative class in Southern California given their high debt and contract-based employment, though no specific implementation is guaranteed, and the speaker expresses hope that a legislative fix for tax issues may occur before students on income-sensitive plans face liabilities.