How Do We Solve the U.S. Student Debt Problem? Kevin Fudge of American Student Assistance Shares Resources, Potential Solutions
According to Life Delayed, a report issued by American Student Assistance (ASA), “The average amount paid for a mortgage, student loans, and credit card debts equals $1,670.12, or 44.2% of the average college graduate’s take home pay—8.2% higher than the maximum debt-to-income ratio required to qualify for a typical home mortgage, and with no room left for an auto loan or any other type of installment loan.”
As the typical milestones of adulthood have become more difficult to attain, it has become increasingly more obvious that the United States has a student debt problem.
Kevin Fudge, Director of Consumer Advocacy and Ombudsman at ASA, believes that in order to solve Americans’ concerns about student debt, we all have to work together to change the system.
To learn more about ASA, we interviewed Kevin about what they’re doing to help consumers make educated financial decisions before, during, and after college, and what can be done by schools, organizations, employers, and the government to help protect those consumers.
KEVIN: I mean obviously, you know, we can point to all the factors into student debt which is you know less investment in public education…college costs outpacing inflation…exponentially. We can look at the root causes, but in that same vein, it’s also looking at the solutions and everybody’s involved. The idea is that there’s not just one magic solution. It’s a collective concerted effort.
HESTER: That’s Kevin Fudge, from American Student Assistance. He believes that in order to solve Americans’ concerns about student debt, we all have to work together to change the system.
HESTER: To learn more about ASA, we interviewed Kevin about what they’re doing to help consumers make educated financial decisions before and after college.
HESTER: Hello I’m Hester Tinti-Kane with EdTech Times, and today I’ll be interviewing Kevin Fudge of American Student Assistance. Kevin, thanks for taking the time to speak with us today.
KEVIN: Thanks for having me. Appreciate it.
HESTER: So, can you introduce yourself and tell us a little bit about ASA in a sentence or two?
KEVIN: Certainly. My name is Kevin Fudge, I’m the Director of Consumer Advocacy and the Ombudsman at American Student Assistance A.S.A. is a Boston nonprofit that helps students of families make better decisions about higher education and student debt.
HESTER: Fantastic. So can you describe a little of the history of ASA, and its mission today?
KEVIN: Certainly. So ASA is about 60 years old. Most of our history was a guarantor of student loans, which meant that we ensured the student loan lender against default. Today our mission is to ensure that no student fails to realize the full potential of higher education just because of finances. So that can mean making sure students understand how to pay for college and apply for financial aid, making sure they have the financial knowledge they need to complete their studies, and making sure they know how to manage their student loans after graduation, so they aren’t crushed by the financial burden of debt.
HESTER: So how is your organization really working with students and their families to really navigate the complex financial aid system? It’s not a simple system.
KEVIN: No it’s definitely not. We help students and families in three ways: College and planning services in Greater Boston, for students setting out on an educational journey. A financial aid education program called SALT for students while they’re in college, and after they graduate. And our Center for Consumer Advocacy, which works to broaden the public understanding of college financing and repayment. And through research, policy discussions, and direct outreach to consumers, we’re really fighting to ensure students of all backgrounds have the opportunity to successfully pursue and pay for a college degree.
HESTER: So you just mentioned SALT. And we heard the name of that program earlier in our series, when we interviewed VPs of financial aid and enrollment at North Shore Community College and Salem State University. Can you tell us a little bit more about SALT?
KEVIN: Sure. SALT is our financial program that we have at about 300 colleges nationwide. Colleges help sponsor the service—it’s a combination of digital online offerings and one-on-one counseling. So it’s really to help develop financial competencies for students so that they can feel confident in addressing their loan concerns and financing concerns. Understanding, you know, how to pay for college while they’re in school, what are their options for student loan repayment when they’re done with school—whether that’s forgiveness programs, whether that’s graduate school financing. And so, it’s really developing financial competencies not just for college, but like, you know, life beyond—budgeting when you’re on your own, whether you choose to live at home after school to save money so that you can purchase property. But it’s really developing those competencies.
HESTER: That’s really important. So can you tell us a little bit about the research that you do? I know you, in your role, do research and analysis. We’d love to hear about some of the recent work you’ve been doing.
KEVIN: Certainly. So we’ve had a series of papers come out that show the impact that student debt has and various things like certain life decisions, like family formation, getting married, purchasing a home, and also later in life, for retirement. The reports are called Life Delayed and Retirement Delayed, respectively, and really look at how student debt is impacting…because a lot of times what happens when you hear about college, it’s all about, well, you earn a million dollars more in your lifetime, and therefore it’s such a sound investment in your future. But we’re not really looking at sometimes, what are the costs of that investment. And so I think it’s important to sort of bring balance to that discussion.
KEVIN: You know if we’re looking at Life Delayed and and how people are doing things later in life because of student debt—you know, that’s why we have our program SALT, which helps people, while they’re in school make better decisions about their finances. So that, hopefully, some of these trends that we’re seeing right now can be arrested. I mean obviously with wage stagnation, and you know, higher cost of living, you know those things also factor into people’s financial decisions and their ability to sort of get ahead and undertake these traditional milestones of adulthood. But also, we’re looking at the back end with retirement, financial security for older Americans is very, very important. And so we really want to encourage people to make those sound choices.
KEVIN: The Consumer Financial Protection Bureau, came out with a report that said in 2005, 750,000 Americans 60 and over had student debt. And in 2015, that number went from 750,000 to almost 3 million. So it’s again, it’s further expanding sort of the research showing how student debt is impacting individuals in the economy, and what sorts of necessary steps we can take to address that.
HESTER: So are you doing any original research yourself, or you analyzing other data that’s out there?
KEVIN: I think it’s a combination of both. I mean our recent research, we do a qualitative analysis of retirement delayed in young workers. So we had a survey that we did for young workers that showed about 60 percent worry about repaying their loan either all the time or often. 40 percent say that worrying about student loans has impacted their health. That could be physical health or mental health. And that’s something that really hasn’t really been explored. And we talk about how debt is impacting employment. Eighty-six percent of young workers had said that they would commit to an employer for five years or longer if the company helped pay back their student loans.
KEVIN: And so what we do is we sort of take that evidence, along with some legislative initiatives…like an employer tax credit for companies that maybe want to offer a student loan benefit to their employees. And sort of to buttress that, to say that, you know here’s what the evidence is showing. Here’s what may introduce a policy, and then, if that policy isn’t implemented, here’s how then we can, you know, inform the public that this exists. We know how to cover those things all work together.
KEVIN: So it really is sort of a convergence of, you know, doing our own research, looking at what else research is out there, what are the questions that aren’t being asked? You know, what can we do legislatively? And then, how do we then advocate and all those things sort of come together like in a cycle?
HESTER: Got it. So I think that’s a really interesting piece of employers supporting their employees, by helping them pay back their student debt. So I don’t know if you can answer this question or not, but are there some Boston area employers who are doing this?
KEVIN: Sure. I think Fidelity’s gotten a lot of press lately. PWC, which has an office down in the Seaport, has gotten some press for their initiatives. I mean the larger point is that it’s just reflective of the fact that the private sector has a role to play in this.
KEVIN: If they’re saying you know we need educated workers for the 21st century workforce—Well, what’s your stake in that? I mean obviously, you know, we can point to all the factors into student debt which is you know less investment in public education…college costs outpacing inflation…exponentially. We can look at the root causes, but in that same vein, it’s also looking at the solutions and everybody’s involved. We’re talking about the private sector. We’re talking about the not-for-profit sector. We’re talking about higher education administrators. We’re talking about secondary school counselors, secondary school administrators. How are they directing students? How do we expand the definition of pathways? Not just making pathways to college, but pathways to education beyond high school, that could include…vocational training. So you know there’s a space at the table for Workforce Development. The idea is that there’s not just one magic solution. It’s a collective concerted effort.
HESTER: Well that’s really exciting to hear about all of the different constituencies that you’ve gathered into this conversation, and the research that you’re looking at. Because the truth is, all of us in the professional world have been through college or have children who are going through college. And people seem to be fairly aware of the urgency of the situation that we’re facing right now.
KEVIN: Yeah I know, totally. I mean, it just impacts just so many different sectors.
KEVIN: We could be talking about you know mid-career professionals that may have kids that are thinking about saving for school. And then we have older workers that are on their way out the door to retire, but then figuring out you know, well, am I gonna contribute to my grandchildren’s education or my own children’s education. What does that mean for my retirement?
KEVIN: And so that’s one of the things we want to be able to do is to help not only show how we can have an impact on the people that we connect with, but then, you know, with a degree of separation, you know, how do we support community-based organizations or other nonprofits or even state agencies that are doing this work to help them have a strong of an impact as they can have.
HESTER: That’s fantastic. We just spoke about employers in the Boston area who are supporting their employees by helping them repay their student debt. Can you tell us a little bit about what ASA might be doing or some legislation that might be out there on the state or the federal level that you folks are supporting that’s going to help more employers get involved in paying student debt back?
KEVIN: Sure. ASA has actually offered both tuition reimbursement and student loan reimbursement for at least the past 15 years. $5,200 for tuition reimbursement, and then roughly $2,500 for student loan reimbursement. And so, it’s a great opportunity for individuals that are either continuing their education through graduate programs, or need to pay off debt that was from an undergraduate program that they already undertook.
KEVIN: On the federal level, there are some bills that are percolating about employer tax credits if they offer student loan repayment options to their employees. So again it just speaks to the involvement of other sectors in helping you know this this issue of student loan debt.
KEVIN: You know it’s not a one step solution. It’s a multi-step process that employers can play a role in, the federal government can play a role in. State legislatures can play a role in.
HESTER: So if you were the V.P. for financial aid and enrollment at a local university, how would you advise your counselors to speak with prospective students?
KEVIN: If I was in that enviable position, I would just inform any staff members related to…recruiting or speaking with students and families, that this may be the first time that they’re ever paying for school.
KEVIN: I mean, even though you have the information readily available on your website, and you think like, most people understand the difference between grants and loans, don’t take for granted that it’s common knowledge. And recognize the concerns that you know your future consumers have—sometimes, almost bordering on anxiety.
KEVIN: I think that’s one of the challenges when you work in this space, is that because we deal with these terms and this terminology on a daily basis, we swim in these terms. We think everybody knows what FAFSA and EFC and CSS mean, and it’s not common knowledge. I mean I always joke, and say sometimes we’re like Egyptologists because we help decipher hieroglyphics and or we’re like the Rosetta Stone we translate you know these these terms and complex symbols into things that people can understand. And I would…maybe have focus groups with…families and students or maybe have like a student advisory board or figure out ways that you can just reinforce that idea that we may know this.
KEVIN: And this is common knowledge to us but it is not to everybody and how do we…communicate in a way that is not only effective but helpful? How do we be accessible?
KEVIN: I know a lot of college financial aid offices were sort of trying to become more user friendly and more like a cafe and coffee and conversation style, because people are intimidated, by you know having an appointment or talking with finances because the power relationship. They’re holding the money and like, in some instances…you’re holding this kid’s future in your hands. Because whether or not you can provide a sort of a scholarship to make it available you know feasible for that family to attend. So it’s really just understanding that dynamic and being sensitive and figuring out how you can be most helpful, I guess is what I would what I would say if I were vice president at a college.
HESTER: That’s very helpful. Thank you.
HESTER: So what do you think about loan financing and repayment in the future? What does it look like 20 years from now, for example. What do you see in the future?
KEVIN: That’s a really good question. You know I guess I’ll put my crystal ball on the table and sort of you know resident soothsayer hat. But I think most reasonable people can agree that there will be some sort of—I don’t know if you want to call it a correction, a reckoning—but that the current path that we’re on right now isn’t necessarily sustainable towards…the outcomes we want to see. We want to encourage more people to go to school, or to seek some education beyond the high school. You’re gonna need to do it in a way that makes it sustainable. And so the onus can’t be entirely on students and families to just borrow and say like we’ll just pay later and then we’ll borrow as much as we can to make it happen. I think…rather than focus so much on the what’s going to happen with you know 1.4 trillion dollars of student loan debt, which can only continue to grow with 44 million people that are currently student loan borrowers that may continue to grow. It’s more, what are some of the things that can happen on the front end before they even get to the back end. And so I look at it as like, maybe use more schools will take advantage of dual enrollment programs that allow students to earn college credit while they’re in high school at a community college. Perhaps we’ll see alternate forms of credentialing. So I know that there was, in the higher education space, there was a movement a few years ago for massive online open courses, or MOOCs.
KEVIN: I don’t think bricks and mortar will go away. People like the convenience of Amazon, but they also like to actually go to stores and shop themselves. So we’re not going to see, you know, a complete decimation of that, but people in my opinion will start to ask, well, if the reason why I’m going to get this education in high school is for the credential, what are the different ways that I can demonstrate skills or knowledge? And you know learn as I go, because for the most part, even if you come out with a degree, you’re not necessarily applying that degree knowledge to whatever job you’re working in immediately when you hit the ground running. Right? There is a learning curve that you know. And so your degree is almost like a signal to employers that you have the malleability to be taught these skills that will help you in your career. Right. So you know it’ll be sort of in my opinion a sort of evolution of that idea. So how do we bring that to the secondary school level and really maybe open up apprenticeships to high school students. I mean you’re starting to see that now with some colleges sort of starting at junior of high school, so you have you know two years and then so now it’s like you do two years of college or postsecondary education. And so now you have the equivalent of a bachelor’s degree in two years versus four years. Right? Which obviously comes at a great cost savings, there’s some benefit to that.
KEVIN: So it’s more of like, in my opinion, it would be a transition from the K-12 if we make it instead of K-12, you know we make it k-14. And we try to have, you know you’ll see some of that with the states have already tried to say well we’re going have like free community college. Basically what they mean is, we have subsidized public school, like K-12. So maybe that would just fix them a timeline and say you know what, we all agree that we need some education beyond high school. So now we’re going to just make it K-14. And if you want to go on and get a bachelor’s degree after two years of college, or you know, your Associate’s, then that’s where you can borrow money or you know get scholarships and what-not to do that.
HESTER: So. So one final question—and you’ve just covered, I think, a lot of ground in terms of alternative credentials, and dual enrollment, and that’s really, really exciting and topics we’re going to be exploring on EdTech Times—but finally, are there some tangible steps that you would like to see happen to support the student loan borrowers?
KEVIN: Absolutely. I mean we’ve always said here, even if they made college free tomorrow and nobody had to pay anything for college, there’s still 44 million people who have student loan debt. So you need mechanisms in place to support people who already have debt. And it’s—I mean it sounds simple, but it’s a lot more complex than delivery.
KEVIN: But there’s a difference between like loan servicing—like calling up your loan servicer and asking, you know, is there a way for me to reduce my payment, and then they they either don’t give you all the options and they give you incorrect information — and loan counseling, where you’re actually talking with somebody on the phone for 10 or 15 minutes who’s getting you your options, understanding your scenario. They’re not talking from a script, and they’re able to assess your situation and help you figure out how best to apply all the tools that are available out there to your individual situation. I’ll just give you an example. You know politicians often talk about kitchen table issues. It’s very funny. And you know, obviously, I’ve made no bones about you know my desires to run for higher office one day, but I do actually sit down at people’s kitchen tables, and sit down and talk with them about how to best manage their debt. And there’s a gentleman who, you know, just in casual conversation I mentioned what I do, he’s like would you mind talking to me? I’m not sure, you know, what I have. And so he thought he had a hundred and fifty thousand dollars in debt. Turns out after review he had more like a hundred and ten. So he was actually $40,000 ahead of where he was at.
KEVIN: And then with a combination of, if he had actually filed his taxes separately, and so jointly with a spouse, plus reduced his adjusted gross income based on employer contribution to a 401K retirement plan, he could take advantage of an income-driven repayment plan, that would not only cut his payments almost by a third, but also make him eligible for public service loan forgiveness, based on the organization he was at.
KEVIN: And so each, like in a two-hour session—and granted, you know, most counseling, you’re not going to take that long of a period of time—but, in a two hour session we were able to talk about financial planning, how to invest the savings that he would have made by having a reduced monthly payment, so that he could achieve some of his goals with his family. And then how to repay some of the higher interest loans more aggressively so that they could be gone. He could address his private loans and get rid of those in two years, and he had a plan to do that which is theoretically, mostly at higher interest rates than federal loans.
KEVIN: And you know, just the confidence that he had after we went through that, that’s sort of what we’re trying to get at.
KEVIN: That’s…what we want to do through SALT, through our research, through our advocacy. And that’s the goal. And hopefully we’ll see more people feel that confidence.
HESTER: That’s great. I want to thank you so much for taking some time to speak with us today. This has been great.
KEVIN: Thanks. Thanks for having me.
Listen to the full series, “Challenges and Solutions for Student Financial Aid & Debt.”
Hannah Nyren is the General Manager of EdTech Times. A Texan by birth but a Bostonian at heart, Hannah is an educational writer, AmeriCorps alum, and one-time StartupWeekend EDU (SWEDU) winning team member. She started her career at a Pearson-incubated edtech startup, but has since covered travel, food & culture, and even stonemasonry in addition to education.