Restructuring Student Loans: Question and answer session

To go we have 2 people with microphones so

you raise your hand and they come over and
they hold the microphone in front of you

and if you start making a impassioned
oratory they take it away.

So ask a question that has
a question mark at the end.

She's not going to give it to you but
she's got all that let go Leslie let go.

There we go OK So so
this is actually a question so

I really appreciated so much of this
question I want to identify yourself

let me turn our University of Maryland.

So much of the discussion from the
International Panel framing income based

repayment or I.C.L. whatever you want
to call it in terms of insurance or

social insurance I think that's really
appropriate one question I had for

the experts here is when we think of other
social insurance programs oftentimes

we worry about moral hazard or that
the existence of this program will cause

people to change their behavior whether it
be they take it easy or major in school or

they take a lower paying
job after college and.

I just was wondering if there
is any evidence on how large is

moral hazard is there any
evidence that that these programs

do distort people's behavior and
if so to what extent Thank you.

Elaine did you really think the range
of OK but I also wanted you to say

something about the incentives created
when you got the mortgage because

you made this point in point about the
more when you got a 47 percent tax rate so

I think I didn't show my picture but
basically you know you had a 49

percent ranging down to about

the low paid women where is it
over 25 years you know it Max that

fine just under 5 percent you know right
at the end but basically was very small.

Incentives I mean surely what what
is that going to do to somebody

when they're choosing a job you know
what what what is that going to do to

decisions of when you have children and so
it's going to be influenced by you know.

The design of the tax system where it's
under the up a system there's no use in

very difficult incentives so
here's the point being that there is also

incentives within
the mortgage based program.

And I think a lot.

OK.

You know.

You know I mean what economists
call 2nd best economics says

there is no single perfect solution if you
have a pension system that's got a poverty

relief element it will cause labor supply
to the cure is to have a pension system

with no poverty relief the cure is worse
than disease the way to have student loans

with no incentives is to have no student
loans the purpose of student loans is to

encourage the efficient volume
of investment in skills and

learn system will create some adversity.

He said The trick is
to choose a low design

that has a few have those
incentives as possible and

as many good incentives as possible we've
heard from the right if you have a dumb

movie top system it will create a domino
effect if you have a badly designed dumb

income contingent system with an interest
subsidy where Everybody borrows as much as

possible even when they don't notice
that will cause that person centrist So

the answer is any system will
cause some adverse incentives

you design a system to have a few bad ones
possible of the many good ones supposedly.

Never.

Heard a.

Big.

Area.

For many years.

You're.

Right and.

Yet.

Their readers.

Will so Bruce looks like he has
an answer I'm not OK but let's let him

answer and 11 point somebody might have
their cell phone on because we're getting

a buzzing so if any of you turn your cell
phone on during the break turn it off.

First the 1st point is that the strain
system which has been around for

a lot of study about whether or

not change is in the system
change behavior and

the overall bottom line is nothing
can be found and it was radical

to go from 0 to efficient to about
a quarter of the current cost but over not

insanely any effects on denying the fact
applications within moments went out.

One of the critical things to note here
Wal-Mart being theory adverse consequences

or any consequences the prudent question
is how big are they lucky to be so

ask yourself this question would you
change your occupational choice.

When you're talking about a potential for
avoiding some part of the debt

which is $30000.00 in a lifetime average
income advantage of about a 1000000 and

a half OK these are really small numbers
you much change why you behave in any

one year to for example avoid repayment
to keep yourself under the threshold for

a war chest of your voiding for
more than a year close to nothing so

then the calculation is going to be
the net present value of the advantage

of shifting from one year in a lifetime
income context these are pretty

small now are my 2 other points one
is trying system is really designed.

And people said to me happen economists
be involved in such a ridiculous

notion that once you know $54000.00
you have to pay 4 percent of your

total income so if you calculate that is
what is what we call an effective marginal

tax rate as if you never pay back in
the of the money that that calculation is

record effective marginal tax rate and

people expected to see bunching underneath
that because you can balance because

on the basis of taxable income so you
got a few deductions and what we find in

the data is yes this bunchy but
we also farm in the need to look long to

choose unity that people only do it for
one year should be fixed I think so and

ask yourself the whole package there's
a whole package of questions and it was

really interesting the the discussion
about learning to Zani in the U.S.

context because of course these things
matter what threshold you want depends on

Social Security or because Shien's our
overall the rules of graduating camps and

all that one of the reasons
the strain 1st threshold is.

Very high which then required the use of
totals to get the money back quickly who's

to avoid any potential collisions with
Social Security so once you're around if

your earning less than $54000.00 and keep
leaves no one else in your family working

will be social security implications
particularly with the presence of

of children all of that is forgotten
about if the 1st threshold is high but

you still get these We'd bunching thing
whether or not you want to live with it

I actually think industry would bring
that threshold down a little bit and

change the right from 4 to maybe 2 to
avoid the benching the other point is that

more that we get it we're going to have
more questions just very pointed and

this is about us choices
you get moral hazard or

adverse selection all kinds of weeds
stuff when you've got a lot of choice

if you said to people you can have
an income based repayment when you've got

allowing come and you can have non income
based repayment when you've got really

high income you'll end up with
a very bad system I think I know

a country that has that
thought the stuff has been OK.

Marshall Simon I have a question for
president so.

It based repayment has been presented
as I think a very effective way to

both eliminate delinquency and default and

that potentially we haven't
really talked about this but

also increase completion which I know is
a big issue and I'm just wondering whether

you forsee a possible kind of death spiral
of a positive direction in the sense that

you know we're basically requiring the
people to complete higher education or to

get any kind of decent job at all and in
a world in which you know we've eliminated

default everyone's at least paying but we
have no regulations on rising tuition or

any reason why wouldn't just go up there's
some evidence that in fact you know

tuition is quite responsive to the federal
student loan program and I think the U.K.

evidence is pretty interesting and
suggestive that you know when you.

Company kind of a robust
I B R with lax regulations on

tuition you know essentially just you
just get up the cost of college and

in a context in which you sort of
have to get this credential to

enter the labor market you know I've just
sort of envisioning a scenario in which

everything that you've said that's good
about I.D.R. comes to pass in fact and

yet we end up either with a fiscal crisis
or you know I mean even leaving aside

the government's finances just say
you know we're not actually solving

the problem of higher education you know
acting as a barrier to Mary's and so

I think I think I took I took
the reins point about caps.

Very much to heart that all of this
would have to be combined with as we

have now caps on borrowing so we currently
have caps on borrowing an instrument we

don't have available to us that the Brits
can make use of is caps on to wish and

we don't seem to have the political will
for that So given that we have to have

caps on borrowing I think further and
beyond that we need to have some.

Lower threshold on quality of institutions
so we have accreditation problems and

quality problems in our post-secondary
sector basically the easier we make it for

people to go to college and pay off
their loans all of which are good things

the easier we make it for scams to
occur so we're going to have to combine

you know a better in the thing is you know
sometimes that I feel like it's presented

as well since we don't feel like fixing
the scams let's just make life hell for

powers to make sure they don't borrow and
I don't think that's a terrific solution.

So you know if we're going to have a well
insured system it's we need to make sure

that the institutions are regulated
Well no one not denying your question

be careful about the way to use.

Fees are raised 9000 I'm coming
up on those Everybody point 9000

that was not the U.K.
insanity the U.K. insanity was.

We kept student numbers
that was excess to mom and

the $9000.00 was a response to access
which is a mistake that you've avoided so.

It's one particular institution that's
because the quality you know just like

everywhere right where it was on what
margin does higher education and expand

we don't get more Harvard so we don't get
more Elysees they tend to expand on the on

that so effectively so we had there's
a hand over here is your hand still up OK.

Hi My name is repeat and
like the American Institute for

Research my question building on
the previous one was how to ition or

how cost of living is determined in
different countries that allow borrowing

for cost of living just as we don't
have to caps here we also don't set

the cost of living estimates for campuses
we allow them to do it themselves so

I was wondering in other countries
how those costs are determined.

And we ask that from
the Swedish context I think.

Cost of Living within the students
a student loan should come in no.

Actually I was mentioning
in my presentation the.

Sorry.

Coming too close to you sorry month.

The year the amount when
you can have this loan and.

Every year since the thoughts.

Of the loan and
one thought is that grog so.

That kind of the figure I can get
back to you to be most specific

does it does it vary so yes Stockholm had
different yes are you living in every

sense does that's right they do yeah OK
and the rain did you have an insight on.

Students who go to university in
London can get a higher maintenance

loan than students who go to university
outside London so it's a low.

This is all right but it sounds like
the government setting this is a pleasant

institution of government so the
government is using some sort of formula

about what the cost of living is in
certain places we have this lovely system

where we let the institutions decide how
much it costs to stay in our town and

see the laughing at us and laughing at
us OK we're going to hand over there.

Just O'Connel them in a foundation so

when you as to talk a little bit about
system scale I mean each of your countries

in terms of number institutions numbers
of students volume of money are orders of

magnitude smaller than the United States
and given that it's coming up several

times today that it ministration is
really what matters with these programs

how feasible is it really to implement
some of those policies here.

Doesn't scale scale up.

So I mean as a percentage of costs
if you have a larger scale and

their fixed cost to Texas ministration
it's not clear that they would multiply

as the government gets larger but.

Just take them in.

Rough orders of magnitude.

Of the following We've got about 600000
mystic students in a population of.

people age 18 to 20 enroll in college or

university which is similar to
your was while the numbers much

smaller in proportion terms in not a not
so different economy Cisco I don't

really understand because the marginal
cost of collecting on top of an existing

collection arrangement is not going to
have a con of the scale you've already got

them they're already there so if you
multiply that out number of people by

marginal cost which is 2 to 3 percent.

And I think if.

The United States was 10 straight years.

No problem it's not the scale of
the thing it's the share the versity

which in the US system is so much greater
than as I understand all of the U.K.

as I understand it the straightly and
there is an issue and

says already alluded to some of
the issues a cap on student loans.

Quality Assurance those issues I don't
think it's a scale issue it's how

you design a one national system to
accommodate a very diverse system and

my guess is there isn't a single simple
on say it would be an evolutionary

process but based around income
based repayment collected on

a car basis this I think would be a
terrific place to highlight something that

I don't know if it was clear when you
were listening to the presentations

when people are talking about
their student finance programs.

This is typically what they're talking
about in Sweden in England in Australia

they're talking about university higher
education means be a that means going for

a B.A. So they're talking about the
funding of their be a institutions they

typically have a separate funding
structure for technical education so

it's called further education
in some general education for

us it's community colleges right to
to sions and they are quite different

they're attached to different labor
markets they have different structures and

it may well be that we would need to
have a structure for people seeking B.A.

is a separate funding structure with
a different set of tax rates for

people who are seeking shorter term
education levels and body else wanna.

Right.

This is a perfect segue to my question
my name is Taylor white I work here in

Washington at the Australian Embassy for
the Australian Department of Education and

Training a plant and you know well I'm
going to ask the question very carefully

Les I dig up all sorts of current events
but I should say I'm the reverse I'm

an American working for the Australians
here in the US so we were all scrambled

between the 3 of us but my question has to
do with this these different systems so

obviously in the Australian context right
now it's a hot topic that the inclusion

of the vet sector in the hex scheme has
put a lot of tension on the system and so

with I would say with of that the vet tech
I'm sorry that's the sort of locational

education sector so the equivalent of the
TAFE sequin of community colleges and for

profit training institutions and so

I noted in the presentation that these
again were about higher education

insofar as they're defined as universities
only I was wondering if Sweden and

the U.K. and Germany might talk a little
bit about how the funding systems for

their vocational sectors differ and what
sort of calculations are made based on

the demographics the type of occupations
you anticipate people entering it cetera

et cetera and what sort of design
differences you may need to account for

those differences in the pop student
population institutional populations.

OK who wants to start.

And there now they're in a gorgeous
let's pass the ball back and

forth OK Mulder OK Bruce.

The vocational education
training system you know stray is

in the private sector is about
as close as you get to for

profits arrangements in the US If I
understand them properly and we

had a bit of a disaster it's accurate to
say over the last 2 years where the income

contingent learned which is only
designed basically for universities but

including graduate schools went into
that sector with very poor regulatory

cover and a lot of providers who you had
not established reputations that would

not clearly of hard quality had the access
to this extraordinarily powerful generous

instrument called an income contingent
loan with that to manage too many quality

controls all regulatory arrangements and
it lost a lot of money and

it's extremely important to understand
the potency of this instrument it's

basically a gift to the institutions and
you really have to watch very carefully

how it's use particularly if particularly
in the profit with a profit making sector.

Just following on from Bruce's point.

I could set up.

The nick rip off School of
Economics charge a high fee

students come if they don't very much
they don't repay they know it if they

don't earn very much the taxpayer coughs
up not me so there are horrible adverse

incentives which is why quality assurance
is absolutely essential in the U.K.

The loan system I've described is only for
the day etc We treat our vocational

education very badly I don't understand
the details but I gather it's complex and

a mess my own view is the income
contingent mechanism is crying out to

be extended to plumbers hairdressers sort
of a whole range of things the parameters

my well be different a few years ago
with a colleague I did the simulation of

the repayment performance of loans in
the vocational sector and somewhat to our

surprise the repayment performance was
better because the loans are smaller and

of a shorter duration so the answer is
we don't in the U.K. but we should.

Well.

If I understand your question correctly
we don't have an efficient fief So this

is a love interest to dish about that and
the state actually from the universities

almost every university in Sweden so
there are very few private universities.

So if somebody is doing sort of
technical education as opposed to

an academic degree yeah is that done
through universities or the sekret is

actually no it's really it is in some
ways it's all in one thing yeah OK.

OK make.

Doing vocational a what Haitian
there is it is student grants for

those doing vocational education and loans
is terrible so you say they do not have

access to nearly as much generous support
support but they begin talking about.

Subject return to Sheree rather than
plumbing all things like that but

but I can't yet I thinking I think.

It's very.

Jolly we have.

A very complex system location training.

And.

How to describe it.

And you can.

Realize professional degrees in
professional schools for example they are.

If I compare it to is a level
of the community colleges and

the United States there
are no higher level and

they are leading to a technocratic
race but the economic results.

In the social sector
then you have a system

there are about 1800000
participants actually.

DO IT system that means that
those which are involved in this

training programs they have done it for

enterprises on the other hand they're not
in the professional schools as well and

if they are reaching achieving
their degree they are partly or

some of them are able to enter
universities or universities for

Applied Sciences because there was
some kind of trade transition but

during this time when they are.

Learning and this is good system they
are counting some money some salary

of cost and they are free of creations so
how do these a system that borrowing

was quite low is 18 percent for people
going to university what's borrowing for

people who are doing this other technical
training over it's a it's a trade

is are going more are to universities than
in our of vocational trying to program

us to the people in the location training
programs borrowing do they borrow money

they don't borrow a lot so this is
how it's being paid OK and so on the.

If for example if there was
a taking profession of schools for

time professional schools they're able
to realize the financial support of

present government as well so
this is a difference so

I mean what would what I would so
the the bad players in the for

profit world have figured out how
to play our current system and

what you described as you know bad
incentives and people going and

borrowing a lot and they're not repaying
it in the government's picking up the tab

is happening right now to great cost
to the affected students because they

go into default in their credit records
are affected in income contingent and

so income contingent loan system would
shift the the cost would still be paid

by the government but it wouldn't hurt the
students now the ideal world we would fix

and regulate the for profit sector but
if we're not going to do that do the risks

and the cost of all that and
the pain of that fall on the students or

on the taxpayer my thinking you can
guess is that if we're going to be so

lazy and
cowardly as to not regulate higher

education in a credit properly then
the risk should not fall on the students

the cost of that needs
to fall on the polity

which is unwilling to do this regulation.

There's a hand in this too and
Arts had his hand up for a while as well.

So I feel badly because artist
had his hand up for a while but

the key is Smith Lumina Foundation and I'm
wondering if you could speak a little bit

about the cultural context of each of
your countries that maybe has made some

aspect of reform difficult so when I think
about the United States we are now having

what I would call a backlash against
it loans and I talked to my grandmother

college in an era where there were no
student loans she thought the idea that

someone would loan you money to go to
college was revolutionary and it be damned

task to make the students who are going to
college today have no memory of that time

when you didn't have the access and
now we have a different cultural kind of.

Context of student loans which is
what it is and leads to kind of

different just challenges and how we think
about what might be possible because of

what that means in terms of the political
realities of what people are asking for so

in each of your countries what are what
are some of the things that maybe have

been difficult that people
have tried to do but

because of the cultural contexts
have been there's been pushback.

Thank you I would say in view
to surveys we have done Sweden.

We have learned that many people
wouldn't have gone to high education

if that wasn't a possibility to
borrow these student loans so

that is a figure quite high I would
think 40 to 50 percent of something so

that if the comes from tradition in
Sweden so many people go on as I

mentioned in my presentation to higher
education thanks to the system.

I think I've always been fascinated so

in the contract you're right next to
each other so Sweden it's very firm

that if you are 18 plus you're
an adult separate from your parents.

And that is how the funding
mechanism funding framework and

the way we're thinking about
it goes therefore there is no

subsidies based on your previous family's
income for example or no expectation of

your parents contributing a very different
and also that you don't live at home while

you go to school people don't
live at home or they go to school

a different set of cultural
assumptions is in Germany OK we have.

You have no culture of borrowing money for
investing in education.

That's explains for
example when we introduced ration fares.

Some of those which could have
started to say didn't try to start

as a went to work or into overcaution or
training programs and on the other hand

those which started as a increased
employment their own employment

more money for financing just others and
maybe there are more opportunities for

drugs that they can find insisted his but
the.

Lone systems the raunch taken and
as you have seen there

are only 6 percent which are borrowing
money for financing system but

in this there's an expectation an explicit
expectation of $735.00 euros for

each student of support from their parents
as long as their income is above was

this is this other stuff a coast No And

I think of the structure it's such
a great solace and so from such a.

Euro parents have to pay for $40.00 or
so with parents who think I'm 850000

above the expectation is that they're
coughing up $12000.00 a year for their

kids' living expenses so yes the tuition
is free but they're expecting their.

Their parents are supposed to
be coughing up a $1000.00 so

that's sort of underlying It's very
different from the Swedish example but one

of the sort of on the other hand if you're
paying for parents you're get reduces

from paying taxes on the out on just one
so this is a picture for Atlanta just.

You know Nick wanted to do you
want to give and he's British and.

You just kind of a much there yeah
very well I will act as the woman

warm up act for Bruce who will
tell you the stories of a stranger

where he was chased by 10000 students
down the streets of candy I think

when we when we introduced loans in
the U.K. for the 1st time in 989 there was

the biggest Stude that there was still was
the biggest demonstration ever outside

Parliament I was going rounding student
debate saying loans the right idea but

that the wrong sort of loans that should
be mortgage loans they should be income

potential loans and
I was regarded as a fascist hyena.

Within 5 years the students
at my public economics

lectures were busily taking down market
failures mortgage loans in the fish and

etc etc cultural views
can change that's point

$1.00 you've got to be very careful to
distinguish between what people say and

what people do if I ask you how do
you feel about a higher price for

wine you're going to give me a grumpy
answer does that mean you're not going to

drink one at a high price different
question different answers.

So and

the final point it's not just a cultural
difference from your grandmother's era.

When I was a student 5 percent
of Brits went to university

today it's 50 percent one of
the drivers for bringing in loans

is that's what's necessary to open
up the system to give chances

who when I was an undergrad to people who
would look anywhere near University and

should have done and didn't then and
it was an outrage and they can't a day.

That the hardest thing in countries
like England New Zealand and

Australia is they came from 0 to Asian
to the introduction of tuition and

that was the big 5 then if I call cultural
a bit it was certainly political and

it was certainly about where you
start from is absolutely critical to

understanding what what would
cause an extended frustration and

hatred even and that that was the point
university should be free that was

the mantra and I and
what what madness Strayer was and

probably England in maybe 3 unique was
the demonstrations this is actually

regressive because the people who pay went
free means paid for by all taxpayers So

who's paying for these train system work

university is is this a reasonable thing
when the profit benefits are very high

it's not a reasonable thing between with
an income contingent solution to their

ethnic mix kind of got this rock music as
well as for a strike it didn't take long

before that was considered to be OK and
partly the part politicians were astute

and setting that 1st income threshold
of repayment average income was

a really profound political move because

the argument was happy to fight against
something which is going to charge you

$10.00 a week which would leave you
a $1000000.00 over your lifetime and

you only have to pay it when you
earning more than the average tax but

that's pretty hard rhetorical to follow
and now it's not all controversial

if we can have any other large system
to compare with so if we had him.

Steffen loan system that if I would have
been staff exists income contingent not

free income contingent the value of income
contingency wasn't really pointed out or

understood including by me in my view but
it became apparent later and

now I think it's accurate to say that the
system is very well regarded by the uses.

State and I think you know one of the key
differences between the 2 systems

is in the U.K. you get a loan for
support maintenance and

feeds whereas in the stranger
it's just fees and

that reflects cultural differences most
a lot of Australian students study in

the city where they live you know it's
a basically a 6 city country and it's so

so sad you know and
it's not you know I went to a new

I lived a camper I went to a new and
that whereas in U.K. The expectation

is that you know when you go to
university and says it's a cultural thing

I think you've got a lot to do between
the differences between the system.

Or.

One quick historical comment and
then 3 quick questions

on his it would be quick this is
why I waited on you thank you.

On the historical just to let
people know in 198788 Bob rush hour

wrote a paper on using Social Security for
the loan program and

Michael Dukakis at the urging of
Gene Sperling put it into his program and

there was there was change from what Bob
had said so had we done it at that time

we had instead we went to an income tax
base system rather than a payroll based

system and I think probably to our
detriment quick questions One was

once we've been a little bit more
elaboration on on why the mortgage or

you went back to a mortgage
style repayment on Australia.

The vet I mean the vocational program of
my understanding is also that Australia is

now bundling on living expenses
to some extent and such was.

Told and I was wondering whether tech
you know whether I'm sorry Bruce

wants to comment on whether or
not that's detracted from the reputation

advocacy of of hacks both those things and
the 3rd one is for everybody.

Basically if you go around the countries
that are represented here and

other countries like the Zealand
the loans have helped

to raise the participation rates
no question as Nick said but

we all have equity gaps still we all have
big differences between low income and

high income and the loans don't
seem to have solved that and

so I'm curious what you think
from your experience why that is.

OK.

I think.

That.

The system led to quite high borrowing
speaking of Swedish matters and figures.

Because there were no really
incentives for for the borrow for

the student to finish
their studies in time and

at the same time we have this economic
recession with great greater or

higher interest so I think it was a back
kind of company combination that actually

led to this modified mortgage slow but
to respond to that has been to set caps on

borrowing and subsidise the interest rate
yeah so I mean you know there could have

been a way to modify the income contingent
program you address Yeah that's right.

Yes.

You can talk about Australia.

Income Income Support could be
used in in theory in concept very

easy as an extension to our system and
it happens in the U.K. It happens in 0 and

I probably be tempted to have
has it have it as an add on for

example to cover the textbook costs saw
moving costs when people 1st students or

computing cost when they 1st students not
to make it complicated maybe an extra

$1000.00 a year.

But not to undermine the grant system as
far as the question would you question

training is concerned there is no reason
at all why you shouldn't have an income

contingencies to all 3 post compulsory
schooling in my view so long as you've got

the you've got the Cretaceous issues
the writ large as Nick's just you probably

need a lower threshold in Australia
because the incomes are a bit lower but

I think it's all completely manageable and
have been people about my size

who are getting shorter who've
been saying this for 26 she's.

There or maybe because of inequality.

If we understood them better we
could solve them we should solve.

Increasing participation.

Has a net effect of leading to
the quality being less than they

did otherwise would if we
kept pop dissipate 5 percent.

And simply changed the makeup
of people going to university

I'm not sure I would believe that but
expanding to 50 percent and

having a lot more people from poorer
backgrounds going to university the net

effect is to reduce inequality is it
enough hell no a lot more to go but

you call her education in education
in general Consols all the causes

of inequality particularly
today one extraordinary fact.

Of the English and U.K. thing is that
ethnic minorities do you much better by

the end of school and a significantly more
likely to dissipate in higher education

than any than any that the white
British at least like me to say so

we do have socio economic
inequality based on income but

we do know the ethnic inequality
is completely different.

We're going to get questions from
Twitter at some point that we need to

pay attention to who is gathering those.

You know geez Twitter people.

Andrew has a question.

I intercalary from Jason's future
employer American Enterprise Institute.

We're taking him in because he needs job.

Just getting so I'd prefer professor did
in your in your remarks you referenced

when you were talking about risk
how the risk voluntarily of attack.

The taxpayers or the polity is said.

And you and you mentioned in very briefly
in passing that Professor Barr was working

on some ideas around risk retention on
the part of institutions I wondered if you

could talk a little about that that's
a debate we're having here as well and so

if either of you could weigh in on how
such a system might work it's a part of

the problem the big problem when
we went from 3000 fees to 1000

pieces there was no incentives for
universities to do

anything other than charge because
they they bore none of the costs and

that there was a number of ways
they could fix that by you know for

every 1000 pounds you know you would need
that they couldn't come and when that.

So and so it can take very 1000 pounds.

So if you have a university charge
an extra 1000 pounds the government would

give it 70 it would tax it 70 percent and
between $709.00 it would tax it 50 and

if 50 percent the problem was that
elite universities like Oxford and

Cambridge said that's just way too high

we're going to go private you know
because because our students say so.

And so
they dropped I think believe they would

I don't believe they would have complied
and then they opted out and stayed out of

the system safe because you know
the government could cost of borrowing is.

Lower than what they are but
they threaten that and they pull down but

Nick's doing someone.

Might do we have a review of 2010 has
a right and said proposed that as

fees went up about certain levels of the
government would take an increasing slots.

But what you need to do is not
target on the field level but

on the the universities
risk in other words

if it charges high fees but it's boring
as all go on to have higher earnings and

repay their loans they're low risk if they
charge high fees and lower earnings so

you want this is this is a paper that I
wrote with new shepherd of Harvard and

it was $1000000.00 in principles paper
which said that income contingent loans

are designed to make a loss on people with
low lifetime earnings the question is

where that lawsuit for and in the U.K.
and Australia it falls on the taxpayer.

If it could for it could be
shared between the taxpayer and

all the cohort of student borrowers by
charging a cohort risk premium and or

a university specific insurance
premium whereby if the loans that

Oxford University makes on its feet
he's above some level makes a loss of X.

percent then if Oxford charges
a fee of $15000.00 pounds

the student loans administration that
currently pays the female me on behalf

of the student would hand
over not 15000 but 14200 and

the principles are very clear the
difficulty is how you actually quantify

and there some work is being
done about it's a question of

getting hold of the data I mean Lorraine's
seem very much involved in that and

I hope will tell us some more about it but
it raises a general issue for the U.K.

and the US lots of data are being
gathered at taxpayer expense education

health transport United that are not
being made available to researchers and

this to me is absolutely not so
there is a huge data access for bona fide

research as agenda for both our countries
that's much wider than our education and.

And the right knows much more about
the quantification than I do.

About some of it's been
about some of it but

some university forgiveness permissions
doing economics Elysee is very very good.

But there that I mean there is a paper
that's big but you never know about it and

then again if we're going to
publish papers on the Institute for

school studies workshop
where we live by subject and

institution it's based on students who
took out loans in at the very beginning so

it's only in 1980 I've got 10 to 12
years of earnings of of the students and

we can see what the returns
are by institution and

subject genda high income but the rest.

OK This means that this
question of wrists the risk for

the institutions is a much bigger
question in a world of Prost discretion.

When you are priced caps it's almost
doesn't matter so much if you design

the system properly when you don't have
crossed caps you've got to put change into

these because it's a great monopoly
instrument the teen situations can abuse

by charging very large sums and
not actually having any so-called skin

in the game about the returns how you
measure these things is really hard but

that's if you if you want to go to
a universal contingent loan and

have crossed discretion a lot of
attention has to go to that question

isn't to do you want to contribute to this
was a separate question that you know OK.

Which was.

So on the on the.

Home Sorry forgot the question no it
was relevant was it about risk area

yeah it's about film I didn't
come back to it yeah OK.

I'm going to my name is
Colleen Campbell and

from the Association of Community College
trustees grad Star Universe emissions.

And I mean receive machine graduate.

And think you know Korean technical
education bringing together this point

risk sharing having institutions
have some skin in the game but

then also thinking about the incredible
diversity of our system and

the open access nature of community
colleges in particular and the fact that.

Students that attend community colleges
have a different kind of risk profile for

not repaying their loans then students
that might enroll at say it like a 4 year

institution how would you
model a risk sharing system

kind of based on the system that we
have now and not on one where you

are you have pretty solid control of
the quality of your institutions and

you're holding your students to
a certain bar cross the board.

So what one thing to remember as you
thinking about this is that we have

the Pell grant system right so
while in England for example at this

point there are no grants that you
can use as a tool in this in this.

In this world we can't and
our community colleges tend to charge

tuition is about half those
of the universities so

I think that I mean it's not
a one size fits all prescription.

Some universities you know but
you know Chicago helicity University

coach on compete internationally
it's a competitive environment and

the safeguards we even talk about on
quality assurance matter there are other

institutions community colleges or
access universities in the U.K.

that cater to a local population
they are doing a different and

fundamentally important
Tosk it's not clear for

the love mobile let alone the competitive
price model is the right model for

the assumes said Pell grants grants in
general might well be a more appropriate

instrument at least at that stage and
if students then progress from

community colleges to 4 year degree
colleges then the loan system comes.

It's a play now I'm not saying I'm
sure that's the right answer but

at least I'd want Ditto
reflection round that approach.

Well I mean there are bound
to be huge complex these

these situations and.

Then we kind of arrogantly say too
much about it but I would say the city

even put you have to put the attention I
think into some kind of capper a shipment.

It's Prost caps next countries he's
probably learned caps in this country and

then the capsule have to be determined
by the institutional complexities and

targeting Why is it accommodate some
Prost discretion that is a critical

thing I mean you kind of need caps of
various kinds anyway no matter what

line system you've got because in the end
the government's picking up the tab for

the amp I did so it's not that far away
from that but the institutional design

issues which were covered really nasty I
thought in the penultimate session here

the fundamental and
I think we can cite much about the.

High in the Center for American Progress I
was going to talk about for

the place that having computing Gitlow
is where the employers are doing with

the withholding Can you talk a little
bit more about the system from

the employer perspective in sort
of 3 key ways you know 1st and

sort of what very hard employers react to
when you created these things and had done

some of the start doing the withholding
like to the object would they go along

with that to what happens if an employer
makes a mistake in the calculation and

sort of either withholds too much or
too little and then 3 How do you handle

the multiple jobs problem that we heard
talked about on prior panel where people

might have income coming from multiple
sources and doing a calculation there.

In these trying context the last 2 issues
all done by reconciliation through the tax

system at the end of the financial So

that's kind of strike food for Max mistake
it all gets sorted out with the annual

income tax arrangement that doesn't
have to get through the tax system just

happens to be fusion Nice try income tax
it could be done through another office.

So the extra job stuff if you
have to pay contingent line

on that income the it all gets fixed up as
I understand it after the end of the year

with the you know talking about big
sums of money I don't know if employers.

Did and the fact that I don't
know it's kind of implausible

are you either didn't notice so they
didn't and I kind of would have noticed or

certainly notice a 10000 students
having kept burning effigies of me in

hanging little statues and stuff so
I would have focused on the employees

the employees which is far as I can see
got kind of been on didn't really notice.

Who instructed or some more.

Well.

Now the lines are provided
by the government so

that what you can Has this is a very down
and dirty question like somebody gets

hired how does the employer know that
that person needs to have loan payments

withheld from their check because everyone
has the U.K. we get the tax code so

you know how much the tax free
threshold is you get National Insurance

way you pay Social Security
it's a fixed threshold and

you get a notice you get a tax notice
saying this person has a student loan

you should start stopped adopting 9
percent about $21000.00 from the state and

they tell you when if you have
multiple jobs in the U.K.

I don't know if this is a well known
feature it is you just look at

that the salary in each job and
it's only if the salary in the job.

He says so it's treated like
a separate job for you so

if you've got to do all passes work I mean
there's a sense that when the sign with

national insurance if you've got 2 jobs
where you and 20000 pounds a year you pay

nothing on your student because you're
below the 21000 threshold in Job one and

job 2 you pay nothing so
you say you know it's and

it doesn't get reconciled it doesn't get
NO NO NO NO NO National Insurance exactly

the same to you National Insurance
threshold is 110 pounds a week

if you've got 2 jobs below 110
you pay no national insurance.

If it stays in the economic model
everyone should move to the U.K. But

the but the tax the prediction but.

But in time this happens if then
it's all added together and

reconciled at the end of the year and
completely different it also means that we

have statutory maternity pay if you have
$2.00 jobs above the national insurance.

Limit you get double the statutory
maternity pay but I think.

That's because the insanity
of the British system is

income taxes annual national interest
Social Security is weekly or

monthly Ditto student loans so
if you've got 2 employers for

income tax one employer gets your tax code
saying here's your tax free allowance and

you pay tax only above it the other $1.00
gets a code that says tax them a lot but

that that's only for income tax so.

Here you.

Go saying.

So.

All right.

But it could be the student
loans administration that has

the power to inform employers just coming
back to the point about him employers in

Britain in 1989 made
somewhat grumpy noises but

remember all the historical cases
we're talking about occurred

before computerize ation was
totally universe was it is now and

you know now sort of the software
package just to deal with.

This in these trying cases no need for
the government to do anything because

the student has a unique identifier
a unique social security number text phone

number to get the date they have to
produce that and then if the job

they have to produce that so everybody
knows we're also breaking the law and

it's kind of kind of hard to get out when
you can't fit in the my for taxpayers to

do tax returns right so you said
the tax code to the employees get take

into account what they paid to charity and
so most low rate taxpayers do not do

tax returns if they so it's an automated
system and the employees are just it's a.

If they said that's why you it's very
different from a straight where it's

everybody does a tax return and
it's an annual reconciliation in the US.

Which is of.

Course.

Compared to the old timers.

Most of them but most of the know that but
but the national insurance system is

completely different it's just as if you
said that you know national insurance and

student life is completely
different a few times say it now

you've got 2 jobs that 2 jumps in just to
it's very simple so Kevin had a question.

You have to yell since you
don't have your I'm going to.

Say.

He said that in New Zealand when
they get a job they check a box

that they have a loan on that so it's all
we do when we get a new job we give to our

employers a form we filled out that our W.

other information and on that could be

a box which is I have a student loan now
there could be some reconciliation at

the end of the year where you think Jason
you did not say you had a student loan we

are going to now withhold something from
your annual tax return or increase your

payments or something to fix that I think
you can has but when you start a job.

That's kind of it but
they catch up with you.

So I want to let these guys know if you
have something that you want to say that

hasn't been covered by questions they
could get enough time that you could each

have like a minute or 2 to say that so

I'll take one more question and
then we will do that any more questions.

OK So
who is brute now we've got 3 minutes left.

When I want to reinforce something
that nixes talk continued lines

are really different and if you think
about contingent lines like normal lines

you get the story quite wrong and it came
out in the last discussion before this one

the idea that in a focus group people say
my God you've got a contingent line it's

going to take me 30 is to pay off or
whatever want that that's because they're

holding constant the amount of payment
period and of course was off but

the following see our country's
history here in England they go on for

repayment at all why is that because

the incomes alone so if you frame
the question in not hell long it takes but

how much you pay and how many years you
don't pay because you incomes below

the threshold you get such a different
perspective on the value of a.

Point of detail and

then a broader point point of detail
income contingency protects people with

lower earnings there are people who want
to get rid of their debt fast any well

designed loan system should allow people
at any time to send a check to the student

loans administration paying off their
student loan wholly or in part in the U.K.

The only restriction is if you send
a check it's got to be for at least 500

pounds just to keep it ministration
down my bigger point with that I've got.

My bigger point is when the Beatles
were in their prime at a press

conference the journal offspring said to
regard what do you call that haircut and

riggers answer was off.

And that makes the point you can call
anything anything you like and you know

the words should be the words that
create the greatest happiness so.

It's people who have people
who worry about debt and

they worry about the stock of debt.

If you focus them on the flow of
repipe once the payroll deduction.

It changes things I say to parents do you
lie awake worrying about your child's

future tax bill and they go Bill at me as
though I was slightly batty the flow we're

all relaxed about so focus on the flow
tell students in that the annual

statements say if you continue paying
your present rate we think you will have

finished paying in between 8 and 9 years
Robin thank you it's 24820 dollars so

you can call it a loan or
you can call it a tax or economics teacher

of mine many years ago said why do we call
it the national debt why don't we call it

the national credit college student
credits rather than student debts so

all I'm saying is think very For
whatever to design parameters you choose

the nerdy technical stuff think very
hard about the words you use and

a Higher Education Contribution Scheme in
Australia was much better than the U.K.

where the word debt was allowed to
escape run around like a rabbit fair.

OK.

The rain you have any you know OK OK.

I want to draw uncertainties to
the question there's quite a concern.

I would say we were under to be rigid and

reduce inequality to
introduce you to what we.

In neighborhood participation for
those with our system if you're asking me.

For some recommendations I know
that it would be not were year.

To transit our system so
United States but perhaps you could

make the community colleges
free of iteration fees to

widen access and on the other hand for
the loan system it would perhaps help for

to reduce the some of
the loans we do it and.

The other hand whether as a national
government is paying 0 interest which we

are doing as well so this could be for
example transparent for

those which are forced to
take loans on one hand and

on the other hand you know what's
a have to pay back and which period and

otherwise and this is a I think
it's a political discussion we

we are we say why we are against.

Your tuition fees and
a system of loans in Germany we see

it as an additional tax income tax for
those which have

started which are realized and we know
that when they have finished their studies

not all of them are realizing
high salaries that's a problem so

I was system depends on the economic
capacity who is able to pray

I take since the pace and
this are not only academics is always

people which I planted a handicraft which
confounded an enterprise and sort of.

Christina.

I mean Sweden has actually
been working I've

been telling you about taxing them in
the presentation for the last 15 years.

And the as I was mentioning the default

right off I went down from

To borrow as we have in Sweden quite many
of them of course live in Sweden only

they have a higher debt to pay back

quite many of these bar was residing
abroad live here in the U.S. and

quite many live in the U.K.
today we have an agreement with the U.K.

and the Netherlands to change addresses
but what I would rate would like to have

before I go back to Sweden is some
kind of not an agreement of course but

some information you guys who
could I address here in the U.S.

to start the discussion could we have
some kind of cooperation in exchanging

addresses we have taken legal action
in California same kind of phony as you

probably know and we have been successful
but that costs a lot of money so

it could be handy to have stuff with
the address exchange to everyone within

the sound of my voice Look for
the scofflaw screeds and

send their addresses please
do Christine OK All right.

I really appreciate all the wonderful
questions this is been a terrific

discussion as I said we are going to
be moving on to some socializing and

you can ask further
questions I hope you treat

all these folks here as a resource
in your own work the resources

that I mentioned at our website at
the Education Policy Initiative are there

including their contact information
let's go fix everything thank you.