Freakonomics Radio 377. The $1.5 Trillion Question-How to fix student loan debt?
May 9, 2019
Mitch Daniels, former governor of Indiana and president of Purdue University, brings his pragmatic approach to tackling student loan debt. He discusses the alarming rise in college costs and its economic repercussions. Daniels highlights innovative solutions like Income Share Agreements, which shift financial risks from students to investors. The conversation also covers the challenges of maintaining educational quality while managing budgets, and explores how Purdue's strategies could serve as a model for reforming higher education financing.
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Rising College Costs and Student Debt
- College costs have risen dramatically due to Baumel's cost disease, increased value of education, and easy access to loans.
- These rising costs, coupled with increased demand and readily available loans, have led to a significant surge in student loan debt.
The Severity of Student Debt
- The magnitude of U.S. student loan debt is staggering, totaling $1.5 trillion and affecting roughly 45 million people.
- This debt burden has far-reaching consequences, impacting major life decisions and the overall economy.
Freezing Tuition
- Mitch Daniels froze tuition at Purdue and cut room and board costs, proving that cost containment is possible.
- This approach challenges the typical economic model of constant tuition increases.