Keynote Remarks of Seth Frotman
At the Federal Reserve Bank of San Francisco
San Francisco, CA
April 23, 2019

It is an honor to be here today as we discuss the state of student debt across our country, and more meaningfully, across our communities.

And I am humbled to be among so many people working to help their own communities—whether it be through cutting edge research or innovative policy solutions. In fact, today’s research takes a huge step toward showing the true impact of the student debt crisis right here in the Bay Area, including the toll that this burden is taking on our neighbors, our community, and our society.

And that is what I would like to talk about today.

Because for too long we have let the loudest voices in the room skate by on the weakest arguments.

  • Arguments mocking a generation burdened with unprecedented debt with quips about avocado toast;
  • Arguments minimizing this crisis by resigning it to a millennial issue, marginalizing the plight of tens of millions more;
  • Arguments downplaying the economic implications and societal impact of this historic burden with tired tales of “good debt”;

But for more than a decade, the generation borne of the financial crisis—the generation tasked with carrying this unprecedented burden—has intuitively known the truth. The truth is—and what the research released today proves—is that these arguments don’t hold water.

Today’s work adds to the ever-increasing amount of data and research that demonstrates that these arguments are, quite simply, wrong.

Look at the state of student debt in the Bay Area, or any of the dozens of big cities across the country, or the small towns in Appalachia, or the shuttered mill towns in Maine.

From the Bible Belt to tribal lands, and in nearly every slice of America in between, one aspect of life cuts across, interweaving these communities with seemingly little else in common—the fallout from extraordinary student debt.

And in these communities lies further proof that our trillion-dollar experiment in debt-fueled higher education has failed.

And yes, we can tinker around the edges. We can poke our fingers in the dam to try and plug the deluge as it rushes toward us. But until we recognize that the system is truly, fundamentally, at its core, broken—we are simply fooling ourselves in believing that the small solutions that too many propose will do anything but fall short.  

The ramifications of this broken system—the one we are sending hundreds of thousands of new borrowers into, year after year—are proving to be devastating.

Each month, 44 million people get a student loan bill. They collectively owe $1.56 trillion in student debt.

$1.56 trillion—that is the cost of chasing the American dream.

America deserves better than this.

The tens of millions of folks who are paying that bill each month, but still barely scraping by, deserve better than this.

The eight million borrowers who are in default on their loans, deserve better than this.

The five million more on their way, deserve better than this.

People are hurting. Families are hurting. But their pain doesn’t stop at the kitchen table, or at end of the driveway. The sum of this pain ripples—across neighborhoods, across communities.

And if we are going to do better—and we must—we need to see the bigger picture, the totality of these actions. We need to acknowledge where the collective weight of the burden we have pushed onto millions is tearing at the already-frayed fabric of our society.

Because the true cost of student debt doesn’t end with the monthly loan payment:

  • Women make up half of all college students, and yet owe two-thirds of outstanding student loan debt. And the gender pay gap only serves to keep women in debt longer as they try to manage larger student loan bills with smaller weekly pay checks.
  • After more than a decade into repayment, white borrowers will have paid down two-thirds of their loan balance, while African American borrowers will owe 113 percent of what they originally borrowed—weighing them down as they climb the steepening slope to bridge the racial wealth gap.
  • Millennials purchase fewer homes, save less for retirement, have less in savings and more in credit card debt, all because of their student loans, and then spend a lifetime playing catch up to build wealth and accumulate assets.
  • But the student debt struggle is not limited by race, gender, or age. We also see that rural areas such as Appalachia and other communities seemingly long-forgotten by policymakers have some of the highest rates of out-migration because of student debt—and incur some of the highest rates of delinquency among those who stay.

And so yes, student debt impacts people and families. But we must look at the bigger picture too. Like kerosene on a fire, student debt accelerates the disparities raging across our communities.

Where student debt further fuels gender gaps, student debt becomes our collective burden.

Where student debt further fuels racial disparities, student debt becomes our collective burden.  

Where student debt further fuels economic or generational or geographical divides, student debt becomes our collective burden.  

What we are doing to this nation in the form of debt-fueled higher education—is driving the systemic racial and economic inequality that is tearing our communities apart; that is tearing our country apart.

And the intellectual dishonesty underpinning this model is driving the most vulnerable borrowers deeper and deeper into debt, and bringing their communities along with them.

We hear about how the mythical million-dollar wage premium—a premium that magically skips over minority communities—will be our white knight.

We hear about how student loan debt is somehow

“good debt,” from a generation who paid for school with pocket change and part-time jobs a lifetime ago.

We hear about how grit and bootstraps—and more debt—is all that is needed to stop racial and income divides—when in fact, research shows it is actually now the driver.  

And after a decade of listening to these arguments, it should come as no surprise that folks are no longer listening. This generation no longer buys it. Entire communities don’t believe it. Nor should they. Because they see how these arguments fuel a system that promised them the American Dream, but left them behind. They see how the plans and priorities of the fierce peddlers of the status quo push their children, their friends, and their neighbors, even further down this path.

Small solutions lead to small outcomes. We need systemic reform. Not only for the 44 million student loan borrowers saddled with a bill each month, but also for the nearly 20,000 cities and towns in the country that are left with the fallout.

And cities find themselves on the frontline, suffering the impact of these colliding policy and market failures.

Just as is true with so many other issues, cities are left to pick up the pieces of these systemic failures—left to navigate the aftermath.  

We saw this with the foreclosure crisis. We are seeing it with the opioid crisis. And now we are facing a student loan crisis.

While others sit comfortably debating the Bennett hypothesis and state divestment, senior citizens can’t afford medicine because their Social Security benefits were seized to pay their student loans. Teachers can’t afford to live in the neighborhoods where they work because student loans consume an increasing share of their paychecks. Servicemembers can’t protect our country because their security clearances are revoked when their loans are misreported to credit agencies. 

The reality is, while Washington fiddles, Rome is burning—and with it, the futures of 44 million Americans.

But, as is true in so many other contexts, cities do not have the luxury of writing off an entire generation or writing off entire communities. Cities do not have the luxury of waiting for DC advocates to make their case. Cities do not have the luxury of waiting for other elected officials to catch up to the plight of their constituents. Cities do not have the luxury of waiting for the higher education system to realize the significant cracks imperiling its foundation. 

And so, as is true in so many other contexts, cities are taking action. In fact, we are all here because cities are taking action.

As you will hear today, cities are undertaking the critical research to expose the true costs of student debt. To expose how student debt imperils their most vulnerable citizens. To explore how student debt impedes the building of progressive, inclusive communities.

The research you hear about today will challenge the very assumptions that created this mess. But we can do more—we can answer the still unanswered questions about the true cost of student debt on our communities—particularly where this debt leads to further fallout:

  • What is the true cost of student debt to a city’s economy, labor market, and wealth when thousands—or even hundreds of thousands—of its citizens are behind on student loans and now face roadblocks to access housing, credit, or even employment? 
  • What is the true cost of student debt to a city where instead of putting more money towards a down payment, borrowers are forced to send that money off to big banks? Where instead of making critical investments and building wealth, they are forced to help Wall Street pad its bottom line?
  • What is the true cost of student debt on smaller communities, where wages cannot keep up with increasing student loan payments, and where residents are flocking to larger cities just to pay their bills?
  • What role is student debt playing in our communities that have been left behind—communities that have been targeted as “opportunities” for investment?

Beyond doing the research, beyond documenting the costs, cities are also stepping up by being creative with their authorities and aggressively fighting to protect their residents.

As Washington pulls back even the most basic protections for borrowers, cities are drafting new rules of the road. Cities are beginning to hold predatory for-profit schools accountable for the harm they cause. City offices like New York’s Department of Consumer Affairs are bringing significant lawsuits against players that operate in their borders and leave their students with mounds of debt and worthless degrees.

But we can still do more—cities can take action to halt bad actors across the industry—including student loan servicers, debt collectors, debt relief scammers, and more. Historically, when challenged, cities have repeatedly risen up to tackle crises—employing their authorities to seek justice and hold bad actors to account. The student debt crisis demands the same response.   

Cities are also beginning to step up where servicers fail. By taking advantage of the countless interactions they have with their residents on a daily basis, cities can provide them with the information borrowers need—information about how to access the key protections designed to alleviate the burden of this debt. Furthermore, cities are using their knowledge of who needs help to target information and resources most effectively.

But we can still do more—cities can leverage technology to make these interactions scalable—bridging sectors, neighborhoods, and entire communities. Cities can leverage their social service networks to help borrowers with severe disabilities access loan discharges so they are no longer needlessly paying on a loan. Cities can leverage their own status as an employer to help public servants access loan protections guaranteed through their service to their community. And so much more.

Cities are doing the hard work—rolling up their sleeves to do the job that must be done. And when the fog of incompetence and cronyism lifts and the federal government once against prioritizes helping people over powerful special interests, cities all across the country will have laid the groundwork and forged a path forward.

The work starts from the ground up—in discussions just like this. In cities just like this. It’s our turn to do the work, to make lives better, and to carve out a path forward.

And that is why today matters. That is why this research matters. That is why this work matters.

Let’s get to work.