MS. SUSAN PAGEThanks for joining us. I'm Susan Page of USA Today, sitting in for Diane Rehm. She's away on station visits. The current interest rate on federal student loans held by more than 7 million undergraduates is 3.4 percent. That rate will double in July unless Congress takes actions. This week, President Obama visits college campuses to argue against the hike at a time Americans owe more on student debt than on credit cards.

MS. SUSAN PAGEJoining me in the studio to talk about the economics and politics of student debt are Derek Thompson of the Atlantic, Jason Delisle of the Federal Education Budget Project at the New America Foundation, Sujatha Jahagirdar of Student PIRGs and Vince Sampson of the Education Finance Council. Welcome to you all.

MR. DEREK THOMPSONThank you.

MR. JASON DELISLEThank you.

MS. SUJATHA JAHAGIRDARThank you.

PAGEWe're going to invite our listeners to join our conversation a little later in this hour. You can call our toll-free number, 1-800-433-8850. You can send us an email at drshow@wamu.org, or you can find us on Facebook or Twitter. First, we're joined by Mark Zuckerman, deputy director of the White House Domestic Policy Council. He's joining us by phone. Mark Zuckerman, welcome to "The Diane Rehm Show."

MR. MARK ZUCKERMANThank you, Susan. Good to be here.

PAGESo, tell us, why is the president making this push this week on the issue of keeping student loan rates at the current level?

ZUCKERMANWell, let me tell you why. The interest rate for students is, right now, 3.4 percent. And if Congress doesn't take action by July, that interest rate will increase to 6.8 for 7.4 million students. What that would mean for those students is an average increase of $1,000 in debt over the life of their loan each year. And so what the president has said in his budget and what he'll be telling the nation today and tomorrow is that we need to take decisive action to make sure that these students are getting a fair interest rate and their rates are not doubling in July.

ZUCKERMANThis is critical to maintain access to colleges across the country and to make sure that these people, especially young people, have a fair shot at college, be able to participate in economy and get ahead and join the middle class.

PAGEAnd how much would it cost?

ZUCKERMANThe total cost of this provision is $6 billion. And what the president said in his budget is that he's accounted for it, that it'd be fully paid for and that he wants to negotiate with Congress to find the money to pay for this. But I want to say one thing, that the cost of providing these low-interest loans are at the cost of what the federal government pays for this money to administer the program. So the cost isn't really the issue. The issue is whether we're going to give these students access to higher education or not.

ZUCKERMANAnd they're already saddled with a lot of debt, $1 trillion as you said in the opening. And the idea that we would double their interest rate at a time when it's very, very important to get these students into college, to stay in college and participate in the economy.

PAGEYou said that the president says this will be fully paid for. I know that access to a college education is a big cause for him. He's also talked, though, about the need for responsible fiscal policy. So I wonder, how would he pay for that $6 billion cost next year?

ZUCKERMANWell, what he wants to do is negotiation, and negotiate, with Congress to pay for that. But this president has been very fiscally responsible when it comes for paying for higher education. We've increased the Pell Grant by $900 since the beginning of the new administration at no additional cost to taxpayers.

ZUCKERMANAnd the way he did that was he took out the middlemen banks in the student loan program and transferred that money for the benefit of millions of Pell students -- Pell-eligible students who were participating in this -- in the loan and higher education program today. So he has a track record of being fiscally responsible. He wants to work with Congress to pay for this, and the, you know, the Senate and House rules require that it be paid for.

PAGEI don't want to be dense. But when you say he wants to negotiate with Congress to pay for it, does that mean you don't have specific proposals of your own about how the administration would propose to pay for it?

ZUCKERMANWell, we have billions of dollars in the budget that we've set aside to pay for the initiatives that we're planning to initiate. And so we're happy to negotiate with Congress over the offsets, you know, to fully pay for this. That really isn't the issue. The issue is whether we're going to double the interest rates for students in one year. This law was passed with a bipartisan support of Congress in 2007. It was signed by President Bush. And we expect it to be and have bipartisan support. It should have bipartisan support in Congress.

PAGEYou know, interesting, it's certainly true this reduction in the student loan rates was a bipartisan effort in 2007. Why do you think that's so much more difficult at this point to get Republican support for the President's proposal on this?

ZUCKERMANWell, I really don't think it should be. This should be bipartisan. And you saw Gov. Huckabee a few days ago, said essentially that this should be a no-brainer, that we should do this. We want bipartisan support. This shouldn't be -- paying for college in a reasonable way shouldn't be a partisan issue. And, you know, we intend -- I know Secretary Duncan has said and other members of the administration will be talking to Congress about getting this done. We don't want to fight. We just want to stop the doubling of interest rates.

PAGEAnd just one last thing, some Republicans have said that the White House is playing politics on this. And they note that the states -- the president's going this week to talk about it: Iowa, North Carolina and Colorado, all key battleground states in 2012. Is this, in fact, an effort by the White House to get a political issue that may help with -- especially help maybe with the young voters who were so supportive of the president four years ago?

ZUCKERMANThat's just not true. The president goes all around the country talking about key economic issues. This is a key economic issue. This is a jobs issue. This is about our competitiveness. It's not about politics. And the reason he's going around the country is he wants people to know, he wants students and families to know that if Congress doesn't take decisive action by July 4 -- by July 1, their interest rates are going to double, and that's just unacceptable.

PAGEAll right. Mark Zuckerman, deputy director of the White House Domestic Policy Council. Thank you so much for joining us.

ZUCKERMANThank you.

PAGEWell, let me get some reaction from our panel. Jason Delisle, what did you think about what Mark Zuckerman had to say?

DELISLEWell, there's some key details here that are left out. And I realize in the federal student loan program, the eligibility rules are pretty complicated, and so I think we should walk through a couple of them now. For example, the loans that we're talking about here, the interest rate is not doubling on existing loans. This is only for new loans issued after this July 1. So students who already have loans at 3.4 percent interest rate, their loans aren't going to double. That's key.

DELISLEThe only thing is only some students are eligible for these loans. These loans -- the loans at 3.4 percent are only available to undergraduates and only available to undergraduates who meet some sort of income or needs test. So most students are already paying the 6.8 percent rate -- they have been for years -- and they will this coming year as well. So we're not talking about the whole universe of student loans. This is for a select group of students.

DELISLEAnd the only reason why it's limited to some students is because the Congress enacted it in 2007. It was too expensive to provide the lower rate to everybody.

PAGESujatha, what do you think about what the points Jason just made? It's a limited universe. It's only new loans.

JAHAGIRDARWell, it is true that these loans only apply to a certain subset of students. But 8 million students is quite a subset of students. We're talking about a huge number of young people that have the potential to help fill the gap in skilled workers that this country currently faces. And doubling student loan rates, even if it's not for the entire universe of students but even for 8 million of them, sends the wrong message to young people. It says, well, maybe you can afford to go to college.

JAHAGIRDARAnd the fact that these loans actually apply to students that pass the means test means that you're not only cutting -- you're not only making going to school more expensive. You're making going to school more expensive for Americans who can least afford it.

PAGEVince Sampson, what do you think about this rate? How significant an impact would it have if Congress does not act and the interest rate goes back up?

MR. VINCE SAMPSONI mean, I don't think it is that significant. And I also think that when we look at this conversation, it really needs to be elevated a little bit. I mean, we're looking at a one year fix, so it's going to be crisis, fix, crisis, fix. And if we're looking at a -- the question of access to higher education, I think that's much, much bigger than a conversation that may end by the end of this year or may end by July 1.

MR. VINCE SAMPSONI think what we need to do is understand that college costs money, and it's costing more money every year and have a serious conversation about how to finance it. I think that's what we see when we see polls and other information that comes down that talks to students and really kind of gets to what their fears and what their drivers are. So I think when Congress takes a look at this and answers the political question of what should we do now, I think and I hope that they look at the broader question of accessing higher education writ large.

PAGEWell, Derek Thompson, let me go to you. You wrote such an interesting article in the Atlantic that said the cost -- the conundrum, the cost of college gets higher. The cost of not going to college also gets higher. Tell us about that.

THOMPSONRight. The way that I see this debate in broad terms is that we've essentially decided that taxpayers should subsidize people going to school because we think that the benefits of all -- of millions of people going to school who might not otherwise be able to afford it are actually bigger than the costs of college. They are what economists call positive externalities of these millions of people going to school, learning to become more productive, starting companies, being more productive at companies that exist.

THOMPSONSo one of the things that I look at and that other economists that are extremely bullish on the value of college look at is this thing called the wage premium. It's the difference between the wage that someone makes if they just graduate from, say, high school versus them graduating from college. And, in fact, one really interesting thing that's happened in the last 30 years is that the -- is that not only have we seen the cost of college go up -- and that's an important point -- we've also seen the cost of not going to college go up.

THOMPSONThe wage premium is increasing. And, broadly, that's why I think you've seen, you know, both liberals, moderates, conservatives agree that some sort of student loan program should exist because we should be finding ways to get kids who can't go to school to go to school and become productive and earn this college premium.

PAGEOne of the concerns these days for some analysts is the rising cost of going to school means students graduate with more and more debt and yet, in this economy, having a difficult time finding jobs that pay enough to pay back that. We're going to talk about that when we come back after a short break. We'll welcome your calls in just a bit. Our phone line is open, 1-800-433-8850. Or send us an email at drshow@wamu.org. Stay with us.

PAGEWelcome back. I'm Susan Page of USA Today, sitting in for Diane Rehm. We're talking about the debate over student loans and the fact that rates for some students will double in July without congressional action. Joining me in the studio: Vince Sampson of the Education Finance Council, Sujatha Jahagirdar, political director of Student PIRGs, Jason Delisle, he's director of Federal Education Budget Project at the New America Foundation, and Derek Thompson, senior editor at the Atlantic.

PAGEYou know, here's a tweet that seems interesting to me. Let me read it. He -- this tweet says, "Just who wants to raise this interest rate? Is there a person's name on this raise, an author? Who is responsible?" Jason, what's the answer to this question?

DELISLEWell, the interest rate goes up on new loans because of legislation enacted in 2007. Most loans already have the 6.8 percent fixed rate. But in 2007, when a newly-elected Democratic Congress took over, they had pledged during their campaign to cut student loan interest rates in half. They were able to do so for some loans. They phased it in over a number of years, so rates crept down. And this year, they were cut in half to 3.4 percent, but it was too expensive to keep it going past this year. And so the rate jumps back up to where it was before.

PAGEAnd do you think Congress will act -- will this -- will they act by July 1 to prevent the rates from doubling?

DELISLEIt's possible. I would be surprised. The amount of money -- this is very expensive. And also, we have to keep in mind that the president, for all his arguments in favor of maintaining the 3.4 percent rate, he has proposed a one year -- a one year extension of that, so none of this is permanent.

DELISLESo all of these arguments about doing this, the money is only available, at least in the president's budget, for extending -- making this rate available for one more year. And, you know, Congress may go along with that. I think it's unlikely, but that really all you're buying is one more cohort of loans at this lower rate.

PAGESujatha.

JAHAGIRDARWell, I think as we talk about the cost of taking -- of Congress taking action, it's important to consider the cost of Congress not taking action. What we'll see with a lack -- with -- if Congress fails to act and maintain the low -- these low interest rates for these -- this 8 million cohort is not only a personal burden for -- yeah, for college students as they enter the workforce, we're seeing college students delaying significant personal decisions from buying a car to buying a house to getting married to having children due to this growing student loan burden.

JAHAGIRDARBut we're also seeing a ripple throughout the rest of the economy. And, in fact, only 9 percent of 29 to 34-year-olds qualified for a first time mortgage, between 2009 and 2011, down from 17 percent 10 years ago. And the National Association of Realtors found that people age 25 to 34 made up 27 percent of all homebuyers last year, which is the lowest share in past decades.

JAHAGIRDARSo as a nation, as we have a conversation about how to jumpstart the housing market, how to strengthen the ability of Americans to purchase homes, it's just nuts to contemplate the idea of making it even harder for people to make these big purchases.

PAGEDo we know that student loan debt is the reason that fewer young people are eligible in buying houses?

JAHAGIRDARWell, there's a triple whammy going on. It's true. I mean, young people are facing an uncertain economy, high unemployment and student loan rate. And so we believe that all these factors are combining to create an environment that's very hostile to young people.

PAGEVince.

SAMPSONWell, I mean, I think -- if you look at that figure 10 years ago, 2002, pretty hot mortgage market, pretty bad underwriting criteria. I mean, I think it's -- there's more factors than just student loan debt. But I want to talk about the concept of student loan debt for just a second. We -- you mentioned a trillion dollar figure. I think Mark mentioned it. We hear it a lot about student loan debt and credit card debt, and there's this, I think, artificial combination of these two concepts.

SAMPSONYou know, when we look at what is the debt being incurred for, what is the purpose, I think it's a good thing. I think it's a good public policy driver to be encouraged incurring debt for the benefit of higher education. And Derek mentioned there's a cost of not going, right? I think it also, as I mentioned earlier, fits into this larger conversation of the cost. We understand that higher education has a cost, and the cost rises.

SAMPSONYou pick your number depending on where you go. But the bottom line is to equate a trillion dollars in credit card debt and whatever that buys to a trillion dollars in student loan debt, I think, is missing the point. I think we need to be encouraging people to find a pathway to higher education, but at the same time, be intelligent consumers, understand there's a cost. And for some, it's going to require that debt be incurred.

SAMPSONBut the downstream benefit, I think, is significant, and that's an OK thing. I think as long as students and parents are informed going in and making the right choices going in and not borrowing more than they need to, kind of getting, you know, back to that point I made about overheated mortgages and taking on more debt and facing a poor economy and making bad life choices down the road, being informed going in and incurring debt for the right reasons and the right amount of debt, I don't think that's a bad thing.

PAGEWe're all too aware of the housing bubble that burst and has caused us such continuing economic travails for the last several years. There was a Moody Analytics report that came out last year, Derek, that talked about a worrisome possibility of a student loan bubble, that is that too many students would borrow too much money, not be able to pay it back with consequences, maybe for the nation, the rest of us. Are you concerned about that? How seriously would you take that?

THOMPSONI don't take that serious. This is -- it's a serious statistic that there are a lot of young people, and, in fact, student debt -- it's interesting -- it's rising fastest not among people in their early 20s or late teens but actually among people in their 30s. These are people who've looked at the job market and said, wow, there's nothing here for me. I'm going to back to school, get a little bit of training and then hop back in hopefully when it's healthier.

THOMPSONAnd it should be said that that is a smart decision. The opportunity cost of going to school when there are not a lot of jobs in the market is low. This is the time, and we should want people to get trained, want people to get new skills. So this idea of a bubble -- this is not going to be a bubble like the housing bubble because basically you're talking about a student debt market that's sort of governed by the government.

THOMPSONSo if the government suddenly decides it's not going to issue anymore student loans, then, seriously, then one does have a problem. But that's not going to happen anytime soon. The issue that we have, I think, is the same issue that everybody talks about when you talk about the economy. It's, are we going to create a lot of jobs? Are we going to create jobs that pay a decent wage that these kids and not kids, 30-somethings, can pay back all this money that they've taken on?

THOMPSONBecause what they've essentially done is invest. They have taken on hundreds of billions of dollars of investment in a future where they believe they will earn a wage that will pay back this debt. And if they don't get jobs, they can pay back the debt, then we have a problem because then they don't do the kind of things like buy cars, buy houses, become the kind of consumers that we need to have a functioning economy.

PAGEAnd, you know, there's an analysis out by the Associated Press just this morning that says a weak labor market has left half of young college graduates jobless or underemployed.

SAMPSONWell, yeah, and so that -- I, you know, I get a lot of calls from reporters about the student loan crisis and the trillion dollar figure. But I always, you know, start out the conversation with, you know, would we be concerned about a trillion dollars of student loans, or how much debt students are taking on if we had a national unemployment rate of 3 percent? Does the story disappear when unemployment is very low?

PAGEDoes the story disappear?

SAMPSONYou know, I think so for the most part. I mean, that seems to be the real issue here is we're talking -- the focus is on people who are graduating from college. So it's not necessarily on the long-term, you know, burden of student debt and that seems to be it. And, you know, I should point out that you get an average figure of the amount of debt that students graduate from school with an undergrad with a bachelor's degree.

SAMPSONThe average of students who borrow is about $24,000. The median is about $12,000, OK, so $12,000 in student debt, the median. The monthly payment on that on a federal student loan is just over $100, and it's hard to consider that to be a student loan bubble when you're talking about a cellphone bill or a cable bill.

PAGESujatha, what do you think about that?

JAHAGIRDARWell, the thing that I want to make we don't do is minimize the impact of the debt on students as they graduate from college and face repayment because even though, you know, we might talking about $100 a month, if you couple that with all of the additional economic pressures that, you know, people are facing, these numbers are daunting. And with states facing budget shortfalls in 2012, 42 states are looking at -- looked at gaps in their budgets and are looking to higher education as a way to make up those gaps.

JAHAGIRDARWe're seeing higher education nickel and dime on the backs of students. And so $100 here, $100 there, and we will quickly start to see young people just not attending college.

PAGEVince.

SAMPSONYou know, and it's a good point that you raise about the gap, right, and the state's inability to fund and other, you know, we've had market conditions strip out the home equity lines or credit, the traditional funding sources that we've seen. But, you know, it should be pointed out that in that gap, which is going to continue to rise in the near future -- as I said, you know, pick your percentage -- the question then becomes, what do we do?

SAMPSONAnd, you know, I don't see a fiscal or political way for the federal government to step in, right? So for -- I mean, by that is we have loan limits. We raised them in 2008, I believe, by a couple of thousand dollars, which cost a ton of money. So it's a little -- it's a dial that can be turned a little bit with a large fiscal impact. So the question then becomes for students and parents, is how do we bridge that gap?

SAMPSONDo we either just not go, which I don't think is a good idea, or do we sit down and kind of figure out ways to understand how to finance that, you know? Again, I don't think it's -- I think everyone should avail themselves of free money, meaning grants, Fed money. But then there's got to be a way for there to be a reasonable way to finance this such that we don't have heaped burdens on any student going forward and any economic condition.

PAGEWe've got a lot of callers with different perspectives. Let's go to them and let them join our conversation, go first to Texas, Glendale, talk to Tiffany. Tiffany, hi, thanks for calling us.

TIFFANYHi. Thank you. I'm 28, and so I waited significantly to go back to college. And what I found when I went back to college was a really interesting prospect. I have friends that graduated from the same school, with the same degree, eight years ago, and they got through with about $1,200 a semester tuition rate. And now I find the same school is that about $5,600 a semester.

TIFFANYAnd I think it's really interesting because Congress would have stepped in with gas prices rising a couple of years ago if it was a significant jump. And I -- it always baffled me how the same education could jump, you know, $4,000 per semester for the same thing. I'm just going to have your commenters tell me why that is.

PAGEYou know, Tiffany, I think that's such a great question 'cause the other way to address the rising cost of college is to, you know, tamp down on the incredible surge we've seen in tuition cost. What do you think, Derek?

THOMPSONTiffany is absolutely right. One of the driving factors behind the rising cost of education is falling state support for education. It's not necessarily the only one, but it's a big one that -- that's often left out of these discussions. You know, it should be said that, on the one hand, she's right. If this was gas prices, which are the most visible price in America, that you might hear more action out of Washington.

THOMPSONBut I will say, on behalf of Democrats, on behalf -- and the White House, there were attempts to increase state aid, to have sort of second-wave stimulus to support the states after -- the Recovery Act of early 2009. And state aid, general state aid paid into the general funds of states, would have prevented some of these cuts. It is a question whether or not, you know, Republicans and even moderates in the Democratic Party were right to push back against the state aid because they thought that we had too much debt.

THOMPSONI side with the administration on this. I think that we needed more state aid, that interest rates are low enough that we could have borrowed that money, spent it so that states didn't have to cut back not only on health care but also on education cost.

PAGEBut is there a serious effort to get colleges not to increase tuition so much, to keep the cost of going to college down so that you don't have to borrow so much money to pay for it? Vince?

SAMPSONI mean, it may be a topic for a whole other show with a whole other list of panels. But, no, I think, you know, when we talk about serious effort, I hope that doesn't mean price controls. I mean, it just -- it's a interesting concept itself, so a very difficult concept to say the federal government is going to set a price limit on -- you know, hey, school, I think you're charging too much.

SAMPSONBut, you know, I do think the -- you know, I do have to give the administration some credit in the sense that they pointed out the challenge. We've been talking about it for a while -- I know Jason has as well -- that, you know, colleges need to be brought into this conversation not so much just to justify, but just to help people understand what the rise is all about.

PAGEI'm Susan Page, and you're listening to "The Diane Rehm Show." We're taking your calls, 1-800-433-8850. Is anyone, Vince, anyone talking about price controls?

SAMPSONI mean, it depends on how you look at it. I mean, it's one way to suggest that when people say that -- if they make the gas analogy, saying the federal government or Congress should step in, well, then, what are they stepping in and doing? They're -- they can either step in and try and say, you know, you cannot charge, or you -- or we can somehow adjust the federal spigot, meaning the Title IV, the student loan money, in conjunction with what tuition rates are.

SAMPSONBut I don't know if that's really the right conversation. You know, I'd posit that it probably isn't. I think, as we pointed out, it's really this -- what can the states do to support the state schools. I think the private, independent colleges have some other issues that they need to deal with as well. But when we talk about state aid, we have to be careful. And I think one of the challenges is, you know, the federal government is good at pushing money out the door.

SAMPSONThere needs to be an appropriate sideboard so that in these current times where states are running such large deficits that education money doesn't get pumped out of the fed and then somehow diverted into some other field that actually doesn't fill that gap.

PAGEJason.

DELISLEWell, for state-funded and sponsored institutions, we have price controls. They're government and state legislatures and public institutions controlling the price. So we already have price control. They're setting the price. And what the caller is talking about is that, you know, the state support from the legislature, from the state government, is sort of creeping out the backdoor, and the institutions, to make up for that, are raising tuition.

DELISLEAnd so what you hear from members of Congress then is saying, well, why should it be us? Why should it be the federal government to come and step in? And Derek is right. This is one of the sort of -- there was a lot going on in 2009. And during the -- as part of the economic stimulus legislation, Congress put some -- almost $100 billion into supplementals, emergency education funding. And a very large chunk of that went to states to help shore up, sort of as a block grant, to help shore up their higher education budgets.

PAGESujatha.

JAHAGIRDARWell, just to jump in, I think we can talk for months, if not years, about ways to reform education and really address the issue of affordability at its -- at a fundamental level. But just to bring it back to the topic at hand today, what we're looking at is -- what we're asking Congress to do is simply renew an existing policy that had enormous bipartisan support just a few years ago that will take a small step, admittedly a small step, but a significant step towards continuing -- towards ensuring that young people can continue to attend college.

JAHAGIRDARAnd the specific cost to an individual borrower here, which I don't think we've mentioned, is for every year that Congress fails to renew this policy, a student will have to pay $1,000 extra in loans. That's a lot of money, especially right now.

PAGEI know the Student PIRGs, your group, delivered letters to Congress -- 130,000 letters, I think, a lot -- in opposition to the increase in student loan rates or in support of the idea of extending the low rates. What kind of reaction did you get?

JAHAGIRDAROh, well, the reaction from students was overwhelming. I mean, in just a very short window, tens of thousands of students weighed in on the need to -- for Congress to really listen to them and acknowledge that the pressures on young people, as they're looking into the workforce, are daunting today. And the response from Congress was encouraging.

PAGEWe're going to take another short break. And when we come back, we'll continue our conversation. We're going to go back to the phones and take some more callers. Stay with us.

PAGELet's go to St. Louis and talk to Nick. He's been holding on. Nick, thanks for being patient.

NICKOh, thank for your show. It's a wonderful show. Well, there are so many questions I have, but I'm going to try stay focused on this. How many students go into universities unprepared, take on debt, leave school, never go back, are stifled with that debt? That's one area. And the other issue I was talking about is do you think that students actually pick appropriate degrees? I understand that the part of university is to broaden one's scope and to be exposed to diversity.

NICKBut I have to be honest, when I was in the late '80s and I got a science undergrad and science grad degree, people thought I was nuts. You know, they said, why don't you get a business degree or history degree? And I think in a -- when the private sector is expanding and the economy is growing at 8 or 9 percent, the people with "a liberal arts" degree are kind of took it in to the business sector pretty well.

NICKBut a lady told me last week -- she's a recruiter -- she goes, I need people with science degrees, and I can't find them. So I kind of wonder if you can kind of touch about that in the impact on student debt.

PAGEYou know, Nick, that's such an interesting question. We've gotten actually several emails along the same lines. I'll just read one of them from Bruce. He writes, "Loans should only be available to those who are filling the needs of our nation: Engineers, scientists, et cetera. There are too many people spending cost for low-demand, low-wage jobs that offer little chance for loan payback. We need tough love." What do you think, Vince?

SAMPSONYou know, I think Nick points out a key concept when it comes to managing and understanding student debt. One of the things that my members have been working on is the concept of responsible borrowing. I kind of alluded to it a couple of times about understanding. I think it is imperative that students and parents really have a handle on how much they need to borrow, if they need to borrow at all, and then understand kind of what's going to happen down the road. What are these decisions that we're making now?

SAMPSONWhat lifestyle choices might they impact down the road? And I think when you have that conversation and it's a robust one, you'll get into these other ones about majors and, you know, it's not whether or not one's good or not. It's just what one costs and how one pays for one.

THOMPSONLet me say this: If employers can't find Americans with science degrees, the solution isn't to punish history majors. It's to reform immigration and allow more H-1B visas so that we have people who are already educating in the U.S. from over -- from other countries, from India and South Korea, to stay in the U.S. and then take some of these new jobs. That seems to me to be the most reasonable solution. We -- it's hard to know on a case by case basis whether a history major is going to produce more productivity for the U.S. economy than a science major.

THOMPSONThere's just -- it's very hard to measure that. What we do know is that, in the aggregate, people that graduate from college make more and are more productive than people who don't graduate from college. So it seems to me that the solution shouldn't be to punish people who like reading books. It should be to reward people who like reading books and like solving math equations if they choose to go to college by helping them, by subsidizing their education.

PAGEAnd it's certainly true. It's hard to predict what -- who turns out to be the great entrepreneur or the wonderful innovator. It could be an engineer, but it could also be a philosophy major.

DELISLERight. Well -- and what the caller is suggesting, though, is, you know, something that's, you know, a lot of lawmakers and a lot of, you know, people in this country would be opposed to in a different form, which is the government extending loans to pick winners and losers in the economy. That's essentially what it would be. And the student loan program has never been about that. It was created in the '60s. And it's generally been available to people regardless of where they study or what they study.

DELISLEIt's -- there's an -- there's a huge equity component to the purpose of that program, which is basically to sort of create a level playing field for anybody who wants to go. And remember, it's okay if a history major gets a student loan if they repay it. And, you know, we don't know that there's certain majors, people having more difficulty repaying their loans. But, you know, so that -- that's an important point to keep in mind, too, that it's okay to extend credit if these people are repaying the loans.

PAGESujatha, is it affecting what people choose -- what students choose to study, the idea what can I study that will enable me to repay my student loan or even just get a job in this market?

JAHAGIRDARWell, I do think if you talk to students on college campuses these days, that is the one of the -- if not the top concern, is what is my employability after I graduate? What can I -- how can I succeed in this economy, both in order to repay my loans and even just to be employed, period? And in a climate where, again, you're just seeing these mounting pressures from all sides, it's hard to understate how important this issue is to young people.

JAHAGIRDARAnd one of the things I wanted to mention, just to go back to this issue of personal responsibility. You know, it's true. It's a question that we should ask. But it would be a more, I think, appropriate question if were looking at a subset of students who are very -- a niche of students who are, you know, majoring in basket weaving or whatever not able to find jobs after they graduate to repay their loans. But what we see is an across-the-board trend here.

JAHAGIRDARI mean, two-thirds of college graduates are graduating with student loans, and those -- the average of those loans is $25,000. So it's really, you know, I question whether it is -- this is a case of personal responsibility or really it's an overall trend that we need to find policy solutions to like the one that we're proposing.

PAGEJason said earlier that if unemployment rate were 3 percent, this wouldn't be am issue. Do you think that's right?

JAHAGIRDARWell, in a way, it could be. I mean, I would -- it would be wonderful if the employment rate were lower. But, you know, I know I'm not economist, and I don't know when the last time that the employment rate was -- unemployment rate was 3 percent. But what we are faced with right now is reality. The reality is that the -- it's harder to get a job than it's been in a very, very long time.

JAHAGIRDARMoney is tight, and college costs are escalating, in large part due to budget cuts that we're seeing at the state level. And so students are just asking, let's, you know, let's take some action. Let's have elected officials, actually, demonstrate that they are hearing students and recognizing the reality they're facing.

PAGEAll right. Let's go back to the phones. We'll go to Little Rock and talk to Joe. Joe, you're on the air.

JOEYes, ma'am. What we're doing is we're financing education, and education is an asset. And what we're dong is we're over-financing the asset because the asset is not worth as much as the price of it. And if we stop financing the asset or stop financing education so much, prices will come down. If you lower the amount of the student loans students can get, colleges would not be able to overcharge for their price, over charge with their service. And that's what education is, it's a service.

JOEThe same thing happened in the housing market. People bet up the price of homes because you had easy money because banks were forced to loan money to people who didn't afford it. And same thing may be happening now where we're overcharging for an asset, and the asset's not worth as much. And the government financing it, and somebody's going to be holding the bag.

PAGEJoe, thanks so much for your call. Jason, what do you think?

DELISLEWell, yeah. And you hear this argument a lot. And, you know, sort of in theory, it holds up. You know, the more easy credit there is, the more seller of the good can raise the price. But let's keep in mind, for federal student loans, the maximum award a freshman dependent student, someone who's still dependent on their parents, can borrow is $5,500. That's as much as they can borrow in one year. So that's not a lot of money compared to the price of college. You know, for a state school, you know, in-school tuition, room and board, $5,500 is not going to get you very far.

DELISLEAnd you'd be hard-pressed that that's moving the needle of cost. Now, the flipside is, though, on the other end, for graduate school, the federal government will let you borrow up to the full cost of your attendance, regardless of what the school cost, in federal loans. That may be an area where, if you are seeing too much debt, the price is too high, people graduating with debt that can't repay, it's probably in the graduate school area. And if the federal government is complicit in that, it's probably the grad plus loan program.

PAGEAnd what's the rationale behind the distinction between undergraduate and graduate degrees?

DELISLEYou know, as far as I know, there really isn't a distinction. I think it was a policy that was made that there was an assumption that grad students were better credit. They were better credit risk, and so you could lend to them in unlimited amounts.

PAGEDerek, did you want to comment on Nick's call?

THOMPSONYeah. I think Nick made two big important points that we're talking about. One is that college isn't worth it. And on that point, I think it's worth saying that even though college tuitions have tripled in the last three decades, between 1979 and the mid-2000s, the other thing that's tripled is lifetime earnings for college graduates compared to high school -- compared to people that just graduated from high school.

THOMPSONSo, in fact, the cost of going to college has increased more or less the same rate as the lifetime benefit from those who go to college as well, which is what you would expect to see from something that's actually a good investment. And there's lots of other studies that have shown that college is a better investment than anything else you could sink $100,000 into, whether it's gold or houses or corporate bonds. The second point is that tuition -- is that these loans are driving up the price of tuition. And to a certain extent he might be right.

THOMPSONThere are a lot of studies about this, and they're inconclusive when you take them as a sum of literature. But college prices are going up for reasons that have little to do with student loans. It has to do with budget cuts, and it also has to do with the nature of education. Education, like health care, is a locally delivered service good. It can't be made efficient the same way making a car can be made efficient or offshoring, you know, part of your -- part of a corporation's operations.

THOMPSONIt has to be delivered on site. And unless there's some sort of video revolution where we have a prestigious college delivering accredited schooling through videos and virtual education, it's going to be very difficult to bring down the cost whether or not we choose to subsidize it from the federal level.

PAGEVince.

SAMPSONI think, you know, Joe points out, and Derek, and Jason do as well, you know, as we note that 5550 number -- or 5,500 number is flat, and has been flat for a number of years. Meanwhile, the tuition is rising, so I think the studies are inconclusive but almost trending, too. On the federal side, it's really not -- it's not controlling anything. And I think the PLUS program is one of the bigger challenges, right? It's a cost of college. It's a 7.9 loan. It's -- the size of it dwarfs what's left of the private supplemental student loan market.

SAMPSONSo we have a situation where students may be being funneled into a higher-cost loan, bigger tab burden, but that goes, again, back to what I was saying earlier. We just need to, not so much force people into choices, but educate them, and so they understand that when they take this on and when they achieve this service, as the caller pointed out, I think it's -- I think I agree with this earlier comment that it's more of an asset, that it's financed properly and that it's able to be managed on the back end.

DELISLEWhenever we have these conversations about, you know, loans driving up the cost, I think people need to sort of play an experiment, you know, in their minds of -- so what would the world look like without a federal student loan program? So you could solve this problem, sure, that, you know, tuition wouldn't go up anymore -- probably go down. But what are you left with? You're left with probably 75 percent of college students who are redlined in the loan market.

DELISLEThey can't get any form of financing to pay for school. I mean, that, to me, would seem like, you know, a pretty bad outcome to get whatever cost reduction you're trying to achieve.

PAGEHere's an email from Chip Taylor, who is founder of a group called Student Loan Debt Reform. And he says, "The obvious unfairness of the high interest rates American student loan borrowers pay is even more striking when considering that the federal direct loan consolidation program never allowed borrowers to reconsolidate their loans to take advantage of lower interest rates. So unlike financing a car, home or any other purchase, many borrowers are stuck with the high rates that prevailed at the time of their consolidation." Anybody have a comment on that?

DELISLEUh, yeah, I do. I mean, this is a comparison that comes up a lot, refinancing student loans. Student loans have fixed interest rates, and people want to know why they can't refinance them like they can their mortgage. The reason why you can refinance your mortgage, even though it's a fixed interest rate, is that someone in the private market is willing to lend to you at a lower rate. In the federal student loan market, it's only the federal government.

DELISLEThe federal government has already set the terms, and they're already below market, believe it or not. The federal government is already subsidizing you, and so no one in the private market is willing to come in and lend to you at a lower rate than what you have in the federal rate.

PAGEHere's Eric, writes us from Louisville. He may be one of the people caught in the situation. He says, "I have $35,000 in student loans, which I consider quite low for a bachelor and two master's degree, but I pay $650 per month. This is the number one item that holds my family back. I don't think it is wise to charge 8.5 percent on student loans, which part of mine are." I'm Susan Page, and you're listening to "The Diane Rehm Show." So you -- I saw, Sujatha, you're nodding your head to Eric's email.

JAHAGIRDARWell, unfortunately, Eric's story is repeated over, you know, thousands and thousands of times all across the country. What we are seeing is young people putting off major life decisions that not only has impact on their personal lives and personal prospects but also ripples through the economy. And the other point that I wanted to make, it's been alluded to in the conversation but I wanted to highlight it, is that we as a nation have decided that actually people going to college benefit society as a whole.

JAHAGIRDARAnd we want -- we have set up these programs to make -- to allow as many people as possible to attend college. And this is not an abstract idea. There are direct economic benefits to having young people go to college. And, you know, just one study that experts estimate that we'll need 22 million new college degrees in this country by 2018, and we're projected to fall short of that number by 3 million degrees.

JAHAGIRDARSo the debate here today, you know, really should be about, how do we maximize the number of college degrees that we're able to give people access to? And, you know, again, not to be overly focused on this, but we have a very salient proposal before Congress right now that if Congress votes the right way on the July 1, we'll be able to take a step towards that goal.

PAGEVince.

SAMPSONCouple things, you know, the -- Chip's question and Eric's question from Louisville kind of highlight the complexity of student loans, right, 'cause we have a multitude -- even in this day after transition to 100 percent direct lending, we still have -- it's very complex. We don't know what Eric's situation is. Is it a private loan? Is it a federal loan? Is it a combination of both? Where does it come from?

SAMPSONIt's a very interesting tapestry that is weaved for student lending. And I think that's something that folks need to understand when they talk about student debt and try and drill down on this.

SAMPSONOne thing that also comes up again when we -- to a point made earlier about trying to encourage folks to attend school and the national benefit and the fact to get jobs -- that's why I think it's important to not conflate numbers, like the credit card number and the student loan number, 'cause I think when people see things like $1 trillion and there's a lot of debt over here and it looks like that debt over there, it actually can act as a disincentive for folks to achieve the public policy goal of higher education because it becomes so complex and so confusing and so overwhelming.

SAMPSONI think -- so I think, you know, we as those who speak about this all the time need to be very conscious of that and kind -- and make sure that we're talking about the right thing at the right time.

THOMPSONYou know, we've talked about student debt as an investment, and I think that's a good way to look at it. But another way to look at it is as insurance. It's an insurance policy that you take out for fear that your skills don't match up with the labor market and that you don't want to fall behind as other people collect more skills and outpace you in the labor market. And so it's true, you know, thinking about Chip's situation, it's interesting because, you know, $35,000 is a lot.

THOMPSONIt's in, I think, the top quartile of student debt in this country. And $650 is also a lot. That's a lot to pay every month. When you think about investment, you think about insurance policies, you know, they always incur a sacrifice in the short-term end that you think will pay off. And, you know, we can't say that every single instance of student debt is going to pay off.

THOMPSONIt's insurance policy. It's an investment that people take, and they do incur sacrifices in the short term, hoping and expecting that the education that they now have that is an asset building in their possession will help them later down the line.

PAGEWe have a lot of callers and emailers with such compelling personal stories. I'm sorry we can't tell all of them, but we're out of time. I want to thank our panel for joining us this hour: Derek Thompson from The Atlantic, Jason Delisle from the New America Foundation, Sujatha Jahagirdar -- I'm sorry for mispronouncing that name -- from Student PIRGs and Vince Sampson from the Education Finance Council. Thank you all for being with us.

THOMPSONThank you.

PAGEI'm Susan Page of USA Today, sitting in for Diane Rehm. Thanks for listening.