(Ep. 191) Every Loan Has a Story: Private Student Loans and How They Work w/ Ascent CEO Ken Ruggiero

Hello and welcome to another episode of the Student Loan Planner Podcast. Today we have a special guest on. Ken Ruggiero is the CEO of Ascent and this is a private student loan company. So I think some of you listening to this might say, why am I listening to this? I'm going for forgiveness. Well, I think it's going to be really interesting so you can learn about the history of student loans in the student loan industry and just to hear from, I think, the diversity of opinions in the student loan sector. So Ken, welcome to the show. Thank you so much for having me, Travis. Yeah, of course. So the first question I have got for you is, you know, you've been in the student loan market for, I don't want to say this in a bad way, but a while. You have a lot more experience than I do and you started, I think, in the early 2000s and have really been through a lot of different market cycles. So maybe you could just explain your history in the student loan industry. Sure. Yeah, I started back in 03, as you said, and I focused on the Federal Family Education Loan Program or the FELP Program. And I led a company to be a top 10 lender doing consolidation loans. And in 2010, that whole program was shut down. But in the Great Recession, everything kind of shut down around student loans and a lot of finance. So we shut that business down here in San Diego and we started another company that provided services to investors and originators that were focused on student loans. So can I ask more about that? So what, you know, the FFELP Loan Program, that was a program where the government would guarantee the interest to lenders, where the lenders wouldn't take the risk of default and they would make interest income. Can you explain just for our more recent borrowers, you know, what that program was and how it worked? Yeah, it was, the little history lesson is the way that student loans got started, if you go way back to the 1965 Higher Education Act, Congress had realized there were all these young men, specifically men, because it was 1965, people, you know, various wars going on, baby boomers coming into the workforce. So they realized that going to college was mostly just for the privileged or the very religious. And they said, hey, we need to incent people, we need to open up access to all of the population. So let's create a grant and private public partnership program that responsibly lends to people who don't have the means, and a lot of middle class didn't have the means back in the in the 60s, and incent schools to offer services to more than just the wealthy. And I'm definitely simplifying for obvious effect, but that's the way it started. So the FELP industry, which started, you know, through an act of Congress, and then Sally Mae was similar to a Fannie Mae, they used to be a government-sponsored entity, a GSE. And that was another quasi-public-private partnership. So that whole program ran all the way up until 2010. And the government did guarantee both interest and principal on the loans. But they didn't guarantee, they used to guarantee 100%. When I was involved in the early 2000s, they guaranteed around 97% of unpaid principal and interest. So there was an incentive from the private sector to make sure that lending was done responsibly, and that borrowers were informed, and that servicers knew what to do and how to collect on the government program. And I would argue it was working quite effectively up until it was shut down in 2010. Well, a lot of people don't know this, but in the mid-2000s, we sometimes see people with FFELP loans that have like a 2% interest rate on them. How was the government making a loan at that interest rate, and were private lenders getting reimbursed for that? I mean, just curious how that was occurring. Yeah, the reimbursement went through a lot of edits and adjustments over time. Each time that Higher Education Act, I mentioned, it got reauthorized by Congress every six years. So every six years, Congress took another bite at, is the private sector making too much money? Are students being afforded all of the same opportunities they can get through the federal program? Because back in 1983, the Department of Education started lending money alongside the private sector. So what happened is profits were capped, and that helped keep the interest rates at a manageable level and helped keep the private sector not making, quote, outsized profits. So if you ran a good business and you did well by your students and families, then you could avail yourself to making a steady stream of profits, but nothing that would be oversized. And that's how the interest rates were kept down and the markets were kept pretty efficient. And this might be like a niche question, but you know what I mean with those like 2% and 3% interest rates? I assume the lenders in an environment where treasury rates were higher yielding than that, the lenders had to be getting some extra reimbursement from the right? I assume that's the case. Yeah. Yeah. I mean, the rates got set by Congress, just to be clear. So each year, the rates for those felt loans would be set by Congress, and then we would offer only what we were contractually allowed to or statutorily allowed to. And they were set, as interest rates go up and down as they tend to do, the interest rate to the students and parents would go up and down in accordance. And yes, if you made a 4% fixed rate loan in 2006, and then the interest rates went down to 2%, the government would reimburse you for that 2% that you weren't going to be making on that loan. That's really interesting. Yeah. And very often folks like Gold Financial, which was the company I was leading at the time, as well as banks like Bank of America and Citibank and Chase, who all used to be big players in the student loan space, very often they would sell bonds similar to taking a bundle of mortgages and selling mortgage-backed securities. We would take a bundle of student loans guaranteed by the federal government and sell bonds. So that 2% really just passed through to the bondholders, who were usually pension funds and mutual funds that were investing people's retirement money or on behalf of endowments. And those are called slabs, right? Student loan asset-backed securities? Yes. You'll see that applied to loans that were both federally guaranteed and the private student loan. And those are two very, as I think we'll discuss today, those are two very different loan types with different characteristics. For sure. So for a dumb question here, so if this was working pretty well, I mean, obviously they shut it down in 2010, but you guys made the decision to shut down early. Was there something with the 2008 environment that precipitated a need to shut the business down? Or could you see the writing on the wall that that business was not long for this world? What was the decision making with that? Yeah. In early 2007, the Democrats took control of the executive branch in Congress. So they had run the 3D across the board. And one of the planks that the Democrats ran on was terminating the FFEL program, or at least rationalizing it. And Ted Kennedy was a champion of this. And he had been trying since 1983 to terminate any kind of public-private partnership that was the FFEL business. And then once you get a single majority, I don't care what your political affiliation is, once you've seen policies shift. So I'd say there was almost a perfect storm. So I remember the it was called HR 5, and it was dropped in early January. And it said, we are going to cut the subsidy that we pay to the lenders if they make a federal loan. And they had cut them, I think, twice. They had cut the subsidy rates. And when we did the math, we're like, wow, if this actually goes through, then there's not any profits left in the loan program. And it went through in October of 2007. So before the Great Recession, the government had basically sucked the profits out, which sucked the motive to participate out, and we couldn't run a profitable business. And then if you go way back into the Affordable Care Act panels of history, you'll see that in 2010, the termination of the FFEL program provided by the government's calculations, there's a qualifier, but by the government's calculation, $65 billion of savings. So what partially funded the Affordable Care Act was the termination of the FFEL program. Which is ironic, because it is true, regardless of your views, that it was not $65 billion in savings. No, not quite the opposite. And the interesting part to that, I guess, is you said 2007. So a lot of people, I think, are unaware that the PSLF program was signed by President Bush, right? So was there just a bipartisan consensus back in 2007 that terminating the FFEL program was a good idea, given that it was a Republican president that initially signed the, especially the PSLF kind of beginning? Yeah, it was. I mean, everything in DC is a negotiation, and there's always trade-offs and political winds change. So no, it was, you had the Senate and the House both pushing to do this, and there were value trade-offs for doing it that took place. And I don't know that, I wasn't in the room where it happened, but there you go. But it definitely, it was definitely a horse trade of pretty epic proportions, is my guess. So, you know, so we have this business you decided to shut down, and then, you know, things changed in the environment, and then you decided to re-enter the market in 2017. So what about the lending market made you think that, you know, that was the right time, and why would you want to re-enter the student loan market at that time in particular? Yeah, I think it was a combination of events. It was, you know, where the gold businesses were at the time, and the access to data, and technology, and relationships that we had, combined with my own personal journey into and out of higher education, combined with being a dad here in San Diego. My wife and I were, at the time, both of our sons were in high school, and we were talking about college, so kind of had this flood of external thoughts and nostalgia. And so I went back to the way I went through college, and I was one of three sons of second-generation Italian parents in New Jersey, and at a very young age, they sat us all down and said, hey, we didn't go to college. All three of you are going to college, and all three are paying for it yourself, because we don't have enough money. And that was, you know, so I worked in my dad's ice cream store from a very young age, flipping burgers and serving ice cream, and made good money. All my friends in New Jersey, you know, worked in their dad's businesses, plumbing, electrician, barber. It was kind of normal in working and saving money when you wanted to go to college, because that's what your parents said. So I paid and saved my way through college, but my father ran a cash business, so he didn't like sending in tax returns, and he refused to fill out the FAFSA form. So as a low-middle income family, we would have qualified for aid, and we didn't get any aid. So it was even harder to pay for out-of-state tuition at UMass, which had a great accounting program, and I became a little young accountant and so I went through college paying and saving without parents who'd fill out the FAFSA for reasons I couldn't convince them otherwise. So combine that with being a dad and looking at the state of higher ed for my two sons, and tuition in California, if you're an in-state resident and you want to go to a Cal State or UC school, is between $32,000 and $36,000 in-state tuition room and board. So if my own kids wanted to try and go through our state school, they couldn't afford to do it unless they quit high school so they could work full-time, and that's not going to work. And then we had amazing access to data. The services business that we started in 2008 had really grown to be a very significant player in managing student loan portfolios, and now solar and home improvement, and we had access specifically to student loan data. And at the time, we got hired to do a research project on student loans to Indiana students going to Indiana schools because we had that much data that we could analyze that specific edge case. So in 2007, really back in 2015, when we started our first prototyping, we looked and said, well, if Ken was going to school, what were his options? And at the time, it was, you know, go apply to a bank like Sallie Mae or like Discover or at the time like Wells Fargo, the big three players at the time, and none of them would fund a student with no job, no credit score, and no completed education. No one. Why would you give money to someone who didn't? So we said, hey, if we work really hard to find good schools and find good students, can we lend money to a student without a cosigner? Because there's a lot of them, and it's sad, and it's an is, right? And so the answer was yes. And we used all of our own money at the gold businesses to prototype the Ascent business and poured $15 million of our own money into the business to see if we could get it to work at scale. And I'm happy to report like with all that we're doing here at Ascent, it is working at a scale that allows us to continue to offer really, really innovative, cost-competitive products. So a couple questions. In terms of people, some people are afraid of a recession right now, right? People are kind of concerned, you know, with the continuing pause of the federal student loan payments. Some people are saying that the economy is not stable enough to turn on payments and interest again. Certainly most of the people in our audience are rooting for another extension. How is your loan portfolio performing right now? I mean, what has been the journey of the performance of your loan portfolio during the pandemic, and how are people paying back their loans currently? Yeah, so I'll break that question into two. So in the pandemic, back in the second quarter of 2020, 95% of our loans were to students who were still in school. And that's in the undergrad space. We're a leading lender in the adult learner coding bootcamp space. So those folks were not, and most of those folks were not in school. We treated both of them the same. We said we proactively, we had our servicer proactively reach out to all of our borrowers and say, hey, if you're having any problem at all, just like reply, just text, just call and say you don't want to pay us for a while. And we were implementing 90-day forbearances, and all you had to do was say you just didn't have money to pay. And we would just roll those people into a continued forbearance. So we've seen these models and these curves before. They all happened the same way. So a lot of people got themselves righted, got themselves financially set, and went back into repayment. A very, very small portion didn't call us and didn't ask. And that's kind of the sad thing. To all your listeners, the one thing I would say is when most people have troubles with debt, they go into a hole, a dark place, sometimes physically, indefinitely, mentally, and emotionally. And the servicer can help you. But if you don't let them talk to you and you don't listen to them about what your options are, then nothing but bad things happen. And I know it's stressful for everybody when they can't make their bills. But the servicers, including Ascent and all of the other people in the space, and I'm not talking about the federal program. That's a whole other conversation. But in private student loans, we're built to serve. We're built to know what it's like not to collect money for a number of years. And we know what it's like to make a 10- and 15-year commitment to get repaid by a family. So just call. Just let us know what's going on. If you can make a payment, great. If you need a payment plan, great. If you're going back to school, great. If you dropped out of school, fine. Just talk. And that's what students don't do. And then they end up with those bills and the fees and the collection calls. And it's sad. A lot of the people, I think, on this call or on this podcast that are listening, some of them at least would be maybe even, I don't know if mad is the right word, but very skeptical of me hosting a CEO of a private student loan company. We've had almost three years of student loan pause payments and interest, income-driven payment plans seemingly getting more and more generous, discussion of canceling 10K of student loan debt. When somebody has that skepticism, how would you answer why someone would use a private student loan in this environment? Yeah. I mean, I've got a lot of answers to that. And it depends on who your listeners are. I don't know everyone, but I'm going to describe a number of cases that aren't edge cases. And so one, let's just pick the current cost of an education relative to the amount of money that's available to you from the federal government. For this example, I will pick Florida. So let's say you want to go to the University of Florida and you're an in-state resident. Total cost is $22,000 a year, tuition room and board. Let's say you're not in the state of Florida. Total cost is $44,000. So in each of those situations, let's say you fill out the FAFSA form and you qualify for maximum amount of aid. The maximum amount of Pell Grant and loans you can get as a freshman going to the University of Florida is about $12,000. So if you're in state, you've got a $10,000 hold. If you're out of state, you've got a $30,000 hold. Now, what if you didn't fill out the FAFSA? Do you know what the FAFSA completion rate is in Florida and North Carolina by any chance? Oh, that's a good question. I have no idea. Half, maybe? Yeah. Yeah. So half. So all the most recent data as of the end of June of all the high school students graduating eighth grade, I'm sorry, 12th grade, only half of the families fill out the FAFSA form. I can go down. So in our analysis, you either need between 10 and 30 to go to a state school in Florida. And if you don't fill out the FAFSA, you need between 22 and 44. So why do private student loan, why does this small little segment of financial services and lending exist? It exists because one, families don't or can't or won't fill out the FAFSA. And so they don't start with a $7,000 loan and a $6,000 Pell Grant or a six and six. They start with a whole nut of higher ed to pay for. And there's very few banks that want to lend to people going to school. That's why the federal government has stepped in because they can't provide a hundred percent of tuition room and board. And they're trying to defray as much as they can. And the private sector has come in and said, hey, we can lend responsibly. And that's what I would argue the whole private student loan sector is doing right now. We are lending responsibly, trying to incent people to make good decisions, and then trying to get really cost-effective products to help them deal with the math I just described. Now, just a couple of questions about that. So some of our private student loan refinancing partners during the pandemic put on their homepages. Just so you know, if you refinance your loans, you lose access to income-based repayment and forgiveness and the federal student loan protections. If a huge part of the private student loan market exists because people are not filling out the FAFSA, do you think that there's an opening for the private student loan market to increase transparency and put that on the homepage of an application or let people know that at some point in the application so that they can perhaps borrow less and also be a lower credit risk? Yeah, I'm going to split that one into a couple pieces. One, you brought up refinance loans. And Ascent doesn't do refinance loans. And refinance loans are used to usually get a lower interest rate or extend your term so you get a lower monthly payment on usually a combination of federal loans and private loans. The biggest federal loan balances are in grad programs, because those are the most expensive programs. So you see those $100,000 loan balance stories, and those are usually people who've gotten some kind of a master's or PhD doctorate program. So yes, they're very big loans. And those folks, the research shows the majority of those students graduate and they can afford to pay down their debts. So some of the disclosures you'll see on those websites are basically saying, hey, do you want a lower interest rate? And some people said, yes, I would like a lower interest rate knowing what my trade-offs are. And then I would like to think that people who are listening to your good show and other literature that's out there, if they're availing themselves to some of the great programs the government offers in terms of IBR, in terms of payment pauses and whatnot, they should not refi their loans. I mean, we do not recommend people refi their loans if you're not paying interest and you're not paying principal, and you might be able to get some debt forgiveness. I mean, I don't know why a student would refi their loan unless they understood the math of a lower interest rate and the impact that that would have. And I think that's generally what's been going on with the refi sector. Now, the refi loans have gone to a drip of volume because of the patterns I just, and the facts I just described. And when the loans turn back on, guess what about those interest rates? So you're going to see refi volume just not be economically viable from a student perspective, unless they're trying to achieve something else like a lower monthly payment by re-extending their term and then paying more interest over time cumulatively. So that's kind of where we are with the refi loans. And to your listeners, I would just sit tight and I wouldn't look to refi any loans right now until the government makes its final decisions. Yeah, that makes sense. But so for the private student loans, it is an interesting case that you bring up. You can't get more than a certain amount for undergrad, whereas for the graduate market, it's uncapped. You can borrow up to the cost of attendance in a student's name. And so I guess that's why we have the undergrad market being really the dominant share of the private student loan originated market, correct? Yes. Right, that's interesting. That wasn't always the case. Back in 2006, you can go back to 2006 and the federal government, kind of one of those in the room where it happens moves, the schools were getting frustrated with the private sector because there was a cap on grad school borrowing. So your graduate, there's two loans, your direct graduate loan and your grad plus loan. The grad plus loan never existed. The private sector was doing private loans to graduate schools once students couldn't borrow more than call it $20,000. And the private sector was saying, hey, why would we lend to programs that weren't providing good outcomes to students who can't afford to repay it? So there was a natural equilibrium that existed. Well, guess who got mad about that? The schools. So the schools went and lobbied the government to get the grad plus loan, which you can tie the increase in the number of grad programs and the cost of those grad programs to the grad plus loan. And a whole sector of lending at the grad school level just disappeared almost overnight. So on average, about $13 billion was done per year to the graduate schools. And that number went down to like, I don't know, like a billion. Now, when you look at the total federal lending, grad schools account for, I think almost half the dollars in some years of all of the borrowing that are taking place in student loans, but not half the borrowers. These are big balances. So it's half the loan volume, almost half the loan volume, and one-tenth of the students who have loans. Careful, Ken. Those are mostly our listeners you're talking about. I mean, it is interesting though. So I mean, not to spook you here, but one of the strategies we currently do for undergrads is a lot of times people will take out parent plus loans and you can take out unlimited parent plus loans for multiple children. So we sometimes have people that have 400,000 of parent plus loans and you can consolidate that loan twice and bypass the ICR 20% of your income rules. So for example, these people can consolidate twice and instead of paying 20% of their income for 25 years, they can sometimes get on a program that's 10% of their income where forgiveness just makes a tons of sense for that kind of person. So let's say that the government made forgiveness just way more accessible to parents. Do you think that parents, if they knew that it was very straightforward, you pay almost nothing for 20, 25 years for your kid's school, do you think parents would rationally choose to do that in the way that graduate students have chosen to do that? Or do you think that there's some resistance on the part of parents to borrowing out of principle on their kid's education? I am very frustrated by the cost of education and the lack of transparency and accountability in the entire higher ed system. So when I hear that people have $400,000 of debt and they have to live with getting a bill for, I can't do the math fast enough, 12 months times 25 years every, and they watch that 400,000 in your example go up to 500,000. I can't imagine the psychological and emotional damage that it does to both the parent who knows they're in a debtor's prison and every time they make more money, they owe more money to the government, and then to the student who has to deal with the fact that they put their parents in this situation. So I don't want people borrowing $400,000 and going through a 25-year torturous journey that you described. I want people borrowing responsibly, whether it's from a cent or the federal government. We should not have people with $200,000 worth of loans that aren't doctors or dentists. That's all I got. Maybe lawyers, but don't get me started on lawyers in law school. So what if that's somebody's only option? Because at the end of the day, we can have those discussions about what should be, right? But if you are somebody that has a very low income, and you're not qualifying for the, yeah, you could go the military route, you could go to a community college first, right? But from a rational, pure numbers standpoint, which is kind of the way I look at it, what does the system encourage, regardless of whether or not those are the rules that should exist? If somebody could access completely paid for elite education for all three of their kids, and they're just going to pay $100 a month based off of their social security income and small pension, do you think that'll grow in America as a backdoor way to providing free college if that can't get done politically, or do you think that people will push back? Yeah, I sure hope not. I would push back hard on that. It's irresponsible. You cited, just in quick passing, a really cost-effective way for low-income families to get amazing educations. Go to community college, two years associates, free. Do dual enrollment while you're in high school, and you get college credits. This is happening in states like California and Tennessee, and it's being continued where the community college is in partnership with the state schools, guaranteeing access to those elite programs, as you call them. And I call most state universities, at least their premier universities across the country, 80% of all the students going there are getting an amazingly great education. So if your cost of education for the first two years, your first 60 credits is zero, right? It's literally zero because you went to your local community colleges, or you knocked out a semester and a half while you were a senior in high school because you were taking science, English, and math at your local community college and getting used to what it's like to go to a campus and telling your friends back in high school about it. Well, now you're just trying to afford the last two years of your state program. And if you're like that low-income family you described, you get grants, especially in states that are very generous with grants for low-middle income families here in California and across the state. So you should be able to get your bachelor's degree with very minimal debt, if any debt at all, if you choose wisely. And these are not edge cases. These are community colleges that are providing solid foundational credits and then transfer credits into state programs. So I look at that and then I look at, or you don't do that and you go to the local liberal arts school because you really, really, really wanted to go to that local liberal arts school at $65,000 a year and you have to go find $50,000 a year to go to that liberal arts school. It's just a bad decision. Now the federal government is enabling that bad decision with all of this money. Now, should everybody get to pick whatever college they want to go to, whether it costs $65,000 or $22,000? My answer is no. Sorry. You're going to get a bachelor's degree in English or economics or CS from both of those schools. And if you can't afford one, you're going to get a bachelor's degree and the government's going to support you. And it's really cheap and really local. So why don't you do that? Well, Ascent is trying to make all of this available through our Bright Futures engine that allows you to compare the cost of tuition to your eventual starting salary. Through our student success program where we have coaches on staff that are talking to students and families if they take a loan from us, talking to them about how they're going to pay for the rest of the school. Are they taking care of themselves? Do they have a budget? Do they need help with looking at internships for the summer? So Ascent has said financial literacy and academic wellness and career readiness are all important keys to success. And we're making a 10 or 15 year loan to a student that we want to be successful. Why don't we invest some of our profits if we have that many profits? Because we're only charging 6% interest rates on some of these loans. Why don't we invest in the relationship that's going to last a decade? So we're doing more than the federal government is with financial literacy. We're doing more than the federal government is with student support. We're doing more than most schools will do with mentorship and career readiness because we see the value. I mean, we're incented to succeed. If the student doesn't succeed, they don't pay us back. So that's what we're doing. Sorry for the little infomercial there, but that's kind of the arc of the way we see the problem and the solution. I will say, you know, obviously, what I like to do is have diversity of views on this podcast. So, you know, some people will listen to that and think that it's spot on. Some people will listen to that and totally disagree with it. And that's okay. I think it's good to have people with the different views. And so another question I had, you said six percent. One of the questions I get a lot is, you know, why is why do they charge me so much for my student loan? You know, I can get a mortgage. This is when you could get a mortgage at three percent, you know, months ago. But, you know, people will say I can get a mortgage at way lower interest. Obviously, the federal government can charge whatever it wants to. But from a private market standpoint, when you're getting in sourcing these funds, you know, why do you have to charge a six percent interest rate versus something that's, low like a mortgage rate? What's the what's the rationale behind it? Yeah. So so we can pick mortgage. Let's throw a car in there. If you don't pay back that three percent loan in your example, whether it's for a car or a house, what happens? They seize it. Yeah. Yeah. So they have a physical asset that helps them manage the profitability of the loan programs that they're running. I until I get to the minority report status in life, I don't know how to repossess knowledge. And and so so barring some kind of odd sci fi example, we can't repossess knowledge. We're making an unsecured loan for a very long period of time. And we're basing that off of, you know, a person's FICO score if it's a credit tested product and their income levels. And all we're trying to do is to say, hey, for a basket of these loans, are we making enough money to run a loan program? And and you can you can you can say, hey, you shouldn't make any money. It's it's education for America. It's like, hey, like like we're filling a gap. It's a it's a very niche business. It's a very complicated loan product. Not many banks make loans to people with no job, no money and no credit score. And and credit scores do signal whether or not you're going to repay the loan. So some people get a six percent, some people get a 10 percent because their credit score and their past history suggests that they're not a good repay that they're not good at repaying their debts. So so, yes, it's all it's a very efficient market. So so if you if you see a price, it is very likely that if you went to another lender or two, you would be offered about the same price and and no one you can look at. You can look at the. Well, so, yeah, so that's that that's that's the answer. Without without profit motive, there is no reason to exist. And there needs to be some level of profits in the system in order to attract the right level of capital support where the government can't fill or won't fill those gaps. Sure. So, I mean, you know, you just had to throw out a random guess and you might say, I have no idea. But, you know, if they did take away the bankruptcy protections for student loan lenders, you can't just discharge it like you would a credit card or a personal loan with a, you know, super easy court action. Right. How much higher do you think privacy law industries would be without that protection? It depends on how they take it away. So if you if you go back to I'll take you back in time again. You got me started. So go back to 1975. If you go back to 1975, you will see that the Congress handled the question of bankruptcy discharge ability in the following way. They said, hey, if you if you tried if you tried to or you made five years of payments on your loans and then you file for bankruptcy, you're free. You get to get out of you get to get out of this commitment. But if you graduated and you haven't tried to make five years of repayments, then then like then you owe money. And and so that seemed pretty effective. It still seems pretty effective. You know, if you look at if you look at that, the number of people who struggle in the first five years to pay back their loans, they they they'd be on a different path. And if you look at the balance that's left after paying your loan for five years, it would be that it's only about 30 percent of the original balance. So so you've you've got a situation where Congress addressed bankruptcy discharge ability and then politics got involved in the and and what we have now is private loans and federal loans are non-dischargeable in bankruptcy. So the so the answer to your question, to be specific, is is if you had that same kind of five year term that Congress had back in the 1970s, then there'd be no impact by our calculations to the coupon on the loan. It would mean it meaning that you have to try again. Say that again. You have to try to make payments for five years. What's the test again? Yes. Either make payments for five years or try to make payments for five years post separation from school. And and if that if that were if that were the time frame, then then there'd be no impact to the to the loan coupon. The loan interest. And would it just be credit card interest if they said you can wipe it away in the same terms that a credit card can be wiped away for pennies in the dollar? Yeah. Yeah. It would be restructured like all of the debts that are restructured in a normal bankruptcy proceeding. And and so you you don't like it gets resized relative to and you're part of all the other debt pool. And and and we've we've we've found that people who don't have money don't pay back any of their debts, even if they're non-dischargeable in bankruptcy. So it is it is pretty efficient, whether you you come out of bankruptcy with a $10,000 loan or a $2,000 or a $50,000, you can only pay back what you can afford. And and and if you can't afford to feed yourself and shelter yourself, even if the bankruptcy court says pay back these people or the government, they don't pay it back. So right. Yeah. So and so, yes, bankruptcy, bankruptcy discharge ability is is I think, you know, it's one of those those, you know, it's easy to get people's attention about it. It doesn't affect hundreds of thousands. If not, it's not affecting hundreds of thousands of people. Some people just run into problems, right? They lose their job. They're overcommitted, but they've got a good job and they lost it and they couldn't pay their debts. Those people actually come out of bankruptcy and they pay back the rest of their student loans. And then there's the people who are on the other end of that spectrum. They they never could manage their debts. They never could get their their income on the right side of of of their lifestyle choices or their monthly spending. And they never pay back the loan, even though it sits there on their, you know, on their on their service report every month. A couple more questions for you. The gainful employment rule. This is a rule that sort of looks at outcomes and, you know, kind of says, are you achieving these outcomes? You need to be to continue to exist. And this rule typically applies to for profit schools. You know, in terms of talking about obviously every industry lobbies for its interests, but I think people are seldom aware of the power of the not for profit higher ed lobby. Can you talk about maybe if you think it's one of the reasons why they've been excluded from that rule? Why doesn't why don't why isn't there a more accountability type metrics that are applied to not for profit schools as well as for profit schools? Yeah, I mean, you hit it on the head. The higher ed is probably by my my estimate, the most powerful lobbying industry. And it's an industry in the country, more powerful than teachers, more powerful than auto workers. And why? Well, one, all schools are local. And everyone who works at a school, not everyone, like they are very high voters. So so they they show up in D.C. with and they drive a lot of local economies. So so it stands to reason that politicians, local and otherwise, would listen to what the schools want because they are economic engines, as has been proven time and again. And they do vote or they can rally people to vote it different. So so they are a very, very loud voice. And they looked at gainful employment and they said that that kind of accountability doesn't work for us. Like, oh, OK, that's that that that I don't know why it wouldn't work for you. You're charging in some cases just as much as for profit schools for your education. And and you're you're you're not being held accountable. And you guys have resisted any form of being held accountable since Congress has been trying to increase transparency and accountability in the higher ed system. So, yeah, I want I want a form of gainful employment to apply to all schools that take money from the federal government, regardless of their tax status. And I can show you for profit schools that are performing better than non nonprofit nursing schools. And I can show you and I can show you the inverse as well. So so tax status doesn't doesn't bestow quality on an educational institution, nor should we separate from a policy perspective, the accountability that schools that take money from the federal government should be held to. I recall a story of a sort of a moderate Republican congressman, and I think it was Maine, who was being pressured to vote against the Prosper Act in 2017, which would have capped a lot of the borrowing for the universities. The universities are fiercely opposed to this. And one of the key reasons why he would not support it, as far as I can recollect, is that he had a local, to your point, a local Maine university in his district that was the number two or number three employer that would have been severely harmed because it was one of these more marginal type liberal arts schools that might not exist if you couldn't get unlimited funding for graduate programs and the like. And and that was the reason why he would not vote for it, because it was a local political. It was just too important for him in his swing district, you know, to be able to vote for it. And so it's interesting. Like, I think people are not aware that higher ed is up there with like the pharmaceutical lobby in terms of its power, influence, and its spending, and that obviously has policy implications. It does. And the, I mean, the not dirty secret is grad schools provide all of the profits to schools. The undergraduate programs, whether they're for-profit, I mean, at least most of the for-profit and most of the non-profit state schools run unprofitable, highly subsidized by state and federal government undergraduate programs. And though only 10% of the students going to school are going to grad programs, it's those 10% of the students that are funding the profits to subsidize the undergraduate program. So yes, they are going to fiercely defend any type of price control or any type of limitation to borrowing at the grad schools. Yeah, it's going to be interesting to see what happens next as potentially undergrads get access to a more generous income-based repayment program to see what kind of impact that has on things. So a couple more questions for you. Two more sort of policy questions, and then one just, you know, where can people find out about your questions? So just a quick, maybe like 30-second type answer, what do you think of income share agreements? We're fans of income share agreements. We like the accountability, the way they're used with coding boot camps specifically, where if the student gets a job, they pay a responsible and manageable portion of their income. Like any new product, it's gone through a lot of iterations and gyrations, and most new financial products are rejected by the incumbent banks and the federal and state governments. So income share agreements is following another normal path for a new product that we've seen over the course of decades. It's in a timeout right now, given the headwinds it's hit, but if SENT has its way over the next several years, we will take our outcomes loan, which has the same type of outcome contingent repayment feature. If you don't get a job, you don't pay it back, that an ISA has, but it doesn't have the income indexed perfectly. We'd like it to be perfectly indexed to income. It's just too complicated of a feature to add to a $10,000 loan. Yeah, I have to say, I prefer private loans. I like that it's straightforward, people know what it is, and there's an interest rate there. It'll be interesting to see if ISAs take off at some point in the future. A couple more questions. What is peak season? Why do people talk about peak season? Why does that matter? Yeah, in private student loans, 65% of all of the loans that will be created in this, what we call our academic year, are done the eight weeks after the first Monday or the first business day after July 4th. A lot of families either get their bill or open their bill after they, I guess, party on 4th of July weekend, and they get that, hey, you're not going to be able to make your course selection, pay your bills. People rush to pay their bills. They start in early June, but that's what we call the planners. The planners start showing up in early June. The other 80% of the people show up between really July 5th and August 31st. It's that summer of payment processing that we call peak season. For sure. The last question is where can people find out more about you or more about your company? Ascentfunding.com is really worth checking out. It's got a lot of tools for, you know, how do you pick? How do you plan? How do you save? How do you succeed in school? You mentioned LinkedIn. I have people following me on LinkedIn. I will take current policy and I'll put my two cents into whatever current policy is interesting. You said, let's hear diverse views. I try and present a very balanced view of the implications to the students, to the higher ed system, to the financial markets. It depends on the topic. That's another option. Sounds good. Disclosure to listeners, we did not receive any compensation for having Ken on today. We will say that Ascent is one of our private student loan affiliate partners. If you are looking for a loan for peak season for your child or for yourself for this upcoming school year, we have studentloanplanner.com slash Ascent. You can apply it to that link as well. Yeah. If listeners, if you want me to put somebody with a complete opposite end of the spectrum to the CEO of a private student loan company, we want to have different opinions. We certainly appreciate Ken's perspective and opinion today as CEO of Ascent Funding. Ken, thank you so much for being on today's show. You're welcome. Thanks for having me. I will just give one plug that's unrelated to student loans. For years, we've been running a scholarship program. We give away $1,000 a day, 50 days of summer. It's a no essay scholarship. If anyone is in school and needs $1,000, apply every day. It's not that hard. We've got amazing stories of students how they're using these scholarship dollars. I applied to a lot of those when I was going for undergrad, and I got a lot of them because nobody applied to them. I appreciate you sharing that. Okay, great. Thanks, Travis. Good luck with all your listeners.