Bringing Clarity to Student Borrowing

Wesley Smith (00:00.465)
Hey Chance, welcome to the President’s Forum Podcast.

Chance Russell (00:09.794)
Wesley, it’s great to be here.

Wesley Smith (00:11.301)
Hey, a lot of our members know you. They’ve worked with you over the years at in both Congress and at the department. But for those who haven’t worked with you directly, can you start us out today by telling us a little bit about your background and how you got to where you are now?

Chance Russell (00:26.562)
Yeah, absolutely. And again, you know, can’t thank you enough for for having me on here. you guys do great work. so a little bit about myself. my background and in my career is is federal student aid policy. So, you know, I started working on the House Education and Workforce Committee in 2019, served there for about seven years, where I ultimately led the higher ed team, focused on student aid policy, and worked on many of the provisions that were included in the one big beautiful bill act, particularly

Around workforce Pell and student loan repayment simplification. from there, I actually went to the Department of Education and served there for around nine months as deputy chief economist, where I was helping to implement those said reforms on Pell and repayment. you know, and being on both sides of that, you see kind of the gap between policy and implementation pretty fast. Congress writes a policy, the partner writes the rules, and you know.

You have institutions, you know, and financial aid offices where there’s, you know, only a couple of people to help make it work by a given deadline with, you know, no new tools to do so. And that’s why my co-founders and I started DeSada, where we’re building these new tools for free for institutions to help them navigate these changes and and close the gap. So, you know, we’ve got a a new calculator that helps institutions see the impact of some of the student loan limits that have been put in place.

As well as our soon to be released tool clarified, which is a private student loaning ranking engine that institutions can confidently point students to and who have, you know, federal aid that doesn’t cover their their total costs.

Wesley Smith (02:02.968)
I I love the background because there are a lot of a lot of folks out there that haven’t really thought about the difference between, you know, writing legislation and then implementing it and actually having it work. And that’s a pretty significant difference. And you’ve been watching that on both sides. On on the finance side in higher education, you’ve mentioned gaps a couple times. So tell me what you realized when after after, you know.

legislation’s passed and you’re like, okay, now the implementation starts. What are the gaps and what are you working on to you know bridge those gaps?

Chance Russell (02:42.145)
Yeah, you know, I’ll start on just when anytime you have a brand new policy, and you know, this is the first time I think in 15 years where we’ve had real significant legislative change in higher ed financing, it’s gonna be difficult no matter what. You know, the department, they have their own timelines that they have to meet that are set by Congress. And so, you know, everyone’s operating under a constrained system. But what you start to see is that something that seems simple in a couple lines in law.

Wesley Smith (03:02.45)
Mm-hmm.

Chance Russell (03:10.975)
Oftentimes ends up being much more difficult to implement in practice. And we saw, especially on the student loan side, for a long time, institutions have not really had to grapple with recommending private student loans. you know, we used to have you know, essentially you could borrow for grad or for parents up to cost of attendance. And so you haven’t had to have those conversations and

Wesley Smith (03:12.806)
Yeah.

Chance Russell (03:40.972)
What we notice is a lot of institutions are struggling when it comes to that because it’s a big compliance issue. for instance, you have to go through an RFI process, you have to do annual reporting, et cetera. And that’s a lot to do in a couple of months. And especially when these are important enrollment decisions, right? For precedents, why this is important. This isn’t just how much a student gets and when they enroll, it’s if they enroll.

Wesley Smith (03:55.878)
Right.

Wesley Smith (04:05.276)
Right, right. you you’re doing this work and you’re thinking through, you know, what do institutions care about? how how do they have to approach this to make it work? But you know, one of the things from the presence forum perspective that we we always want to prioritize is how do students navigate it? How do families navigate it? And give us your your experience on what these changes mean to students and

families when they’re looking at their your educational, you know, financing options.

Chance Russell (04:38.667)
Yeah, you know, with the changes in the One Big Beautiful Bill Act, I mean, I’ll also kind of start with your latter point of the question. So one in four grad parent borrowers are now, you know, if borrowing was what it was last year, are being pushed to the private market, there would be a funding gap. Of course, you know, you may see institutions that may adjust their pricing or their institutional aid or, you know, kind of play around with their programs, but there’s a large share that’s going into the private student loan market. And for that, for in for

Students, kind of like how I mentioned, institutions have not had to grapple with giving that guidance. So students and families are getting a lot of noise. and whether that’s on the loan limit side or repayment, I mean, all the time I’m seeing on Instagram or TikTok things that aren’t exactly true and are either a marketing or, you know, well, you could put this in the same category as like clickbait, right? And I think students and families get pushed around when they don’t have that.

Clear guidance, whether that’s from the federal government, but more importantly, from institutions. And institutions are who they trust, right? When they have a financing gap for college, who are they going to go to first, right? The place where they’re enrolling. so what we’ve seen is is confusion. And it’s it’s kind of the same reason. You know, we’re we’re building these tools for for institutions. A lot of this is is student facing as well, kind of like clarified that I had mentioned earlier. We’re trying to come in and fill that information gap in an honest way.

Wesley Smith (05:45.765)
Right.

Wesley Smith (06:03.826)
Right. Well, we we’ve had these conversations before chance that and I think we’re both on the same page, that transparency of cost is just a high priority. And we’ve got to figure out not only cost, but you know what the outcomes of of education are as well. And the more we can do to get that in the hands of consumers, the better off the market will be in higher education, the better off our institution, the healthier

Institutions will be if we can get that transparency across the finish line. Now, do you do you feel like we’re moving in the right direction on that? What do you what do you think needs to happen there?

Chance Russell (06:41.163)
Yeah, absolutely. I mean, I’ll I’ll start. I mean, I’m very glad that you all, you know, you brought this question up because it’s something that when I, you know, every boss that I have worked for previously and you know, their counterpart on the other side of the aisle are gonna say transparency is key. You’re not gonna find a lot of disagreement, especially when it comes to price. Right. You know, higher education traditionally has been one of these the only market where you don’t know how much you pay until four years later. Like imagine buying a house.

And in three years, well, actually we raise the price. You know, that’s it it’s it becomes difficult. And whether that’s on college pricing or really on the loan side too, which is something that we’ve been seeing since we started De Sada, is that, you know, there’s a lot of gimmicks that can happen out there. And at the end of the day, it’s deterring, you know, it’s either deterring enrollment or it’s leading students to maybe not make the decision that’s best for them. I I’ll give you an example. When it comes to private student loans,

You’re gonna see all the time rates as low as 2.5%. Well, that’s below the federal borrowing cost right now. So if a lender was, you know, lending at 2.5% to everybody, they would be out of business in about a month. but that’s what you see. You see these flashy teaser rates, and it’s luring, you know, you know, it’s it’s distorting the decision making process for students and family when it comes to borrowing. And I think you can say the same way when it comes to college pricing, but

Yeah, on the loan side in particular, like kind of the need is right now with these new caps, like we need honesty, we need transparency. And what are what are you gonna pay? Right? A loan is not like this is one of the bigger financial decisions that students and families are gonna make in their life. And you know, call me crazy, but I think they should know what they’re getting into before they get started.

Wesley Smith (08:29.33)
Absolutely. I completely agree. You mentioned something that is, I think, true for most consumers, most students. And that is they trust the institutions more than they trust, you know, the the marketing that’s hitting them. And so they’re gonna look to, you know, the the institutions, the colleges, universities that they’re that they’re looking to enroll in to for help in navigating, you know, student finance decisions. What do you think the role is of the college and university in that?

In that process.

Chance Russell (09:00.577)
Yeah, you know, I would say when it comes to recommending private student loans in particular, you know, schools kind of have like three options. First, it’s say nothing, be neutral, say student, go out and find your find your loan. And I I say neutral and I want to put quotes around that because it’s not neutral. And I’ll come back to that in a second. Your second option is you can do what’s called a preferred lender list, where you request information from lenders about, you know, their products, and then you decide, you know, which lenders you want.

To to recommend. Now that comes with a lot of compliance issues. it’s a lot of work. and it’s it’s risky because essentially in 2007, you had institutions that unfortunately were taking, I guess, kickbacks, as you would say. You get to go on a cruise, you get to go to Vegas, et cetera, if you put our loans first. Lots of investigations went into that and Congress cracked down on it. Now, that part of the law has not changed with OB3.

Well, more people need private loans. Those same constraints on institutions are there. I think, you know, that is absolutely better than going with option one and saying no, but it’s something that you need to, you know, assess as an institution yourself. The risk, the benefits, etc. The third is to be able to point to like a neutral third party. And I want to be very, you know, I won’t use quotations on neutral like I did for option one because it’s very important that it is neutral. What you’re seeing today.

Is these affiliate loan marketplaces or these other platforms? There’s two things happening. One, it’s pay for play, the highest lender, the lender that pays the most has the biggest ad budget. They’re gonna show up. And B, they’re taking a cut of the volume of the loan. So if you got like a ten thousand dollar loan, maybe the affiliate marketer, that third party, takes five percent a cut of that. What is that doing? It’s incentivizing higher borrowing. So

This brings me back to that first option. When you say nothing, it may be, you know, that you are reducing your compliance risk, but it’s not neutral by any means. Students are going to Google, they’re going to these spots where biggest ad spend wins, and it’s not based on borrower fit. so what I would say is weigh your options when it comes to recommending private student loans, but also look at, you know, actual neutral tools and you know, full disclosure, that’s why we built.

Chance Russell (11:22.071)
clarified, it’s what we’re trying to do here, whether it’s, you know, having a published methodology of how we rank loans or, you know, how we’re funded, look for those tools, but just don’t don’t leave with saying nothing. And if you are going to recommend loans, ask the right questions. Students don’t need another teaser rate. They need to know what they’re getting into.

Wesley Smith (11:41.285)
Right, right. Okay, Chance, I’m gonna give you the the last word on this, but I want you to think big and think out, you know, a decade or two even. where do you see federal borrowing? the federal borrowing rules and and and private lending market going in the next couple decades? Like w how does this evolve? What what do you see happening in the future?

Chance Russell (12:09.163)
Yeah, and I the this is the type of stuff I like to think about. But let me start with like a couple year horizon here. I think there’s going to be the need for some regulatory, well, some legislative clarity around who gets higher borrowing limits. So if you recall, if you’re a grad student, some students get around 20,000 bucks, some get 50,000. And that’s all around this professional definition. There’s tons of lawsuits that are happening with it. It’s just unfortunate the department’s kind of been put in a place where they define what

Wesley Smith (12:32.23)
Right.

Chance Russell (12:38.849)
professional is, but Congress kind of put a constraint on that. so I could imagine, you know, some legislative clarity there. Now, does Grad Plus come back? I think the answer is no. I think if you talk to folks on both sides of the aisle, they are going to say that some institutions, you know, may have abused that privilege for, you know, quote, as many in Congress put it as uncapped lending. So what does that mean for the long term?

I think right now institutions are seeing kind of this, for lack of a better word, I don’t want to call this perfect, but perfect storm of an enrollment decline. You have loss of faith in higher education itself, and you have massive changes on the funding side. I think it’s gonna force institutions, I think for the better to think differently and to innovate, right? And to change how they’re, you know, whether it’s increasing transparency or rethinking college pricing altogether,

I think that that’s the direction we’re moving in. And I’m an eternal optist optimist. There may be bumps along the way, but I think we’re gonna end up in a place where financing is gonna be based on outcomes. Enrollment’s gonna be based on transparency about those outcomes and transparency on the price. And the winners are gonna be the ones that get in early.

Wesley Smith (13:57.789)
Right. Right. I like that. I like that vision of you know, outcomes-based orientation as we move forward. I also really like the analysis around the disruption because I just think we’re in such a a a new era of higher education, not only in the finance side, but just the AI side, the innovation side, that there’s so much changing right now. I can’t imagine.

That that’s not going to have a significant impact on how institutions handle the the you know the cost side, how how the lending takes place, the whole student finance experience I think has to be different, has to change in the future. I’m I’m really confident that outcomes will prevail at at the end of the day. But one of the things that that is really hard to measure right now is the outcome.

do you think that do you think that in as we move forward on this, that employer engagement will will be determinative on how we measure outcomes and also how we finance higher education moving forward? What’s the role of an employer moving forward?

Chance Russell (15:16.457)
Absolutely. I mean, if I’m sitting here as an employee, I am an employer now, I guess, as we started this company. Like, I want to make sure that the students that I’m getting are well prepared. And right now, if you talk to employers, whether that’s in tech and in AI, I mean, recently you just saw Meta, right? They’re gonna be rolling out their own their own like I guess, credentials in a sense to help folks because it, you know, the what they’re getting right now is not

what they expected. And I think for too long employers had sat on the sideline, but now they can’t. so where I see kind of the financing side when it comes well and just the influence from employers going is you’re going to see a lot more, I think, demands on what is it that students are learning, transparency about that, and the ability to prove that it works. And that means you, you know, your members are producing graduates that go into the workplace and those they’re they’re staying there. Employers are happy about it because that’s that’s really not the case at the moment.

on the financing side, you know, you’re seeing different kind of companies pop up that are are trying to look at this, or if you look at like these loan repayment assistance programs that employers are starting to kind of build up, they care about it, right? It’s a recruitment tool, but they’re only gonna recruit those that have the knowledge and the skills to succeed in their workplace. So it’s it’s I’m glad to see more employer engagement. I think everyone in Congress on both sides of the aisle would agree with that.

Wesley Smith (16:31.292)
Yeah.

Chance Russell (16:39.521)
But at the end of the day, there is still, you know, the role for the institution to give employers what they need. And employers should be providing that feedback to institutions as well to help them shape.

Wesley Smith (16:49.008)
Yeah. A lot of work to do here. Chance, we really appreciate you joining. We appreciate your expertise and being being free with it. Thanks for coming on and sharing.

Chance Russell (16:59.028)
Absolutely, Wesley. Happy to do it.