Ken Joins Episode #114 of The Higher Ed Geek Podcast with Dustin Ramsdell
What does the cost of college look like today?
Ascent’s CEO & Chairman, Ken Ruggiero, recently sat down with Dustin Ramsdell at The Higher Ed Geek Podcast to talk about the cost of college today, how Ascent is a part of the higher ed conversation, and the future of student loans.
Beginning in 2013, Dustin created the Higher Ed Geek blog and podcast to combine his love of geeky stuff with college student affairs. He hopes to bring together two worlds to create original, fun, important, relevant, and thoughtful dialogues that makes the world a little bit brighter.
To listen to the full podcast, please visit the link below.
The podcast kicks-off with some short introductions.
(Dustin): Hello, everyone and welcome to this episode of The Higher Ed Geek Podcast episode number 114 with Ken Ruggiero talking all about a college student financing innovations. How students are able to get the financing they need to pursue their higher education goals. It’s a really complicated and nuanced topic, but I’m really glad that we got some time and space to talk about it here. Ken can give a lot of context and clearly has a lot of knowledge and passion for this space, so I’m very grateful for his time and all of that he’s shared, and some great resources check out in the show notes.
(Ken): Great, thanks Dustin and thanks for having me in this topic because it’s important and it’s in the news often. I am CEO and Co-Founder of Ascent Funding and I’ve been involved in higher education for the last 17 years. Prior to that, I was in consulting and technology companies, mostly as their CFO in New York, and then here in San Diego where Ascent is headquartered.
(Ken): I’ve been trying to solve the problem of matching the investment in an education with the outcome of an education for a very long time. Ascent is really the closest we’ve gotten so far, and I am one hundred percent convinced we will get all the way there through the journey that we’re on.
Ken shared his personal story on how he paid for college on his own.
(Dustin): You’ve had a long career leading up to this moment, and like you said, you’ve been kind of dedicated to this a bit. So just to make sure everybody kind of fully understands the context that you’re working in now if you just want to explain a little bit about what Ascent does.
(Ken): Yeah, that’s great. Well, as a finance professional and having been involved in student loan companies that originated over $10 billion of student loans, I not only have been studying the problem and working on solutions, but I’ve been quite the practitioner. I’ve also been, what I would call, a mild user. I grew up as one of three sons who were all first-time learners and all three of us paid our way through college. And we were all sons of parents who didn’t go to college. So, I worked summers and winters, I did work study, and I had a great experience at UMass and graduated with a bachelor’s degree in accounting.
(Ken): And I have a lot to be thankful for and had very low student loan debt when I graduated because of the cost of education and fast forward to where I am now in life.
(Ken): I’ve got to two sons and we live here in California. If they wanted to “pay their way through school” or “save and pay”, it is kind of the way it has to go. They couldn’t do that here in California without materially impacting the everything they wanted to do as young people going through high school. So, it’s not an option anymore. And, we talk about student debt and what the problems are of student debt and it’s not going away.
Dustin and Ken discussed the cost of college today.
(Ken): Like, the idea that college will cost less is that there is a, “bend in the cost curve,” or there will always be cheaper solutions, there always be substitute solutions. But, for more than 80% of the college-going students over the next probably 5 to 10 years, the price is not going to change to get a bachelor’s degree. So, we looked at this problem and I’ve looked at this problem and said, “Well, if you can’t change the cost, can you at least change the choice of what people choose to do? And, in changing the choice, can we signal to the market a good choice versus a bad choice? And, in order to get to any of those answers, you needed to understand what the outcomes of an education are.
(Ken): Ascent was built really as a thought experiment. Could we make student loans to students and families that banks wouldn’t or couldn’t do? And, could we get those financed by the finance years of wall street? Which is really the litmus test for, “Do you have a scalable and viable loan?”.
(Ken): Starting back in 2015, because of the services business we had built through the Goal businesses, we had access to over $20 billion of data; data that were student loans originated from 2001 to 2007. We studied that data and we studied the outcomes of those students that took loans to live through a grizzly great recession and came out the other side with or without a degree, and with student loan debt. We studied their outcomes and we studied what their income levels would and could be.
(Ken): What we concluded was we could actually make student loans based off of the outcome, not the current circumstance. And, as you might know, student loans, when they’re done by banks like Sallie Mae or others, they’re based on the current circumstances. They define the current circumstance just by to two questions:
- Do you have a FICO score over 680?
- Do you have income over a certain threshold, maybe $24,000?
(Ken): If you fail either of those, then the bank is done talking to that student, and they only want to talk to the parent or guardian or a person with those two variables that say, “yes”.
(Ken): We said, “Wow, that’s giving hardworking students, much like I was when I was a teenager, that’s giving them zero credit for what they’ve done in life to date,” and is giving them zero credit for where they’ve ended up. So, can we make a loan that is based on the predicted outcome and success of the student versus the current circumstance. The answer was, yes.
(Ken): The Ascent Future Income-Based Loan is really our signature product. It’s available at over 1,700 schools, and it solves the problem that would address people like me and millions of other first time learners, and millions of other adult learners who’ve gotten maybe one bachelor’s degree and are wanting to get a second because they’re having a career change and there’s no more federal money available.
(Ken): We think it will enable a lot of DACA students, international students, students who have English as a second language. I mean, we’re focused on the underserved and overlooked and it’s been quite the mission, but I’ll say, where I am in my career, it’s been incredibly professionally fulfilling to see the outcomes we’ve been able to help achieve, and the team of people we’ve been able to bring to solve this problem.
How Ascent fits into the story of the rising costs of higher education.
(Dustin): What led to Ascent being necessary in this current situation? What do you kind of see as the variables that let us to this point?
(Ken): We make student loans, and we make income share agreements available to students. We’re a credit provider. So, the thing that I’m most frustrated by, and “hand-wringing” doesn’t do it service, but it’s close; the thing I’m frustrated by is everyone’s talking about the symptom. They think the loan is the actual disease, and it’s just the symptom (sorry for a medical metaphor during this time). I would say that the disease has really the cost of an education and then the quality of the education.
(Ken): I’m not saying that there’s not a lot of really great professors and great programs, but quality has always been disconnected between the transfer of knowledge and the achievement of an outcome defined as a job or the opportunity to achieve more knowledge. So, we talk about saying, “Hey, there’s a problem with student loans,” and it’s the third rail of talking about student loans. The politicians don’t want to say that paying a quarter million dollars to go to a four year institution is too high. They don’t want to say that the universities are allocating too much money to administration and not teaching, but the research is out there.
(Ken): The universities have shifted dollars from actually teaching students to marketing and administrative overhead, and lazy rivers and competing with neighboring colleges for the same students. So, we’ve got this rising cost that because of the cost of labor, because of the cost of the fixed infrastructure of a university, you can’t pay tenured professors less, and you can’t let buildings crumble, or your plant not get maintained. Otherwise, you’ll have unsafe conditions for the students on campus. We’ve got a rising cost, and people point to, “how do you pay for the rising cost” by saying, “whether there should be more government funding.” We might talk a little bit about President Biden’s desire to have free tuition at state institutions, but that’s not going to solve the problem.
(Ken): So, the two problems, as I said, we’re talking about loans and not cost because the lender makes a finite amount of profit. But, once that loan goes to the school, the school makes a much greater profit, or at least, a much greater problem when you send a $15,000 loan to a school and you’re making 6% interest rate on it.
(Ken): And then, to my frustration, and I’ve had one son get a bachelor’s degree in four years, I’ve got my second son, who is a senior now, he’s a nursing major at the University of San Francisco, and I’ve been buying Higher Ed for the last six or seven years now.
(Ken): At the two institutions, they went to there is no help getting into the workforce and there is no real understanding about what your starting salary is going to be, and that’s incredibly frustrating. I think about any other consumer product that you might buy, and if you walked into a best buy and said, “I want to borrow money to buy that television. Can you tell me how much it costs?” And the answer is, “Well, once you get it home, we’ll send you the bill.” You wouldn’t buy that television, right?
(Ken): But that’s the way higher ed works. You go into a process where, at least, here in California, depending on what major you pick at what university, there’s something called impacted majors.
(Ken): They will tell you if you look for it that if you’re, for instance, a psychology major, and I won’t name schools, they will tell you, it will take you five years to graduate because you can’t get your upper level classes. It’s not like if you’re smart enough and hard-working enough, you can get there. They’re telling you when you’re a freshman, you will not be able to graduate in four years.
(Ken): Now, the college costs here in California at the UC system runs up to $34,000 a year for in-school, in-state residents. So, if you’re planning to buy a bachelor’s degree from one of those institutions, you should know that it’s going to cost you an extra $34,000, but you don’t. And, you should know, that if you graduate with a psychology degree, your average starting salary will likely be somewhere in the $30,000 to $40,000 range, because that’s what the data say.
(Ken): So, I’m frustrated that this is not getting exposed. If you look at the Bright Futures Engine, that is our beta version of trying to expose some of these costs and some of these outcomes, and some of these critical choices that families and students need to make; that tied to our loan, which is another signaling device, is our best shot we’ve got so far. We’re making 10- and 15-year loans, which means we have to live with these answers for 10 or 15 years. So, we’re excited about being part of the solution that exposes just good decision-making as you buy higher education.
To listen to the full podcast, please visit the link below.
Get to know the host:
Dustin Ramsdell is a higher ed geek, blogger, and podcaster who has been producing episodes for various shows for over six years. He hosts The Higher Ed Geek Podcast where he explores the intersections of our passions and strengths with his various guests. Dustin also currently works as a Director of Student Affairs at Noodle, where he helps enable universities to develop their digital education programs. Dustin lives happily in Baltimore, MD with his wife, Jenn, their daughter, Ellie, and their dog, Chelsea.