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Student debt cancellation 'doesn’t solve the crisis long-term': New America VP of Education Policy

Kevin Carey New America Vice President of Education Policy & Knowledge Management joins Yahoo Finance's Kristin Myers and Aarthi Swaminathan to discuss how to tackle the causes of student debt.

Video Transcript

KRISTIN MYERS: But let's first talk about school closures. According to the Penn Wharton Budget Model, closing schools impacts children and their future earnings. So all the parents are going to want to listen in to this.

By the beginning of October, the model estimated that children lost between 4% and 5% of their future lifetime earnings. That's roughly between $43,000 and $57,000, and each month beyond that schools are closed costs that children are going to be incurring is between $12,000 and $15,000 in projected earnings.

So joining us now to discuss, we're joined by the leading author of that report Efraim Berkovich. He's the Penn Wharton Budget Model's Director of Computational Dynamics. Efraim, thank you so much for joining us.

I think parents at home are pretty deeply concerned about this given that, you know, all the school closures that we have been hearing about lately. I am wondering do these losses happen if all learning is canceled, and children are going to school at all? Or will children still face these losses to their future earnings if they are still attending school, however, at home and through a laptop, doing so distantly?

EFRAIM BERKOVICH: Hey, Kristin. Thanks for having me on. These are great questions.

So this is a study that I did with Maddison Erbabian and Youran Wu, and the trouble right now is that this is a giant experiment that the world is conducting on our children. We actually don't know what the effects are going to be. So for this work we did the best that we could. We looked at other work of things like Hurricane Katrina, school strikes, things like that to try to get an idea of what sort of massive and long-term loss of schooling does for people, you know, particularly children obviously. And, you know, a review of the literature, we found that, you know, a month of school, as you said, when we did the analysis-- and I should say this is a month of lost school, so no school at all-- will give you these kinds of losses.

So I don't want to be alarmist here, because children are in school to some extent. Some people are doing virtual, some people are doing homeschooling, others are going hybrid. So these are really only the high end of what we would expect. Now, that being said, this is still, you know, an unknown measurement. We know that the world economy is moving more towards a knowledge-based economy, which means that schooling potentially can be more and more important.

So, you know, this is not something to take lightly, but at the same time I don't want to raise alarms that suddenly, you know, you're losing that per month. You can kind of see your children getting poorer and poorer as they sit at home.

KRISTIN MYERS: I don't have any children but I know that a lot of my co-workers who do have kids are, you know, understandably very worried and very concerned about the impacts socially, in terms of development, and their education.

So just to double make sure, I want to clarify here, so between $12,000 and $15,000 of losses each month is on the high end, but where we sit right now for the large part where some children, even when schools are closing, are still going to school through their laptops. Will they still face losses? Because I know that the report highlights that there is still a diminished impact, or rather that the education that they're getting is not as good as when they are attending in person, in class, in school. So there will still be some losses, correct, even if children are at home.

[INTERPOSING VOICES]

EFRAIM BERKOVICH: Absolutely, and, you know, we went through and we talked as much as we could. Because, as I said, the data is just not there. There has not been a mass study of this kind of learning on children, you know. Ask me in 30 years, I'll give you a great answer as to what this was.

KRISTIN MYERS: So--

EFRAIM BERKOVICH: The feedback that we're getting anecdotally is that this is not working as well as it should, in particular for more disadvantaged children. I mean, there's some heartbreaking pictures. I don't know if you've seen them, you know, inner city kids sitting on the curb next to a Taco Bell trying to get some free Wi-Fi so they can access, you know, Collin Academy Online. Right, so, the students, I think, that are less able to have the resources to take advantage of this are hurting more.

You know, on the higher end in wealthier suburbs you have a lot more resources. Everyone has broadband. You have parents at home. So this is really meant to just give a ballpark estimate.

I really want to emphasize this is not some hard number that we're putting out there. We're putting something out so that people start to have an idea of where the trade-offs might be. I also want to add that this is just the measure of education loss. Meaning that there are other things going on here, which I think are also important, in terms of students' mental health, as you said socialization. Those things also are going to impact children's future development and their earnings down the road.

So those are things we didn't look at, at all. That may be something you want to add on to your estimate of, you know, what we're hurting our children by leaving them out of school.

KRISTIN MYERS: All right. Well, it is an absolutely fascinating study. I wish we had much more time to really dive into some of the ways that you achieved those figures, but we're going to leave that there. Efraim Berkovich Penn Wharton Budget Model Director of Computational Dynamics, on your website you have that study. We also have a write up of this study on YahooFinance.com, so I encourage everyone to go and check out some of those resources. Thanks so much for joining us.