 Hi, I'm Jason Delisle with the New America Foundation, as Alex said. I know that was a lot to take in, what Alex said. We're talking about sort of abstract financial concepts. But we have a great panel of folks who are actually doing this and who are going to try to explain to you what models they're actually using. So I'm going to actually let them introduce themselves and then explain very quickly in just a couple minutes the broad contours of how your business or how your idea would implement or is implementing these income share agreements. So we'll start with Miguel. We'll go down this way. Thank you, Jason. Good morning. So I'm Miguel Palacios from Lumni. Lumni is a company that was founded in 2001. I am a co-founder. And Lumni operates mostly international. So internationally. So most of the things I'm going to say are the experience of Lumni outside the US. And Lumni has financed a few students in the US and looks forward to financing more. But right now Lumni is focused mostly in Latin America or actually totally in Latin America. So Lumni started financing students in Chile back in 2001 with the model that Alex described. So students get financing in exchange of a percentage of their income for a fixed number of years. We then finance students in Colombia, Mexico, and Peru. And to date, we financed about 4,000 students. Of these 4,000 students, some 1,000 have completed and have gone through the whole cycle. So we have a history of how students behave under these contracts. I think that's for now. So I'll pass it to Dave. Good morning. My name is Dave Gerard. I'm founder and CEO of Upstart. I left Google last year with several colleagues. So we have a heavy Google bias to our team. We've implemented the notion of an income share agreement as a marketplace. It's not per se for students in higher education finance. The most popular use of funds is actually to retire student debt. And to be eligible, you have to be at least entering your junior year of college for many reasons. We're creating a marketplace that is true to, as Alex described, an income share agreement. We have built a model to statistically predict somebody's income over the following decade, which allows us to actually price these instruments in a very straightforward manner. And we have private investors, individuals, institutions who provide the capital. And so in effect, it feels a little bit like Kickstarter, a little bit like Lending Club, with a little bit of Milton Friedman economics underneath it all. But generally speaking, we're after a great start. The market's been open for about 10 months. We've funded about 160 or so individuals. There's about 240 or so backers who have provided the capital. And we have eight months of repayment with zero defaults under our belt. So we're off to a very promising start, though we certainly have a long way to go. My name is Tony Odisorento. Until a few weeks ago, I was general counsel of pave.com. Pave is very similar in concept, actually, to Upstart. It's a marketplace for people to enter into income share agreements, funded by private investors. The focus, our focus today, the focus today has been on connecting people bilaterally so that you're funded by a person, a natural person, and not an entity, with so far an emphasis on negotiable pricing. So you get to make the case that you're not the 50th. We have a pricing model also. You may get to make the case that you're not the 50th percentile or the 70th percentile, but you're the 80th percentile. Volumes trailing actually track and upstart, but a few months behind. And similarly, repayments. We've had people in repayments since January with no issues to date. Of course, the best thing about income share agreement, servicing-wise, if somebody doesn't have any money, they don't own anything. It's fully performing, right? So to the extent we had an entrepreneur or a filmmaker or someone with a gap month, the products designed for that and accommodates it really well. Hi, my name is Gordon Taylor. I'm with 13th Avenue. And I think the easiest way to describe what we do is to distinguish ourselves a little bit from the two individuals who just spoke. We focus exclusively on higher education debt. Our target market is the low-income, low-well students who may be struggling to enter or contemplate finishing college given the cost. We've discovered that there is an unusually high degree of acceptance of a income share agreement or a human capital contract among this cohort. And we have currently funded 11 students who are committed to fund a total of 11 students from Allen Hancock College in California. We're giving each of these individuals a grant of $15,000 to complete the last two years of their education in one of the California state system schools. They will repay to us 5% of their income over a period of 15 years. If they earn less than $18,000 in any given year, they owe us nothing. We are perfectly happy to let them defer payments so that they can attend graduate school or because of other life circumstances. And the entire obligation terminates at the end of either 15 years. They've paid in four times what they originally were granted or that the cohort of which they are a part has retired the entirety of the amount lent to everybody. And this is a bit of a pooling concept that works to minimize risk or if you will, share as a risk amongst the students themselves. This is controlled not by us but by them. Each of the cohorts that we fund at a particular institution creates what we call the club or you can call it a cooperative in which the participating students themselves actually have a vote. And of the funds that we collect from the students, a portion of this is not paid to the investors that provided the individual funding but is put into the club to support bulls going forward. So far, we've had relatively limited experience but tremendous acceptance. We are a 501C3. We are completely nonprofit. No one involved will make a dime. And all of the documents that we've used to implement this program are available on our website for public use. And it's at 13th Avenue.org. Just sign a release. And if you want to adopt our strategy and create your own program, we'd be welcome to help you. My name is John Burbank. I'm the executive director of the Economic Opportunity Institute and we're the organization that generated the concept of pay it forward. And I think it's OK to be a little bit critical, right? Can we start out with that? So I think what Alex was describing was the commodification of public higher education, which involves in some ways increased segregation of students on the basis of income and on the basis of life chances. And it sort of enhances that segregation. And frankly, I think that my friends on the panel have all described private sector solutions, which indeed are not really systemic solutions but are benefiting from the way the system is broken now. So each of you have good solutions for that small cohort of students who may be able to participate in your programs. But the results of that adhere to those students but it also hears to the private venture capitalists who are involved. Pay it forward is sort of a different mindset, as you will. Because one of the things that we realize is that this whole thing with student debt, really, the source of that is escalating tuition. And the source of escalating tuition is decreased public investment over the past 40 years. Looking around the room, I see a lot of people my age. My bet is that when you went to college, you were not paying an arm and a leg for tuition. The state, if you went to a public school, the state was paying probably about 80% of the cost and tuition was about 20% of the cost. And we didn't think that was wrong. We thought that was a good thing the way things should be. Unfortunately, with the disinvestment of public investment in higher education, and we have this incredibly escalating tuition to take up the load of the cost of higher education, and that creates obviously tremendous psychological and financial barriers for students. So you have many would-be students who never will be students, and then you have other students who are assuming incredible debt. What Pay it Forward suggests is a complete paradigm shift and a systemic paradigm shift. So students going to school would pay no tuition, period. And after they graduate, they would be obligated to contribute for a predetermined number of years at a predetermined rate of income to a public higher education trust fund. And this higher education trust fund would then fund the next generational cohort of students. So these students are not paying for their own education. They're paying for the education of the next generation. They are developing a community of responsibility. To put some numbers on this, we've figured out that in Pennsylvania we could, and this is being proposed by a gubernatorial candidate, that you could have this Pay it Forward system at 1.2% for 15 years for community college students. If you were in Vermont and going to UVM where the tuition is really high over $15,000, then Pay it Forward would work if it was like at 4.25% for 20 years. But even so, you compare that. So that would mean if you're at 4% making $30,000, you're paying $100 a month. If you're making $25,000 as a community college graduate, then you're paying at 1.2%, you're paying about $30 a month. And compare that to many of you, some younger people here who may be still paying off your student loans. I have colleagues who make $35,000 a year and are paying $800 a month. So this is sort of the difference, I think, in what we're suggesting. It's not a debt obligation. It's not a loan. It has no impact on credit rating. Your contributions go to the next generation. And it is not a private investment. It's not for a select or a small group of students. It's not a program that substitutes, in some ways, venture capital for paying your taxes. It's not a program that rewards and results in financial profit because the revenues go directly into expanding public higher education. It creates, in some ways, it is a system-wide change, creating a new social insurance program to fund public higher education. It's a little bit like Social Security upside down, right? So with Social Security, you pay your fight taxes. All of us pay, 6.2%, and then when we retire, we get our benefits, guaranteed benefit, annuity, every single month until you die. This is you get your benefit when you go to college and then you contribute at a predetermined rate of income for a predetermined number of years. What it does do is it gives the student autonomy. The student doesn't have to strike a bargain with an organization, a venture capitalist, about what he or she could do or would do or may do, but the student has the autonomy to pursue what he or she wants in college and what career he or she wants to do. So it catalyzes, it also catalyzes new public investment because in order for pay it forward to work at this and to say starting off at a certain number and then bringing in more and more students, you can only do that if tuition is stable or actually decreased. If you increase tuition, then you can't accrete as many students. Once you say that there is no cost to tuition, you're not gonna only have the cohort of students who are students, but you're gonna have an increased cohort of students who would have been, would be students but wanna go to school. And then of course we have to take and count population growth and the higher education need which everyone talks about. So the question is how much money is this gonna cost, right? So in our state, the state of Washington, the first year, if we went to a universal system immediately which is not going to happen, but if we did it would cost 650 million and on year four it would cost $1.5 billion and then it would go down after that till about year 25 in which you get into positive territory. But the fact is we have plenty of money for this in our country. We have a much more productive and wealthier country now than we did 40 years ago. We had a great public financing system 40 years ago for higher education. So what we're missing is the political will and what's interesting with Pay It Forward is that we are gathering the political will to make Pay It Forward happen and to revitalize the funding of public higher education. Nice, John. So you'll notice that both Gordon and John were able to give you some specifics about how much people pay and for how long. But Miguel, Dave and Tonio didn't give you a flat number, a 4% for 10 years necessarily because I think based on my understanding of how your models work, the price would necessarily be different for each individual student. Is that right? Is that a fair characterization of the differences? Let me first say, we're not a higher education finance solution. We are doing income share agreements, one use of which can be to repay finance. Because we are who we are, and I should say first of all, I think it's important to separate some issues here. One of which is access to higher education and whether ought to be funded through public sources or whether private funds can be used. We don't have the luxury of working with public sources because we're a private company. And though there's obvious suspicions about motivations of for-profit businesses, we think a lot of good happens in the world through for-profit businesses. So first of all, whether or not private funding or public funding is used for higher education, whether it's extended to 100%, a great public policy discussion, I'm certainly in favor of broadening access to higher education significantly. Having said that, I think there's, I actually wrote a piece that is in this morning's Wall Street Journal. I love Pay It Forward. We are enormous endorsers of the concept, but it has at least two very significant challenges if not addressed when it's put into reality. One of which is the real issue is if you go back and visit schools these days, they look like the Ritz-Carlton. The cost and the spending that is going on at universities continues to go up. There is no aspect of Pay It Forward as far as I can tell that encourages schools to actually spend less to be efficient. So it has a problem where it's not addressing the underlying costs, which is the fact that tuition's have gone up far higher than family salaries have. It does nothing to address that. What it attempts to do is shift the burden of those costs to likely high earners, which is a noble concept. There's actually nothing fundamentally wrong with that. It's a progressive concept, but the second problem with it, of course, is it's a voluntary system. So you have a very significant adverse selection problem, in the data my company came up with suggested that if you looked at Oregon State University, since Oregon seems to be where this all started, the top quartile of earners that come out of there would pay two to three times what the first quartile of earners would make. That might sound great, but it's actually quite predictive who will be in the top quartile. People that study computer science or biology or math or things of that nature, and they are gonna opt out of Pay It Forward because they can get a better deal elsewhere. The school's universal opt into a different school. So my only, we love income-based repayment models, our income share agreements, obviously that's why we're here. We love the concept of broadening access to higher education, but I think we're convoluting issues with respect to how do we increase access, but at the same time, how do we put some market forces toward the universities so that there's accountability to cost, which seems to be lacking today. And even though you might say there's been withdrawal of funding, actually that's not the case. The funding's just been transferred from, grants from states to universities to higher tuitions that are backed by the US government. So in effect, the universities have had a free reign on increasing the tuitions and the costs because there's a very strong and proper political force to make sure access is always there. So, but to my original question though, that you're pricing based on the individual. Yeah, and let me say this. Right, that's the difference in the model. Absolutely, our model will predict, will use signals of your past to predict what you're likely to earn, which is, again, in our case, we have private capital, so this has to be something people will willfully invest in. But let me say this, one of the things people say is, is it sort of in some sense discriminatory or only for the elite, far from it? Actually, this is my view and this is why I started Upstart, the history of access to capital for consumers, whether you're talking about education, finance or not, it's typically been based on how much income you have today or how many assets, the assets you have today. Lenders like people who don't actually need the money, right? So that's fundamental to access to capital as a consumer today. We're actually saying no, we don't care how much your family is worth, we don't care how much money you have today, we don't even care what you're earning today. We want to see signals of your potential and we can make access to private capital, capital that's not coming from the government or tax base, private capital available based on signals of what you're likely to earn in the future and that has nothing to do with what your family is earning today. And to us, that's actually merit-based, it's democratizing, it says everybody has a chance, it's the way our country was built. And if you view this as an evil effort by venture capitalists to take over higher ed finance, I think you're taking a very agendist view of what we're attempting to do. Miguel, the economists will tell us that this is not evil, it's just economics, right? That's not what I was going to say, that's for the next panel. But let me compliment what Dave said and compliment what John was saying. So Lumni has attracted private investors and public investors. So there's no reason why, for example, Oregon cannot do this through someone who has the expertise to figure out how much those future earnings are going to be instead of and apply those market forces that Dave was talking about. Those market forces are, should we really compare the engineer with the philosopher? Right, should those two people get the same deal? Should we rather have the idea that, well, the philosopher provides a much larger public good and so we should not treat those two exactly the same, whereas the engineer most likely can fend for himself or herself. That, those decisions right now pay it forward as, it's basically not saying anything about it. When I believe the other members of this panel would agree that, yes, we need to look at those and we need to ensure that all those different factors get factored in in what a student is going to receive and what they're going to be looking to paying forward. Lumni has, most of its students are first generation college students in countries much poorer than the United States and some of them are, the best example is a group of students who were ex-guerillas from Columbia's military conflict. These students have had enormous success with our funding. This funding has come from the city of Bogota who has a big problem because two million displaced people from the conflict end up in the city, right? And they are unemployed and they don't have skills. They came to us and said, we liked your program. It's much better than, it looks much better than what we're doing now, which was a disaster. Basically they were giving the money to the displaced people without any incentive to accumulate skills. Those students that have gone through Lumni have had a much higher success rate, much lower dropout rates and have shown that the concept is not really for a small elite, right? What matters is not whether the potential that they was talking about is in absolute terms large or small, that is it doesn't matter if the person is going to make millions of dollars or thousands of dollars. What matters is whether what they're going to make in the future has some relationship with the cost of attending college today. And so as long as it can be community college or it can be a fancy university, if the income that those graduates make afterwards justifies that cost, they should get funding. And it's not only the elite for whom education pays. Actually the highest value one can make, the argument is at the lowest income level. Go ahead. Just to give the one note, the two concepts that Representative Pave, I mean, Pave arranges funding for productive purposes. We think of education as a productive purpose generally, but there are some education use cases that are more consumption purposes than economic development purposes. But productive purposes pay funds, including non-education ones. And with private capital, especially it has to be sustainable. I mean, public capital should be as well, which is why people are priced according to what's expected as an outcome. Because if this cycle doesn't go around if the money never comes back, it goes around one time and stops. If a pay it forward system was actuarially sound and really supported itself, then that would be fine. It would last as long as it needs to last. There's examples of public systems and benefit systems created for other purposes that ran out, right? So there was a guess about like how much you need to give and trust fund for a given benefit for however many years. And then it's just difficult to keep up with that if every individual isn't priced in a sustainable way themselves. But certainly like Dev Bootcamp, which is a skills training for computer programmers. There's people who come to pay his platform and say, I'll take anybody who graduates from that. It's a credential that's valuable and everybody who does it, it's productive and funding them is sustainable. They'll pay for the next generation of Dev Bootcamp grads. Gordon, you said you want to say something. We do things a little differently. We don't underwrite the student based on some estimate of their future earnings potential. The only criteria that we have is that you've gotten in. And the only criteria we have for continued participation in the program, which is means receiving the balance of the grant that we've awarded to you is that you get to see your better. We think this is a reasonable academic standard. And we're also lending it 0% interest. And we're effectively transferring the risk to the funders and we're doing our best to minimize that risk by pooling the various obligations of the student that we are advancing funds to. Some will be very successful. Some won't. I don't know how you can accurately predict this. Looking an 18 year old straight in the face. Under our system, Steve Jobs would have been funded. I don't know if he would have made it through the other guys. So John made a comment at the beginning here about, and Jamie sort of made this suggestion as well that the current system is broken. And so I'm wondering, are we all here today interested in what you're doing and you're doing what you're doing in response to a broken system? Is there a need for the types of financing because our higher ed finance system of loans and tuition and grants is not enough, we're not working? Or is this sort of a new thing because there was some barrier that's now gone. Either people sort of psychological not interested and now they are, or is there a tonium looking at you sort of was there a legal barrier to doing this before and now this has sort of been cleared up allowing you guys to do what you're doing? I'll go first on law. I mean, the law is still not perfect for these kinds of agreements, but it's been evolving and it's been evolving because people, pioneers like Miguel have been mainstreaming the concept for a while. So there are fewer times when a company like 13th Ave or Pave or Upstart goes into a policy makers office and they've never heard of it. So that's good and Dave was in the Wall Street Journal this morning, you know, I mean, that's, it's becoming very mainstream. Pay it forward is on the front page of a lot of papers. So that's part of it. I mean, because half the battle in legal isn't what's written, it's what's deemed fair, right? It's common law system and people understand now that this can be implemented fairly. It has been implemented fairly in a number of use cases by a number of actors and I think the law will continue to develop but another helpful development actually, a banking client or a payday lender wouldn't say this, but it's been helpful, I think we would all agree that the Consumer Financial Protection Bureau was created. I've done these products pre-CFPB and post-CFPB and having a single point of contact at the federal level has been very helpful when coming out with something this novel and just isn't contemplated by the law, right? So in a number of cases. That's one you won't hear often. CFPB driving innovation, making innovation possible. I don't tell you about it. They're very deliberate about that, yeah. So is there technology involved as well? Is that making this available or is this, again, is this filling a void that is now opened up? Go ahead, Gordon. You know, I think for all of us in one way or another we all came to the critical realization that we heard about when we started this session and that is that the current system is broken. The cost of it painting a degree is sufficiently high as to an either inhibit attendance or significant life choices post-graduation. There's gotta be a way to make this burden, forgetting the cost side, but with the affordability side adversely impacting the student, the family and everyone that surrounds them. And sometimes taking something and turning it upside down and looking at it from another way changes everyone's perspective. Because in the standard loan, you have a fixed dollar amount and a varying percentage of income. So you turn it upside down and you have a fixed percentage of income and a varying dollar amount. And what that gives you in terms of the student is far greater affordability, far greater flexibility of this financing arrangement to respond to life circumstances that under the current system would produce a burdensome default. And the thing that I find most troublesome about and most burdensome about the current system is that the people that we want it most to help are the most likely to become in difficulty under the current system. And when they do get in difficulty in the current system, the system itself compounds those difficulties. And one of the things that, the aha moments of which everyone has several, we were speaking to someone from AARP and I was shocked to learn that a sizable percentage of adults over 65 in this country who have debt problems do so because of education-related loans. This is just sad and it's inappropriate. And from a financial guy's perspective, because that's what my background was before I got involved in higher education, the federal government has a portfolio of about $850 billion worth of this stuff, of which 40% is current. This is not a particularly sound investment. And we spend all of the energy and all of the resources dealing with this problem, dealing with the 60% who aren't performing. Can't we figure out a way through a mechanism such as pay it forward or income-based repayment to lower the delinquency rate? Think how much simpler everything would become if we did. And if that were to happen, think of how many resources we could free up to direct in other ways to the populations we most want to serve. It's just simpler. Now I'd love to create a revolutionary change and do something instantly, but we recognize that's not possible. This is another arrow in the quiver that students and their families attending higher education institution should have to help them address the issue of affordability within the income stream that they have available. So John wants to jump in here and then Dave as well. We'll make sure we get to Miguel. I want to address the issue of cost that pay it forward had no sort of cost contained in terms of college. But in fact, if you look at at least in our state of Washington and you look at the public higher education institutions, the total cost, that is the state contribution and the tuition contribution, you add those two things together and it's actually decreased over the last 20 years. So the idea that we have this escalating cost of public higher education is really sort of a mythology that's based upon people just looking at escalating tuition. But if you look at total costs, it's actually decreased over time. The other thing about public higher education is that there's a political element of deciding what tuition is, right? It's called the legislature. The legislature can set the tuition in many states. In fact, the legislature sets our tuition. So if the legislature wills to keep the tuition down, they can do that and put in the concomitant increase in public investment. And in fact, that is why in the long run, the system is broken, is that we've had a defunding of public higher education by public governments, especially in the last five years with the fiscal crisis. Now the question is, how do we get out of that? And while I would like to go back and say, yeah, let's just go back to 1980 where the state funded 80% of the costs, we know that's not going to happen, right? We know that's not gonna happen. But pay it forward actually creates a pathway so you can get incrementally more and more public investment per student and more students into the program over time. The other thing I wanna say is that it was mentioned that it's a voluntary system and therefore we're gonna lose people at the upper end of income, right? So I was thinking about this and tuition at the University of Washington is about $13,000 a year. That means that if pretty much, if you're any student coming from a family of income of $100,000 or less, you're gonna find pay it forward very attractive. If you're over that amount, say you're at $150, $200,000, you may not, but most likely your kids would not have gone to public higher education in the first place. They might have gone to a private school in the first place. And so we're not actually losing those folks. What's more interesting in some ways is that a lot of states, including our state, we have a pretty robust program of grants for low-income students, college-bound, for example, is one of those. And that's pretty much an entitlement. So it actually helps the risk pool for pay it forward because what you've done is you've lost, you may not have the tail of the high-income folks, but you don't have the big lump of the low-income folks. And we know that kids from high-income families when they graduate, they make more money than kids from middle-income families when they graduate. Who make more money than kids from low-income families when they graduate? So it sort of balances out. In fact, the financial projections we've done are based upon census, historical census bureau data, looking at the median incomes five, 10, 15, 20, 25 years after graduation of BA graduates who haven't gone on to any other form of higher education. So I think it's a fairly conservative estimate of how we develop the numbers. Go ahead, Dave. Yeah, I mean, John and I probably agree on more than you would suspect. First of all, I'm an enormous fan of University of Washington. My father-in-law was a football coach there for many years, and I'm actually going back to watch them upset Stanford tomorrow. So, go Huskies. And I know the University quite well. It's actually an amazingly talented school. I, because I was at Google, know the computer science people there and the department there. It's an extraordinary thing. And my general sort of suggestion, I mean, I'm not here to criticize, pay it forward. I'm here to say I think it's a revolutionary and brilliant idea. But when you talk to the head of the computer science department at University of Washington, he will tell you they're way too small. He wants to be five times the size he is. And if you talk to the employers, the Microsofts, the Amazons, the Googles of the world who are trying to find great computer scientists and University of Washington is one of the best place to find them, there's not enough of them. And so my only suggestion and an important suggestion is how do you structure something that will encourage people into the fields that are both for them a way to earn a great living for themselves and their families, but at the same time to fill jobs that are desperately needed to be filled in the US. And that tends to be, as you read more and more, STEM related. And so my model generally is yes, I think there needs to be a cost containment sort of aspect to this that encourages a university to be efficient. But just as importantly, there needs to be a signal in the system that nudges people, not everybody, not every poet needs to become a computer scientist, but nudges on the margin more people into the types of jobs that are being created in the market. Miguel, did you want to add anything about why now? Why are we talking about this now and not as prominent maybe 10 years ago? Just one reason, the growth in higher education has been explosive. So John was talking about his generation. In his generation, 5% of people went to college. And so public funding of the 5%, that was really elitist. It was 5% who got to go to college. You could find enough public funds for that. If the goal that was stated explicitly at the beginning of 60% going to, I'm not sure the right words were superior education of high quality, I'm sorry if I missed that. But we got the idea. Basically, it has to be the majority of the population who has access to good education at a level that gives them skills to participate in the labor force. That's not going to work only with public funding. And I think John might know that. And so 10 years ago, I was advocating for if it's not going to be enough with public funding, we need a way to attract private funds. And what these companies are doing is exactly that, they're attracting private funds. So the system is broken. There's not going to be enough. The solution is not going to be only public. If we go with or we think that we can fix the system just with public funds, we are in for a surprise. Or at least not from these people, but for those who advocate that policy. And if we're going to attract private investment, then we need solutions like the ones that these entrepreneurs are pushing. So I want to make sure we have ample time for questions here. So I'm going to open it up. And I think there's someone with a microphone possibly. Yeah, all the way in the back. Kerry has a microphone. So the woman right next to you, Kerry, actually had her hand up first. Please say your name and where you're from. I'm Barbara Galt with the Institute for Women's Policy Research. And I'm thinking about how these different models might affect or perpetuate or, on the other hand, eliminate discrimination. And so with the upstart model, it seems that if, say, gender and race are a part of the formula that goes into determining someone's success, it has the potential to perpetuate investing in white men. Because women and people of color are unless. And similarly, if individual investors have a choice, if they have some sort of direct contact with who the individual is going to be that they're investing in, like they see what color they are or what sex they are, we know from a lot of robust social psychology literature that all of us, myself included, have assumptions that a white male is going to be more successful, even if he's similarly or less talented than a female or a black person. So on the other hand, the model has the potential to, oh, and the other thing is that part of the reason for those differences in future earnings have to do with different choices in careers. So with women, people of color are less likely to go into STEM and biology. So the model seems to have the opportunity to incentivize people who wouldn't otherwise to go into higher paying fields. John's model, or pay it forward, it doesn't have that incentive, it's fairer in the sense that everyone gets the same shot, but it doesn't seem to have any built-in incentive to make someone go into a higher paying career. So I'm sort of curious what the possibilities are or what even the existing features that might say allow investors to take a sex and race blind perspective on their investing, like to choose that they have no idea who this person is, or to try to make up for the fact that women and people of color are gonna have less preparation to go into STEM, I mean, you say they all. So let's just, we got the discrimination issue and the pricing out people who otherwise we want to go. Since I was sort of nasty at the beginning of these guys, let me handle that question a little bit because actually if you look at the students that they have recruited and are helping to fund, they are very multi-ethnic and multi, I mean both women and men, right? And from very different backgrounds. So if you go on the website, your websites, you can see that these are students from all different races and backgrounds. What the problem is, I think, is that not that, but it becomes more of the career path that you could almost say, and you'll probably get mad at me about this, but you can almost say you're cherry picking, right? The students who have done the best. And that's great for those students. But what about for the students who haven't done the best, but have done a good job? The students who are maybe in the 75th percentile, or the 50th percentile, or the 40th percentile, they're all gonna be workers, right? They're all gonna be economic participants in our country. And so they all should have the right to gain those academic skills to be full participants, not just in the economy, that's always what we talk about, but really in our democracy. And so I think actually that's the bigger problem. Having said that, we have designed a STEM program for the University of Washington, so. Let me answer John's question first, and then I'll answer your question, which is a very good one. To John's question, actually, we don't select. We have eligibility standards, which are based on our ability to have sufficient data. But basically, there are certainly some elite people from elite Ivy League schools and such, but it is not at all who we are. You have to be entering your junior year of a four-year institution. We would like to be at community colleges, but we're not yet. And that's because we don't have a useful pricing mechanism at this point, but I would expect we will. You have to be within one of 27 states, which by the way has nothing to do with where we want students from. It's about state lending laws and such that prohibit us from operating everywhere. So there's no GPA cutoff. We have people with 2.2s on our site. So just like we're not about elite and far from it. We are about, everybody has potential, and if you can measure it and allow them to borrow from their future earning potential, we believe fundamentally good things will happen. Now the question the woman answers is a really good one, and let me address it, because it's not just a fairness issue, it's a legal issue. And we are adamant that it ought to be a fair and opportunity for people to raise capital. Now on our side, first of all, in our model, what we create, what we call our funding rate, we of course do not take race for gender into consideration or any proxies to them. We would be running a foul of the law if we did, so we don't have to be saints to do that. I think we would do that anyway. But really clearly, it's really clear that we can't do that. Having said that, because we're a platform and we're the middleman, we aren't the investors that decide who gets backed. And you on our, in our thing, you have a public profile. You have a picture, it's very obvious generally what your gender or race or background is. And we've met with CFPB, we've talked about this. And generally, we have two answers to this really. One is we're measuring and tracking. Is there an aberration? Are women funding at a less successful rate? That's the way to think about it. You either fund successfully or you don't when you're on our platform. And are they funding less successfully? The answer in the very short term is no, they're not. They're actually funding at a more successful rate. So that's a good thing, but it's a very early start. The other side of it, which we view as our responsibility is we need to bring diverse sources of capital to the platform who care about things like minorities studying engineering or women pursuing careers in the medical field. You know, to make sure that the diverse sets of capital will ensure that as the numbers get bigger and the population gets bigger, that people have an equal chance of funding on our platform, irrespective of their background. And that's our goal. I mean, will it be perfect? I presume it won't be. But there are a lot of people who are advocates for many, many situations. We have commitments from Eric Schmidt to fund anybody who's pursuing careers in science, technology, engineering, and math, why? Because that's what he cares about. That's his passion. And we are actively pursuing funds that will care about a lot of things. The arts are really important. People going into Teach for America is really important. And we view, there are sources of capital that will care far less about return and far more about what they're advocating for with their money. And that, to us, is all existing or possible in our platform. There's two things really quickly. Go ahead, sure. The first is, any of these platforms is going to have to address all the issues that upstarts addressing. I've advised that actually not just pay, but a number of companies in the space, the challenge is they all have to start somewhere. And so when there's a lot of other risks involved, sometimes it's easy to start somewhere where you know there's sympathetic capital. So it could be a person who loves STEM or it could be a person who has an affinity for a certain school system or background for the people that are being funded. But it's hard to get arms length capital in to start one of these. And so we're all testing them. And in that sense, none of these companies looks today like they will look at scale if they successfully scale. And the second thing, of course, is Pave is very much in favor of pay it forward and its implementation and in talks with Oregon policy makers about their version of that. So as we're all talking about, pay it forward and poor John, you know, it's a straw man and nobody's built it yet. And so we're knocking down a straw man. There's a lot of value judgments that have to be made about how that'll be implemented. And there probably are many ways that could be implemented really well, really fairly and very successfully. So as we find fault with any of these models, like our models aren't ripe or mature yet and pay it forward isn't incarnate yet. And I heard you make a comment earlier that these are fair. Those are your words. These are fair. The arrangements that you're involved with are considered fair and the CFPB has blessed them. And is that, I mean, doesn't that then address this discrimination issue? Well, the Bureau of the CFPB doesn't have a mechanism for blessing things. So if I said those words, that wasn't exactly right. You might have used those words. That's right. I know I didn't really say it. What would a lawyer call them? No, but I'll say this. These companies like ours, market participants are just being very transparent and the Bureau's being very forthcoming about, very open also and we are all out there in good faith. So I think what I would say is, relationships formed on Pave economic relationships are designed to be fair and the participants are happy with them, right? Nobody's forced to use Pave. And then again, they're designed to be sustainable. So that means they're designed and of course there's risk. Alex showed us a really great graph with the bars and the risk allocation. There's risks, but over many repetitions, the idea would be that the risks balance and the capital survives to fund more people. Miguel wants to jump in and then Gordon. Yeah, I'm going to go steal his thunder. Okay. I apologize. We've also funded at least one undocumented student and I hope that addresses one of the questions you probably have. Go ahead Miguel. So I don't think anyone of the companies that would offer these products would do anything illegal as Dave said and so Lumni also doesn't discriminate either by race or gender. But what I want to say is the current system of loans discriminates automatically against the people who earn less. And so the current system has the discrimination built in and so in the worst case, this alternative, if these companies discriminated would be doing the same thing that the current system does. So let's say this gentleman in the front here had his hand up actually in the first round. We're going to start to run pretty short on time here so let's try to keep the questions really quick and very quick answers so we can get a couple more in. Okay, I'll do that for you. Barbara stole my question on discrimination. So I'll ask a question about cost. I don't think anybody, oh I'm sorry, Jeff Stroll Georgetown University Center on Education and the Workforce. So I'll turn to a question on cost. It really does seem all these systems are accepting the cost structure as it is. And I'll turn the direct question to John. You really seem to have answered the question about cost containment by sidestepping to rearranging who's paying for the tuition with no discussion of incentivizing cost containment or lowering cost as one of the drivers. So perhaps you can take it, thank you. So this is how that would work in terms of lowering the cost, the total cost. If we started with a, let's just take a STEM example. So we designed a program for the University of Washington for STEM. And if we, Microsoft is intent on producing more STEM graduates, right? So it's about for a thousand students that would cost about $12 million a year for Microsoft, which is more or less sort of pixie dust for them, right? And so they could fund or the state could close a Microsoft loophole, tax loophole and fund a STEM program at the University of Washington for $12 million a year, right? Okay, if that goes, if that will have a thousand students and if that is a constant annual investment of $12 million a year, and then as the students graduate, they start to pay into, pay it forward. Then you have an increasing number of students who are incorporated into the STEM program. So within 15 years, you're at 2,000 students. So if you doubled your capacity with the same annual investment of $12 million a year. Now, what's gonna happen is you're gonna have students who are gonna be lining up to get into this program because it has no tuition. So that creates a political dynamic for the state to actually lower tuition because as you lower tuition by $1,000 or whatever, then you're gonna be able to incorporate more students into the program at a quicker increment. Oh yes, we're shifting the cost. Absolutely, we're shifting it. That's what public higher education is all about. And I don't agree with the 5% of the people who were in public higher education that I can say is that certainly was not true in Washington state. So that is not the problem. The problem is the taxation that's gone down on some of the people who are suggesting that one way to settle this is through venture capital, frankly. One point I wanna make, I mean, the idea of Microsoft funding computer science grads is obviously great. It seems like a simple equation. Ed Lozowski, who's the head of the computer science department there, said to me, one of the reasons, one of the things he really dislikes is so many people graduate with debt that some enormous fraction of them, like 70%, go to Microsoft or Amazon or Google. And he doesn't like that. And it's actually very tied to why I started Upstart, which is if you're beholden to a large company because you either have to pay your debt or maybe in this new solution because they paid for your college degree, your degree of freedom upon graduation actually is very low. And not that a job at Microsoft's the worst thing in the world by any stretch. But having said that, the reason I found it Upstart was because I wanted people to have ultimate freedom to start businesses, to create jobs, to do what they wanted. And statistically, we believe they'll earn a good living of a time. So the only thing I'd caution is that, my view, the whole purpose of Pay It Forward is to free up people's decision-making as they exit college. And if that's a fundamental notion, then it's gonna do a lot of good. So I'm gonna take just maybe lightning round of two or three questions here and then I'll let you guys answer whichever ones you want and then we're gonna have to wrap it up. We're already about five minutes over. So, right next to you, Carrie, very quickly. Hey, I'm Elizabeth Morgan from the National College Access Network. Several of us in town are advocating federal policy change where we would move the federal loan program to an income-based repayment system for all borrowers. How would the ISA system be a better solution than universal IBR? Okay, let's take a couple more really quick here. Right here. There you go, Carrie, in the front. And then right behind you. I'm Sandy Welch, a consultant for a number of organizations. I'm just curious, would the models you're proposing be willing to give loans to recent young people who dropped out of high school but now have a GED? And then the gentleman, yep, there we go. And say your name and where you're from. Ben Peck with Demos. I guess I was just wondering if some of the folks on the panel could reflect on, it just seems to me any model that uses private funds is in a sense using the benefits of public dollars that are already invested. So if one of your folks goes to the University of Washington, they're of course using labs that were built with public funds. There's NIH funds that went into building those labs, et cetera, et cetera. So it feels a little bit like you all may be getting the benefits of public dollars. And how do you sort of weigh that and make it fair to everyone involved if you see what I mean? Okay, so we've got, how is this different than income-based repayment run by the federal government? And would you fund a high school dropout you know as a GED? And are you free riding, as someone might say, or are you leveraging public dollars? Well, I can take the first question. And from my point of view, the difference is that income-based repayment, it's much better than not having that system. But it's an individual solution for the individual graduate. Whereas Pay of Forward, you're creating a social insurance pool that funds the next generation of students. So that, to me, that's the biggest difference. Go ahead, Miguel. Yeah, first and then. That's it, sorry. Okay. Sure, why not? Our criteria is acceptance and I think that's probably pretty universal. Income-based repayment, I think it's gonna be most successful if it's pooled. The problem with the existing income-based repayment system is individual and it does not minimize the burden for those people who are not able to pay. Miguel. Income-based repayment is half of the story. It doesn't provide the incentives for people to go to where their skills are going to be most valuable and it doesn't provide incentives to reduce costs for those where it's grown, not in Washington state. Which, let me add, maybe I insulted John. I was thinking of the 1950s generation. Not, sorry, John, I apologize for that. In the 70s, participation was more than 5%. Go ahead, David, did you wanna make a jump in here? I'm only with respect to, like, would somebody with a GED, I don't personally believe private funding solutions for all of higher education are feasible if you believe in maximizing access. Those two are at odds because if you tried to say, in average 18-year-old, whether they have a GED or a high school, it wants to go to school and you try to say to like, what rate would some sort of private lender finance that person? It would make zero sense. As we all know, unfortunately, a high fraction of people never actually complete school and when you sort of risk adjust it from a commercial lender, it wouldn't work. So you actually need public funding and it would be crazy not to, if you think about it, we, our truancy laws suggest we're gonna, you know, come knock on your door if in 12th grade you don't go to school. So it seems illogical that the next year we'd throw you off the boat and say good luck to you. So I'm actually very much in favor of public funding for higher education. I would say though that what you can begin to do though is using signals is as somebody progresses through college you can begin to offload some of the costs to private investors where it begins to make sense. So I don't believe actually that you have to be 100% public funded. I don't think it's remotely possible to be 100% private funded unless it became, again, that 5%. So I do believe there's a combination that can work that has market signals in it and that will provide much better access than we have today, much lower costs than we have today and actually be sustainable over decades, which is ultimately what we need. All right, so we're gonna leave it there. Lots to think about. In fact, so much to think about and talk about. We're gonna have another panel after this. But I want you guys to thank the panelists in walking us through how these things work and these great ideas. Thank you.