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Today 40 million Americans are indebted
for their passage to the new economy.

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Too poor to pay their way through college,

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they now owe lenders
more than one trillion US dollars.

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They do find what jobs they can get

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to pay off a debt
that is secured on their person.

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In America,

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even a bankrupt gambler
gets a second chance.

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But it is nearly impossible

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for an American to get discharged
their student loan debts.

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Once upon a time in America,

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going to college did not mean
graduating with debt.

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My friend Paul's father
graduated from Colorado State University

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on the GI Bill.

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For his generation,

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higher education was free or almost free,

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because it was thought of
as a public good.

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Not anymore.

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When Paul also graduated
from Colorado State University,

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he paid for his English degree
by working part-time.

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30 years ago,

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higher education tuition
was affordable, reasonable,

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and what debts you accumulated,
you paid off by graduation date.

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Not anymore.

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Paul's daughter followed in his footsteps,

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but with one difference:

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when she graduated five years ago,

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it was with a whopping debt.

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Students like Kate have to take on a loan

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because the cost of higher education
has become unaffordable

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for many if not most American families.

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But so what?

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Getting into debt to buy
an expensive education

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is not all bad if you could pay it off

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with the increased income
that you earned from it.

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But that's where the rubber
meets the road.

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Even a college grad
earned 10 percent more in 2001

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than she did in 2013.

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So ...

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tuition costs up,

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public funding down,

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family incomes diminished,

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personal incomes weak.

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Is it any wonder that more
than a quarter of those who must

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cannot make their student loan payments?

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The worst of times
can be the best of times,

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because certain truths flash up
in ways that you can't ignore.

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I want to speak of three of them today.

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1.2 trillion dollars of debts for diplomas

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make it abundantly obvious

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that higher education
is a consumer product you can buy.

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All of us talk about education
just as the economists do now,

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as an investment that you make
to improve the human stock

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by training them for work.

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As an investment you make
to sort and classify people

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so that employers
can hire them more easily.

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The U.S. News & World Report
ranks colleges

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just as the consumer report
rates washing machines.

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The language is peppered with barbarisms.

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Teachers are called "service providers,"

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students are called "consumers."

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Sociology and Shakespeare
and soccer and science,

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all of these are "content."

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Student debt is profitable.

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Only not on you.

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Your debt fattens the profit
of the student loan industry.

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The two 800-pound gorillas of which --

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Sallie Mae and Navient --

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posted last year a combined profit
of 1.2 billion dollars.

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And just like home mortgages,

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student loans can be bundled
and packaged and sliced and diced,

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and sold on Wall Street.

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And colleges and universities

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that invest in these securitized loans

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profit twice.

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Once from your tuition,

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and then again from the interest on debt.

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With all that money to be made,

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are we surprised that some
in the higher education business

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have begun to engage in false advertising,

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in bait and switch ...

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in exploiting the very ignorance
that they pretend to educate?

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Third:

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diplomas are a brand.

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Many years ago my teacher wrote,

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"When students are treated as consumers,

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they're made prisoners
of addiction and envy."

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Just as consumers can be sold and resold
upgraded versions of an iPhone,

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so also people can be sold
more and more education.

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College is the new high school,

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we already say that.

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But why stop there?

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People can be upsold
on certifications and recertifications,

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master's degrees, doctoral degrees.

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Higher education is also marketed
as a status object.

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Buy a degree,

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much like you do a Lexus
of a Louis Vuitton bag,

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to distinguish yourself from others.

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So you can be the object
of envy of others.

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Diplomas are a brand.

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But these truths are often times
hidden by a very noisy sales pitch.

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There is not a day that goes by

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without some policy guy
on television telling us,

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"A college degree is absolutely essential

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to get on that up escalator
to a middle-class life."

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And the usual evidence offered
is the college premium:

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a college grad who makes on average
56 percent more than a high school grad.

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Let's look at that number more carefully,

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because on the face of it,

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it seems to belie the stories we all hear

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about college grads
working as baristas and cashiers.

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Of 100 people who enroll
in any form of post-secondary education,

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45 do not complete it in a timely fashion,

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for a number of reasons,
including financial.

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Of the 55 that do graduate,

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two will remain unemployed,

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and another 18 are underemployed.

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So, college grads earn more
than high school grads,

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but does it pay for the exorbitant tuition

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and the lost wages while at college?

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Now even economists admit

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going to college pays off
for only those who complete it.

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But that's only because high school wages
have been cut to the bone,

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for decades now.

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For decades,

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workers with a high school degree

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have been denied a fair share
of what they have produced.

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And had they received as they should have,

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then going to college would have been
a bad investment for many.

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College premium?

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I think it's a high school discount.

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Two out of three people who enroll
are not going to find an adequate job.

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And the future, for them,
doesn't look particularly promising --

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in fact, it's downright bleak.

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And it is they who are going to suffer

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the most punishing forms of student debt.

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And it is they,

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curiously and sadly,

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who are marketed most loudly
about this college premium thing.

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That's not just cynical marketing,

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that's cruel.

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So what do we do?

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What if students and parents treated
higher education as a consumer product?

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Everybody else seems to.

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Then, like any other consumer product,

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you would demand to know
what you're paying for.

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When you buy medicines,

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you get a list of side effects.

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When you buy a higher educational product,

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you should have a warning label

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that allows consumers to choose,

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make informed choices.

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When you buy a car,

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it tells you how many
miles per gallon to expect.

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Who knows what to expect

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from a degree say, in Canadian Studies.

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There is such a thing, by the way.

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What if there was an app for that?

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One that linked up the cost of a major
to the expected income.

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Let's call it Income-Based Tuition or IBT.

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One of you make this.

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(Laughter)

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Discover your reality.

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(Laughter)

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There are three advantages,

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three benefits to Income-Based Tuition.

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Any user can figure out

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how much money he or she will make
from a given college and major.

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Such informed users

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are unlikely to fall victim
to the huckster's ploy,

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to the sales pitch.

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But also to choose wisely.

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Why would anybody pay more for college

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than let's say, 15 percent
of the additional income they earn?

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There's a second benefit
to Income-Based Tuition.

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By tying the cost to the income,

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college administrators would be forced
to manage costs better,

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to find innovative ways to do so.

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For instance,

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all of you students here pay roughly
the same tuition for every major.

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That is manifestly unfair,
and should change.

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An engineering student uses more resources

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and facilities and labs and faculty

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than a philosophy student.

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But the philosophy student,
as a consequence,

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is subsidizing the engineering student.

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Who then, by the way,
goes on and earns more money.

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Why should two people
buy the same product,

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pay the same,

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but one person receive
half or a third of the service.

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In fact, college grads, some majors,

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pay 25 percent of their income
servicing their student debt,

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while others pay five percent.

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That kind if inequity would end
when majors are priced more correctly.

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Now of course, all this data --

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and one of you is going to do this, right?

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All this data has to be well designed,

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maybe audited by public accounting firms

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to avoid statistical lies.

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We know about statistics, right?

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But be that as it may,

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the third and biggest benefit
of Income-Based Tuition,

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is it would free Americans from the fear
and the fact of financial ruin

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because they bought a defective product.

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Perhaps, in time,

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young and old Americans may rediscover,

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as the gentleman said earlier,

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their curiosity, their love of learning --

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begin to study what they love,

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love what they study,

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follow their passion ...

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getting stimulated by their intelligence,

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follow paths of inquiry
that they really want to.

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After all, it was Eric and Kevin,

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two years ago,

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just exactly these kinds of young men,

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who prompted me and worked with me,

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and still do,

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in the study of indebted
students in America.

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Thank you for your attention.

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(Applause)