America’s Student Loan Problem
2012-07-07 · Guest: Arvin Vora (Congressional Candidate and Author) · 50:31
Federal student loan subsidies and higher education distortions
Bob Zadek and guest Arvin Vora discuss the economic distortions caused by federal student loan subsidies and the government’s role as a primary lender. They argue that government intervention has created an artificially inflated market for higher education, leading to skyrocketing tuition rates and a generation of underemployed graduates burdened by debt. The conversation explores the shift from education as a deliberate decision to a societal assumption, the hypocrisy of debt forgiveness movements, and the emerging alternatives to traditional four-year degrees in the internet age.
Topics: Student Loans, Higher Education, Federal Subsidies, Libertarianism, Economic Distortions, Arvin Vora, Jeff Miron, Personal Responsibility, Tuition Inflation
Speakers:
- Bob Zadek: Host
- Jeff Miron: Director of Undergraduate Studies, Department of Economics at Harvard University (Clip)
- Arvin Vora: Congressional Candidate and Author of Lies, Damn Lies, and College Admissions
- Student: Unnamed student (Clip)
- Chuck Schumer: U.S. Senator (Clip)
Introduction to Libertarianism [00:00]
Bob Zadek: Welcome everyone, welcome to the Bob Zadek Show. Every Sunday at noon at NewsTalk 910. Thanks so much for listening. I sure enjoy spending an hour with you. You can listen to us live at 910 AM, live on the web at www.newstalk910.com. Follow us on Twitter and Facebook. We are out there for all to communicate with. If you choose to communicate by phone—remember telephones?—800-345-5639. We are the leading libertarian talk radio show in the Bay Area and around the country. We are the show of ideas, not attitude. If it matters and if it happens, you’ll hear it here, noon Sunday. Thanks so much for listening.
Some of you, I am told by folks who do radio surveys, some of you have found our show by fiddling around with your radio dial or surfing the web, and you hear about libertarian, libertarianism, the Libertarian Party, libertarian points of view. And some of you may not totally know if that discipline is for you. To help you decide whether to sign up, whether libertarian policies are for you, we are instituting a new feature on the show. I’d like to play this Sunday and on following Sundays very short clips from leading libertarians, people in public life who you may recognize, explain very briefly why they are libertarians. And you will either have your beliefs reaffirmed by these speakers, or you may find yourself discovering that you are a libertarian. If after listening to these very short sound bites, you have questions on libertarian points of view, 800-345-5639. Our first clip, Tim.
Jeff Miron: My name is Jeff Miron, and I’m Director of Undergraduate Studies in the Department of Economics at Harvard University. I’d like to talk just a little bit about what it means to be a libertarian. I think at the most fundamental level, it means that you have a lot of respect for individual decisions and for the ability of people to make reasonable choices and decide for themselves what is in their own interest. And you have a huge suspicion of the ability of government to make people better, to make the economy or society better by coercing individuals into doing things that they don’t want to do.
And so the libertarian view does not align at all well with standard Republican views. It does not align at all well with standard Democratic views. Libertarians are against drug prohibition. They’re tolerant of gay marriage. They’re against severe restrictions on abortion and so on. They think individuals should be able to make all those sorts of decisions and live their lives as they want to live them. It also means that you’re very skeptical of economic policy, so you’re a fiscal conservative. You think that most of the things government spends money on are spent interfering with free markets, interfering with individual decisions, impeding people’s ability to just live their lives the way they want by choosing their occupations, choosing how much education, choosing where to work and whom to work for. The liberal and conservative perspectives are fundamentally different than the libertarian perspective, which is really unique. Liberals and conservatives are at some level the same. They’re authoritarians. They both have views on the right way for people to run their lives and they want to impose that on people, whereas libertarians want to let people choose for themselves how to run their lives rather than having government tell people that there’s one right way to do things and other ways that are not legitimate.
The Higher Education Bubble [02:39]
Bob Zadek: Let people run their own lives. If you can identify with that one-sentence point of view, you’re listening to the right show, noon on Sunday. Thanks so much for listening.
I’m happy to welcome on the show today a leading libertarian. I’m honored and delighted to welcome onto the show Arvin Vora. Arvin is running for Congress—his first run, I believe, for Congress—running for Congress in Maryland against—drumroll please—against Steny Hoyer, the number two Democrat in the House of Representatives, Nancy Pelosi’s right-hand guy. Arvin is running as a libertarian, although both—I’m told both Democrats and Republicans would have welcomed Arvin into the fold. Arvin is an entrepreneur, he’s an educator, and he has written Lies, Damn Lies, and College Admissions. We are going to cover a bunch of issues today, but primarily we are going to—Arvin and I will share with you the federal government’s horrible policy on student loans. Student loans have been very much in the news since student loans in this country have exceeded about a trillion dollars. They are larger than—I think student loan outstanding is greater than credit card debt right now. Students are complaining they incur debt and then they can’t get jobs to pay off their student loans. They want forgiveness. There is a bill in Congress to, believe it or not, forgive student loans, tell them forget about it, it’s all a joke, you don’t have to pay it back. And there are—President Obama is sponsoring a bill, or is promoting a bill, which I should add presidential candidate Romney supports, which will keep student loans at an artificially low interest rate of 3.4% rather than its statutory rate of 6.8%. That’s in order to get the student vote. And that bill is presently before Congress. To discuss the federal government’s abortive policy on student loans and indeed the relationship of a college education to the world, I’m delighted to welcome Arvin Vora to the show. Arvin, thanks so much for joining me.
Arvin Vora: Well, thank you so much for inviting me onto the show. You know, I really appreciate what you said about student loans. I think the real question that underlies the whole thing about student loans is the question: Is the price right now for college reasonable? I mean, are we dealing with a reasonable price that the natural free market might have produced on its own, or are we dealing with something ridiculous?
Bob Zadek: Well, isn’t there a free market? But Arvin, isn’t there a free market? People are free to pick their college. Why do you think there is not a free market?
Arvin Vora: Oh, well, there’s an aspect of a free market in that they can pick their colleges. I mean, you’re more free at the college level than you are, for example, at the public school level, the high school level. But when you’re applying for college, your tuition is being subsidized, which means that essentially—let’s look at the two extremes. Let’s say that we had universal forgiveness on all student loans forever. What will a college do in response to that? I believe that most colleges will then increase their rates because now they’re essentially getting free money. The people who are choosing—the decision makers, in this case the students and their families—aren’t being held responsible for the price. So there’s no reason why they wouldn’t want to pay as much as possible.
On the other hand, let’s say that there were no student loans of any kind. Tomorrow we said there’s no more student loans. Then colleges would be forced to charge tuitions that were within what a normal person could afford and they’d have to lower their rates. So the question is, can they lower their rates reasonably? I mean, are they already charging the lowest possible cost? If you’re in a private college in America right now, you’re basically paying $100 an hour for a lecture. So that means that there’s 200 kids in the lecture class with you, the college is receiving $20,000 an hour. And you know, people have said that my educational rates of my personal program are expensive, but I’ve never charged anything quite close to that. So I think that what you’re dealing with here is an artificially inflated tuition that’s hurting the rich and it’s hurting the poor and it’s hurting the middle class and it’s hurting pretty much everybody except for it’s helping colleges.
Bob Zadek: So there is a fake free market while students go through the gesture of picking the college they want, but in fact, student human nature is such that when you know you can borrow the money at very low interest rates and have to pay it back over a very long time, and you therefore tend to treat it as somebody else’s money. Therefore, it is a free market except somebody else appears to be paying, which as Arvin points out, distorts the market, which of course gives college the invitation to constantly raise their tuition rates because they do not have a free market. They have a market that is insensitive to price. And the statistics are that over the past 10 years at least, college tuition has increased at a rate more than 5% more than the inflation rate.
Arvin Vora: It’s been around three times as high as the inflation rate. It’s increasing even faster than medical costs.
Bob Zadek: So therefore, so why is it increasing? As Arvin pointed out, it’s not increasing because the costs are going up, because the cost is substantially salaries, which colleges can pay what they negotiate with their staff. So it goes up because it can, not because the costs go up. And so the federal government is the one who is distorting the market. So there’s been a lot of talk in the healthcare bill about getting rid of the free riders. Well, there’s no more freer rider in this country, not people who get free medical care, but students who go to college on somebody else’s money. So it’s the free riders that we are railing against. So if you are a college student getting student loans, you might very well be susceptible to being considered a free rider. If you disagree, 800-345-5639. This is Bob Zadek talking to Arvin Vora. We are talking about, we are blowing the lid off the abortive federal policy of free money for college students. Back in 90 seconds.
The Value of a College Degree [08:01]
Bob Zadek: Welcome back to the Bob Zadek Show, Sundays at noon at NewsTalk 910. Thanks so much for listening. We sure love spending an hour with you. 800-345-5639 is the way to reach us. We are discussing the bailout, the bailout—oh, how we hate that word—the bailout of college students by on the one hand providing them with no-principal, no-interest loans to pay for their college while they’re in college, and a subsidized below-market interest rate when they graduate. All that to induce college students to pay whatever they feel like paying for college tuition, whether or not the resulting degree will give them anything of any value whatsoever. And we will discuss that very topic, the value of a college degree, in one second. I am spending the hour with Arvin Vora. Arvin has written a book, Lies, Damn Lies, and College Admissions. Arvin is running for Congress in the fifth congressional district in Maryland, running as a libertarian against, of all Satans, Steny Hoyer, the number two Democrat in the House of Representatives. Arvin, thanks again for joining us for the hour. Now, in your book, what was the thesis of your book and what did you discover?
Arvin Vora: I mean, the thesis of the book is really to see—there’s sort of three different types of lies that I look at. One is the financial lies that we’ve been talking about. And I really want to emphasize that that’s not something where I think it’s inherently to say that college students are at fault, because I believe they’re actually being squeezed in many different directions. For example, if you’re going to think about applying for a government job, if you have a college degree, you’re going to get a huge advantage. If you’re thinking about being a teacher, in many states, for example in Maryland, if you don’t have a bachelor’s degree, you can’t even teach in a private school. So you have a lot—it’s like there’s two sides working here. One side, the subsidies, but on the other side, anything in which there’s the possibility of that kind of influence seems that we’re creating a requirement or a huge benefit to having a college degree. So it’s almost like the loans are inflated and the value is being sort of inflated by government force, if that makes some kind of sense.
Bob Zadek: And the bitter irony is that here we have us taxpayers who are subsidizing the obtaining of a college degree, yet statistically there are like 300,000 waitresses in this country who have a college degree. There are several hundred thousand bartenders with college degrees and baggage handlers at the airport with college degrees. So we have paid for those college degrees by subsidizing their tuition and interest payments and to some degree by loan forgiveness, and yet we have bought—we have paid for out of the public till—an education so that a guy mixing margaritas can talk about 18th-century English literature while he’s shaking the daiquiri.
Arvin Vora: Yeah, I don’t think that the drive though for people is always even economics. I mean, I was an econ major, so I tend to think very economically, and as a libertarian of course you think very economically. But for a lot of people, it’s not even—it’s just like this is like what you’re supposed to do. And there’s not really any other options considered. If you’re, for example, a very high-achieving student, you go to college. I mean, there’s so many activists, most notably Peter Thiel, founder of PayPal, was so disgusted by this belief that says the most, you know, self-directed and brilliant people, the ones who would really do the best as entrepreneurs, are being automatically sent to college that he set up his own scholarship program, which is—check this out—you get $50,000 a year for two years, and all you have to do—I mean, of course you have to apply for it and it’s very competitive—but what you have to do is you have to not go to college for two years. So I don’t think it’s just the issue of bartenders and waitresses and baggage handlers going to college. I think that some of the best and brightest shouldn’t even be going to college in the first first place because they can do much better on their own in other ways. One of the questions becomes when you’re thinking about pricing is not like, is the education worth $200,000? Because to me, education is infinitely valuable. To me, the question is, is it worth $200,000 more than what you could get on your own, or on your own plus hiring those very same professors as your tutors or whatever?
Bob Zadek: Well, there…
Arvin Vora: I think a lot of it’s just going into this sort of almost heavy social pressure that’s not even—it’s partially economic, but partially it’s just become this default assumption in our society, especially among the elite.
Bob Zadek: But what’s interesting is while one can argue, as you said, any education is valuable, but valuable to whom? If it’s valuable to the student who is willing to pay for it, fine. But it’s not valuable to me that somebody gets an education that makes—where this person doesn’t add value to society with the education. Then let him pay for—or her pay for—the education if it’s valuable to them, but it’s not a societal cost because society doesn’t get the benefit. And you’re exactly right about the social pressure.
Arvin Vora: Yeah, I mean, that’s exactly right. And I think that’s so deeply reflected from the university mentality itself. I mean, if you compare, for example, a high school teacher—the high school teacher is hired to provide a service to a student. Now, obviously I’ve said many times that I don’t think the public schools are doing a very good job of that, but that’s the theory—they’re being hired to provide a service. Now, in college, college professors are essentially hired to just kind of pursue their own passions and interests, like doing their research or whatever. And that the actual service provided is kind of secondary. And that mindset, which I consider to be a highly toxic mindset, is something that’s filtered down through the entire education system until people start to believe that the purpose of a college education is not to provide some kind of skills that you can actually use or some sort of intelligence that you can apply, but almost like an entirely just sort of intellectual vacation that has no bearing or relevance or connection to reality.
Bob Zadek: And I say take the intellectual vacation if you want, but I’m not paying for it. You know, Arvin, there was a story—the New York Times ran a front-page article in May of this year. The headline of the article was “A Generation Hobbled by the Soaring Costs of College.” And it talked about, in typical New York Times fashion, all this bleeding-heart stuff about these poor students. And it featured a story of a woman named Marlene Griffin in Ohio, who went to—it happened to be a very expensive private college called Ohio Northern, $50k a year in tuition. And she said when she was admitted to the college, the New York Times quotes her—and listen to this, Arvin—she says, “As an 18-year-old, it sounded like a good fit for me and the school really sold it.” Then she says, “But when I graduate, I’m going to owe like—I’m going to owe like $900 a month.” Something very similar—she talks like a valley girl—“I’m going to owe like $900 a month.” Then she says, “No one told me that.” Duh! When she buys a car, is she going to complain she shouldn’t have to pay the car loan because nobody told her what it’s going to cost? And Ms. Griffin, who doesn’t know to figure out how much a loan is going to cost her, she gets the right to vote. If you want the right to vote, you gotta pay your bills. I mean, what’s wrong with this story?
Arvin Vora: I mean, what you see—I mean, like that and that mindset, I think, is so strongly reflected in the college marketing. I mean, if you look at what they’re selling, the top-tier colleges don’t say that they’re giving you the best education money can buy. They’re saying, “This will be the best four years of your life.” I mean, their ads look like ads for a vacation. I mean, “best four years of your life.” I mean, aside from that, I mean, it’s also this weirdly prophetic truth thing because if you’re giving somebody an inadequate education plus saddling them with a whole pile of loans and debt, then yeah, you might actually be creating the best four years of their life, but that just means that the education has failed to make them successful in the remaining, you know, 40 or 50 or 100 years of life.
Bob Zadek: Sorry, Arvin, I didn’t mean to interrupt.
Arvin Vora: Yeah, so I mean, I think it’s just that mindset that says college is supposed to be self-indulgent. And I think that that idea is ridiculous. And if it is supposed to be self-indulgent, why should it be this requirement for everybody? I mean, that’s the part that I think is completely misguided.
Bob Zadek: This is Bob Zadek. I’m talking to Arvin Vora. Arvin is a candidate for Congress in the fifth Maryland congressional district. We are talking about student loans, good public policy or not. 800-345-5639 is the way to chime in and join the discussion. Should the federal government subsidize interest on student loans? Indeed, should portions of student loans be forgiven? There is a bill in Congress, which we will discuss, to actually tear up the debt so students do not have to pay their debt. Is this good policy or not?
Personal Responsibility and Debt [17:01]
Bob Zadek: Now, just to set the stage on student loans, because student loans are very much a creature of legislation. Right now, the federal government has forced out all the private lenders in the student loan market, and the federal government is the primary student lender. And basically anybody who wants a student loan can get it to cover most or all of your tuition. And the interest rate was supposed to be by statute 6.8% per annum when you graduate. However, as a result of legislation in 2007, the interest rate was temporarily—always perk up when somebody in Washington says “temporarily”—the interest rate was temporarily reduced to 3.4%. That temporary reduction is about to expire and kick back up to its regular rate of 6.8%. And that’s—there’s a movement now to prevent the interest rates kicking up. And this is on new loans, not on existing loans.
And also, just to complete the picture on student loans, if you borrow money for a student loan and then you go bankrupt because you can’t pay your bills, while all your other debts go away, your student loan debt doesn’t go away unless you can show real hardship. So there’s a lot of legislation involving the area of student loans. And my question for my audience out there is: Should the federal government be involved at all in subsidizing principal and interest on student loans? More specifically, is there a national benefit in having students just plain go to college irrespective of what they might study or benefit from, and irrespective of whether they will contribute more to society as a result of their education, or whether it’s just, as Arvin pointed out, four years of an intellectual vacation before these students enter the real world? And if they are on a vacation for four years from when they are 18 to when they are 21 approximately, should they have the right to vote? Or if they’re qualified to borrow money, then they ought to be able to pay it back. This is Bob Zadek talking to Arvin Vora. We’ll be back in 90 short seconds. 800-345-5639 if you wish to join the discussion.
Political Pandering and Interest Rates [21:01]
Bob Zadek: Welcome back to the Bob Zadek Show, Sundays at noon at 9:10 AM. Thanks so much for listening. Follow us on—listen to us live on the web at www.newstalk910.com. The leading libertarian talk radio show in the Bay Area and around the country. Thanks so much for joining us this summer’s Sunday.
I’m joined today by Arvin Vora. Arvin is running for Congress in the Maryland fifth congressional district. He is running against Steny Hoyer and some Republican whose name I do not know.
Arvin Vora: Tony O’Donnell.
Bob Zadek: It’s good to know your opposition. Thanks so much, Arvin. Arvin is an entrepreneur, an educational entrepreneur. Arvin is also a published author, and Arvin’s book, Lies, Damn Lies, and College Admissions, discusses the subject of college admissions and the fraud which represents—or the fraud may be too strong a word…
Arvin Vora: I don’t think it’s too strong at all.
Bob Zadek: …but the misinformation that permeates the area of college admissions and the value of a college degree. Now, I should mention that one of the reasons I chose to discuss this topic and invite Arvin to join me is because the issue of increasing the interest rate on student loans from a meager 3.4% to almost as meager 6.8% is very much in the news. Both President Obama and presidential candidate Mitt Romney, in pandering to the 18-year-old vote, both expressed support for a bill to keep the interest rate at an obscenely low below-market 3.4% in a way to get the 18-year-old vote. And of course, the 18- to 21-year-olds are out there complaining bitterly about what it will do to them if the interest rate goes up.
Now, I should mention that on the average student loan, if the interest rate is allowed to go back up to where it belongs at 6.8%, if that were to happen, although students are complaining about it, the effect on the average student will be to increase their payments by about $1,000 a year. Now, and so it’s a very low number. It basically comes out to be about the cost of a cup of coffee a week. And yet the students are complaining. And Arvin, I’d like to play one really short sound bite of one student who was interviewed on a college campus and asked what the effect of this increase in rates of about $8 a week would do to him. So Tim, if we can play clip number four.
Student: Some things probably ought to get pushed back, maybe like starting a family, and it’ll be more important to find a job quickly.
Bob Zadek: So he says, “I may postpone starting a family if the interest rate goes up.” Give me a break! That’s like somebody saying, “Hmm, should I start a family or have a cup of coffee?”
Arvin Vora: Yeah, I mean, it’s something that’s reflected not just in the cost. I think there’s two costs. I think we’re seeing the economic cost, but there’s another cost, this educational cost, that I think is a very much a direct consequence of what’s happening at the loan level. And that is what’s happening to the actual education. In education, you have basically, in the way I look at it, you can either have something called a selection effect, which is where a college basically looks for the best and brightest students and tries to let them in. And you can have education as something called a treatment effect, where the college is not just trying to find the best and brightest, but to actually create the best and brightest, to actually provide education that is directly beneficial to the students who are receiving it. In other words, they’re offering a service. Now, obviously, if you’re operating everything on the selection effect, then you, as a simple little illustration, you would never want to expand too much. Whereas if you’re offering an actual service, you’d be just like Four Seasons or any one of the other high-end places that have many, many chains. You’d want to really be able to expand like that. And that by itself, to me, is like a powerful reflection of what’s happening to education, that we’re replacing real education with this other thing, this selection effect education that kind of looks like real education but is as different from real education as two things can possibly be. And I think that’s really one of the many unintended consequences of basically giving everybody limitless money that they themselves don’t have to spend right away, that they get the bill much later and they just get saddled with a bunch of debt.
Alternatives to Traditional College [24:01]
Bob Zadek: And of course, what’s interesting is the whole discussion of relieving college students of this debt. Understand what goes on. First of all, why do libertarians care so much about this issue? Well, as you heard in my opening sound bite from Jeffrey Miron at Harvard, this is a matter of personal responsibility. If you incur debt, whether it’s to buy a car or go on vacation or go to college, if you incur the debt, make a decision—not the debt, but is the expenditure of money something which is valuable to you? Or if not, then you’re just spending money like on vacation or an expensive meal, and make that decision. But don’t have us bail you out.
And Arvin, you have written and complained about bailouts. And what’s most interesting is the whole Occupy movement was triggered—the flashpoint for the Occupy movement was the bailouts of the banks. And yet when the students are interviewed at the Occupy sites, what do they want? Bailouts of their student loans. What greater hypocrisy can there be than that? Protesting bailouts and saying what we want to make everything right is our own bailout. So the federal government has created this bailout sick, bailout, no-personal-responsibility mentality which is a cancer in the country. Everybody wants…
Arvin Vora: Yeah, I mean, I think what they’re going for at this point is kind of like a quid pro quo. They’re saying, “You know, like these guys got a bailout, so shouldn’t we also get a bailout?” And while I can understand where that’s coming from, it to me is like it’s so missing the point of what’s going on. Because the student loan—I mean, the student loan to me itself is a type of bailout. And it has driven up the price so high that right now, if you get 50% financial aid, a grant, which is almost never happens, you’re still paying more now than if you were paying the full tuition out of pocket, say 40 years ago. I mean, that’s the problem. It’s the government policies have made the college unaffordable. And I think you’re absolutely right with what you were saying before when you’re saying that if you’re just going to go on a vacation, make that decision. And what’s happening right now is it’s not even really being made as a decision. It’s being presented as an assumption. If you have any academic talent of any kind, you’re going to college. And the fact if we can even just bring up that question, just making sure that every student is asking, “Is this worth it? Is it really actually worth it?” I think that if we can just get that question out there, it will make such a humongous difference.
Bob Zadek: You said it—that’s a wonderful way to express it. A decision gets converted to an assumption. You know, that’s exactly right. And so that once it becomes an assumption, you haven’t decided to spend the money, it’s automatic. And therefore you’re not responsible because in fact you never even made the decision to begin with.
Arvin Vora: You never considered it. It’s just what you do. You didn’t consider it anymore than you consider, you know, eating with your mouth instead of through your ears. And I think that’s really where if we’re going to change this—and I do believe that this is something that’s going to change. I think that at some point the financial bubble will probably collapse. But I do think that as we get more and more people criticizing this behavior from the right and also from the left, because you have this whole “student debt equals slavery” movement that’s very much on the left, and I think it’s a movement that’s at least bringing attention to a problem. As we have that happening, I think that you’re going to see people asking the question. And as people ask the question, then you’re going to have more colleges who are going to say, “Listen, we’re offering a better education for a lower cost. We’re not just giving you a brand, we’re actually giving you something valuable. We’re not just giving you like a fancy degree, but helping you think better and faster and have more knowledge.” I mean, that’s something that I can see happening in the very near future, those kind of changes coming into play. And they’re already coming into play. I mean, you see it happening at specific universities are advertising the price, not just the best four years of their life. You have the Thiel scholarships that are getting the best and brightest in other areas. You have so many tech entrepreneurs now that never went to college. And the mindset that says college is like the best thing is really starting to change.
Bob Zadek: You know, I hope that you’re right because we have—I grew up just assuming it. I never thought for a moment about a choice other than by going to college. And maybe that was proper at the time because there were much fewer ways to become successful, whatever that means, without going to college. Now it seems there are many more ways.
And one of the problems is with the student loan bailout and subsidized interest is that at the political level—Arvin, a level you’re going to be wallowing in after November when you get elected—at the political level, it’s easy for a politician to pander and say, “We will guarantee your student loans, we’ll give you subsidized interest, we’ll give you the loan,” because that decision does not hit the budget today. It only hits the budget when the defaults hit in the future.
Arvin Vora: Exactly. They’re negotiating with other people. It’s not going to be this congressional term’s problem. It’s going to be the people who are in Congress, like 10 years from now, who have to deal with it.
Bob Zadek: And just to show you the mindset, Chuck Schumer, in defending the student loan subsidy—Chuck Schumer, of course, is a leading Democratic senator in Washington. Here is how Chuck Schumer justified spending the money on college loan bailouts. Tim, the Schumer clip number three.
Chuck Schumer: We’re not going to make increase the deficit here, so it won’t hurt the taxpayers one nickel. We’re going to close some loopholes. Maybe they should be for corporate jets. Maybe they should be for some of these other examples where people of a very high income don’t pay much in terms of taxes.
Bob Zadek: Did you hear that? Honk if you believe Chuck Schumer. I mean, we’re going to close a loophole, we’ll close down a corporate jet, we’ll make the head of GE take the train to Washington, and that will pay for the student loan debt of one trillion dollars.
Arvin Vora: Yeah, I mean, I don’t think there’s like a trillion dollars of corporate jet subsidies or anything like that going on. While of course I agree that we want to close as many loopholes as possible, those aren’t even on the same order of magnitude as each other.
Bob Zadek: Of course not. This is Bob Zadek and I’m talking to Arvin Vora. We are talking about student loan bailouts, good policy or bad policy. 800-345-5639 to join the conversation. When we come back, not only are we going to subsidize student loans, we’re actually going to forgive them so the students will not have to pay back any of their debt. Back in 90 seconds to learn about this abomination.
Alternatives to Traditional College [38:38]
Bob Zadek: Welcome back to the Bob Zadek Show, Sundays at noon at NewsTalk 910, 9:10 AM on your radio dial, www.newstalk910.com on your computer dial. 800-345-5639 is the way to join my conversation with Arvin Vora. Arvin is running for Congress in Maryland’s fifth congressional district against Steny Hoyer. Arvin is running as a libertarian. Arvin has written several books, one of which, Lies, Damn Lies, and College Admissions. We are talking about the student loan bailout, approximately one trillion—that’s trillion with a T—in debt.
One thing which is really—which I picked up in my research on the student loan debt is I found a bit of a closet libertarian in a surprising place. The hated, famous Consumer Financial Protection Bureau, the bureau recently set up in Congress to regulate consumer loans. The deputy director is a guy named Rajeev V. Date. And in commenting on the $1 trillion of student loan debt, he was quoted as likening excessive student borrowing to risky mortgages. And what’s fascinating to me, obviously he’s saying this is all reckless lending by analogizing it to “risky mortgages,” but what confused me was the one making the loans is the federal government. So by the admission of Mr. Date, the federal government is engaging in the “failed practices of the past” by making risky mortgage-type loans to risky borrowers, i.e., college students who may not have the wherewithal to pay them back.
Arvin Vora: I mean, one of the questions that that really begs to me is—I mean, that comes from the assumption that there’s some students that are going to benefit from college and there’s some students that really aren’t darn ready for college or are not going to benefit from college. And I think that that first group is like a lot smaller than what people think it is. Because in terms of actually learning the material that colleges present, colleges do like the worst job of it. If you use almost any other system—if you, for example, if you’re going to pay the same fees, $100 an hour, you could just hire the actual professors from the colleges to tutor you one-on-one and still save money. So I would take it a step further. I would say certainly people who just are nowhere close to being ready for college might want to think about whether that’s a good idea. But even the most advanced and best and brightest students, I think they should really consider the other options to get that same academic education.
Bob Zadek: You know, that’s a perfect segue into another issue involved in the whole—which I know you have studied. You had mentioned earlier the value of a college education. Because college tuition is perceived to be free—that is, the check isn’t written for some time after graduation because of student loans—the statistics are bell clear that the availability of student loans at low interest rate creates an overconsumption. It invites students to, without much thought, make a decision to go to college because in their mind, a lot of it is free. Because having to pay back your loan far in the future, it’s too—you can’t relate to it. And the statistics are clear that there is an overconsumption or an over-encouragement of sending people to college with this free money. The statistics are that 40% of the students in a four-year program don’t finish. 80% of the students in a two-year college, community colleges and the like, 80% will not finish in three years. And among the graduates, 15% have no job or one which requires no college. And 50% of all college graduates—50% of all college graduates—end up in a job which doesn’t require a college degree to begin with. So if we say to ourselves as a country, we should only spend money where there is a benefit to the country—not an intellectual benefit to the individual, but a benefit to the country—then we would not be encouraging anybody who wanted to go to college, but only those people to go to college where they will become more valuable to the country as a result of their college education. We don’t get anything in exchange for subsidizing these college tuitions. Or do we? 800-345-5639, opposing points of view are welcome. What about that, Arvin? Aren’t we encouraging…
Arvin Vora: I think that’s actually almost too soft a question because anything could be argued to be beneficial. I mean, that to me is like why we have such a mess in government right now, because the litmus test we’re using is, “Is this beneficial?” And to me, the real litmus test to be used at the government level, where everything is being essentially backed up by force, is: Is this absolutely necessary for the functioning of our society? Is this absolutely necessary? And I cannot imagine a situation in which that could possibly happen at the student loan level. I don’t think that the goal should be that there should be some federal student loans that are discretionary. I think there should be no federal student loans at all. And that this will have the effect of first driving down the price, because now colleges can’t charge these insane $100-an-hour fees, but it’ll also have the effect of encouraging people to look in different directions and different and actually more effective ways to get an education.
I mean, one of the things that I found when I was in college is that often the education being presented was being gutted. As a classic example, when I was taking organic chemistry, we did every chapter in the 25-chapter organic chemistry book except for the chapter that talked about morphine and heroin. And not to say that I want to make a lot of morphine and heroin, but the idea that you’re going to present somebody—you’re going first charge somebody this huge amount and then present them this gutted education that doesn’t even really teach them everything they need to know? I mean, that to me is ridiculous.
Bob Zadek: An education driven by political considerations rather than academic.
Arvin Vora: Exactly.
Bob Zadek: And you know, in terms of the value of education, no lesser founder than Thomas Jefferson felt deeply to his core that an educated electorate was the only way our country could survive. He was the founder of the University of Virginia, the first public college in the country. And Jefferson was so proud of that founding that that was one of the three achievements that he had put on his tombstone. He did not have “third President of the United States,” but he did have “the founder of the University of Virginia” because it was so important. But what was important is a public who is educated so that they can vote better. Now, I benefit if anybody out there is an intelligent voter. I will get a benefit, as all Americans would. Therefore, if you’re going to have a say in education, what would be wrong with requiring any student who gets a student loan to take—and I’ll say—a series of courses on American history, on the American political system, on what you need to know in order to make an intelligent decision about voting?
Arvin Vora: Well, one of the things that I talk about in my book is just how slanted textbooks are. And I don’t just mean history textbooks and political textbooks. I mean even biology textbooks. I mean, one of the textbooks that I looked at the most was the Prentice Hall biology book, the one that’s used everywhere, the main biology textbook used in high school and of course authored in colleges. When they illustrate the concept of natural selection, they don’t have like the fastest cheetah winning or like the tallest giraffe, the classic things. What they had is a picture of baby birds begging for food from their mommy. And the idea is, of course, some—just like some college professors are better begging for grants from the government—some baby birds are better at begging for food. But the thing is, it’s in a biology—this is not even a history textbook. I think that when you make a specific course mandatory, it just opens the door to make it just wide open for political indoctrination. And if you can have it in biology, I think you’ll certainly have it in history.
I think that the real test is this: Are you able to provide for yourself? Are you able to function without government subsidies? And to me, if you can do that, if you can pay your debt, if you can pay your taxes, if you can do all that, then it seems to me that you have fulfilled a significant part, maybe not the whole thing, but a very significant part of what is necessary to be a fully functioning citizen. The other thing is, in Jefferson’s time, there was no internet. There was no libraries everywhere. There’s no Amazon.com. There weren’t really a lot of ways that a person could get that kind of an education in America at the time. Now we have all these do-it-yourself type of approaches to universities. We have Khan Academy. We have programs like mine. I mean, there’s so many ways that a person can get a university-level education and beyond without the formal structure of a university. I mean, it’s a completely different situation in my opinion.
Bob Zadek: Arvin, my audience is dying to know, tell us how we can help your campaign. We have about 30 seconds left.
Arvin Vora: My website is votevora.com. You can also find me on Facebook. My name is Arvin Vora, A-R-V-I-N V-O-H-R-A. We have about 30,000 fans. And you can contact me—the best way to contact me is on Facebook or via my website. And you know, if you can join over there, then we can figure out the best way that you can help with the campaign.
Bob Zadek: Thanks so much for joining me, Arvin. This is Bob Zadek. I will not be here next Sunday. You’ll hear an archive show. I will be at FreedomFest—yes siree, FreedomFest in Las Vegas, Nevada. Back in two weeks. Thanks so much for listening.