Preet Bharara:

From Cafe and the Vox Media Podcast Network. This is Stay Tuned in Brief. I’m Preet Bharara. Today we’re going to talk about the student debt crisis. Just 10 days ago, the Supreme Court agreed to weigh in on the constitutionality of the Biden Administration’s student debt relief plan. The justices also left in place an injunction blocking the program from taking effect. Nearly 26 million Americans have applied to have some of their student debt canceled. That’s just over half of the total number of Americans who owe some level of student debt. So how did we get here?

My guest this week is Blake Zeff. He’s made a documentary about that very question. It’s called Loan Wolves, and it was produced by MSNBC and it’s now streaming on Peacock. Blake has worked at the highest levels of politics and journalism. He’s been a senior aid to Senator Chuck Schumer and served as the politics editor of Salon and he also used to work here at Cafe. Blake, welcome to the show.

Blake Zeff:

Thank you so much.

 Preet Bharara:

Congratulations on the documentary. You and I have been talking about this subject, which I know has been near and dear to your heart for a number of years, so I’m glad you got it done.

Blake Zeff:

Thanks. It feels like a miracle for me.

 Preet Bharara:

Well, it’s hard to get anything done, but it’s an important issue. First, let me compliment you on the title, Loan Wolves. L-O-A-N. Did you come up with that yourself, Blake?

Blake Zeff:

I did. Thank you. Not terrible, right? There were-

 Preet Bharara:

No, it’s pretty good. It’s a good pun. It’s hard to get the pun in audio though. So tell folks at the outset, what is it that got you interested in this issue and why are you so serious about this issue, student debt?

Blake Zeff:

Thank you. Yes. So my wife went to college and her dream was she wanted to be a psychologist helping veterans with PTSD. That was kind of the theory that she had honed in on as kind of a public service that she wanted to perform. And so she had to go to grad school, get her doctorate to become a psychologist and then work at the VA hospital.

Well, as part of that process, she ended up with around $200,000 in debt and it’s slowly became clear, after she graduated and was working at the VA hospital, that relative to what she was making at the VA hospital, what she was paying in her student loan debt was really just a tremendous amount of money, making it really no longer possible for her to stay at the VA hospital because it was just really hard to meet those payments.

So that first put this on my radar and I thought, well, we have a lot of advantages in life and there are 45 million other people with student loan debt. This is really alarming. If this is the system that we’re going through and how we’re dealing with it, I felt like I needed to see what else was happening out there. And what I found really did stun me and concern me.

 Preet Bharara:

So we’re going to talk about that in the second, but first, could you spend another moment laying out how big a crisis this is? How many people affected, how much money we’re talking about?

Blake Zeff:

Absolutely. So around 45 million Americans of student loan debt and that, think about that. Everyone pretty much knows someone who does, either you do or one of your children does or your neighbor, and it’s, the total amount is around $2 trillion. So if you do the math, you’re looking at around $40,000 on average. And keep in mind we tell 17-year-olds, 16-year-olds, put your head down, work hard, go to college. This is what you need to do to better yourself to either get a good job or to work your way into the middle class. This is the right thing to do.

These are kids who think they’re doing the right thing. And then if they’re not lucky enough to have parents who are really wealthy, they get handed these loan papers. And when you’re 17, I mean, I didn’t know what compounding interest was when I was 17. You probably did, because you, you’re a smart future lawyer, but most people don’t know that when you’re 17.

 Preet Bharara:

Some lawyers know nothing about math Blake, that’s that’s actually true. But why is the problem so much worse now than it was in prior decades?

Blake Zeff:

It’s a great question and one of the reasons is that, and you may know this based on the age of your kids, college tuition is just climbed to obscene levels. I mean, I’m going around on a college tour now showing the movie to the students and doing Q&A’s with them, and they’re telling me that it cost 80 to $85,000 a year for them to go there. That’s crazy. 80 to $85,000, I mean that is out of reach for most families in this country. How did we get here? Well that’s really interesting.

One of the ways in which this system has gotten out of control is that in 1998, 2 lines were inserted into a massive education bill in Congress. Those two lines essentially said that if you have federal student loan debt, you cannot discharge that debt through bankruptcy. Now you can discharge almost any debt in this country like you and I could go to Vegas tonight and lose $10 million and maybe we should.

And we could discharge that debt theoretically through bankruptcy, excessive shopping, you name it, credit card debt, but student loan debt. There was a little carve out that happened in 1998. And what that did was, yes, a lot of people might want to apply for bankruptcy, but a lot of people won’t. A bigger issue at play.

Structurally, if you’ve got a system where there’s not a threat of bankruptcy, the college lenders know that repayment is guaranteed. And so they will lend out money to anyone at any amount, regardless of who they are. A little bit like the housing crisis, if you remember, they’re handing out mortgages to anyone and the colleges know this. So the colleges will just keep raising their prices to obscene amounts because they know that the lenders will be able to give out money to anyone. So it’s really, there is a structural problem in this particular lending system that is very unique and problematic.

 Preet Bharara:

So you’re saying, so I’m clear that the issue, this bankruptcy provision does not only affect the people who at some point in the future, may in good faith and legitimately need to file for bankruptcy and discharge all their debts, including their student loan debt, but affects everyone else too because of the incentives it puts in place?

Blake Zeff:

That’s exactly right. The prices of spiraled out of control. And it’s because the lack of bankruptcy creates a structural problem where the lenders are just going to keep lending out money to anyone at any amount because it’s repayments guaranteed. And the colleges aren’t dumb. They know that. And so they keep hiking the prices, hiking the prices. The problem is that the people who go to college, or their parents, are the ones who end up with these crazy bills and they have no recourse.

 Preet Bharara:

So who were the folks, if any, who are responsible for putting in these two sentences in the 1998? Bill?

Blake Zeff:

I’m really glad you asked that question because so hard. I thought you was going to reach out to that person and simply say to them, “Listen, it’s 20 years later, 25 years later, I approached it in good faith. I assumed that because the system wasn’t as crazy back then, prices weren’t as high back then. I assumed that they might say, oh yeah, we did that and boy, we didn’t realize what things were going to be like 20 years later, this should be fixed.”

Well, what I first found out was that no one would cop to being responsible for it, and no one put their name on this thing. And you know, and I worked-

 Preet Bharara:

It wasn’t an amendment, you and I both worked in the Senate, it was just inserted in the main bill.

Blake Zeff:

Correct. It was not something where someone, it said the person’s name on it. No one put the, and you and I from working in the Senate know that politicians aren’t usually shy. They like to get attention when they do stuff. So immediately I knew we had a story here and essentially the film Loan Wolves, that I’ve directed, became a whodunit. And for years I was going around talking to everyone involved and no one could tell us, even people in the room, the aids who worked on that bill said no one wanted to put their name on this one.

So eventually during the course of the film, we do find the culprit, and I don’t want to quite give it away, but I’ll say it was stunning. Someone that I never would’ve expected, I do confront them. And I really think that watching that conversation will not just tell you about student debt, but we’ll tell you about democracy in this country and how politics works and how a Bill really becomes a law. And I think it’ll be really a stunning for a lot of people.

 Preet Bharara:

Okay, so you don’t want to give away who the culprit is, but is the culprit a member of Congress?

Blake Zeff:

The culprit is someone who worked in Washington DC at the time.

 Preet Bharara:

Okay.

Blake Zeff:

Is what I’ll say. And now is no longer working in Congress.

 Preet Bharara:

I see. I gotcha. But can you say, or maybe this is the culprit. Is the culprit somebody who put the provision in or is the culprit the person at whose behest it was put in? And can you say anything about-

Blake Zeff:

Yes.

 Preet Bharara:

… At whose behest it was put it.

Blake Zeff:

Absolutely. So someone ultimately a senator had to actually put it in or a member of Congress had to put it in. But they got the idea from a very unusual person working in DC who most people have not heard of, I certainly had not heard of. And this person who was not elected, basically anonymous, essentially changed the course of the economy for generations to come. They weren’t elected to anything. No one had ever heard of them. And the confrontation with them, the conversation about how they feel about this a couple of decades later was really staggering.

 Preet Bharara:

So I’m confused if it’s so clear as your documentary seems to lay bare that this is unfair and student debt shouldn’t be treated in such a specialized way and it should be dischargeable like other debts. Whether you like or dislike the idea of bankruptcy, how come it’s not been repealed?

Blake Zeff:

That was the other really primary question that we tried to set out to figure out here. Because in the movie we’ve got people on the right, like Tucker Carlson, Jerome Powell, a man named Wayne Johnson who oversaw federal student aid for Donald Trump. We have all these people-

 Preet Bharara:

Wait, Dwayne Johnson?

Blake Zeff:

Yeah, didn’t you know that he had a stint in DC?

 Preet Bharara:

I think the Rock could get this done.

Blake Zeff:

He really would be able to, this was unfortunately Wayne starts with a W.

 Preet Bharara:

Oh, Wayne Johnson.

Blake Zeff:

Wayne Johnson. But Dwayne the Rock is not returned my calls yet in terms of being in the movie, but maybe in the next one. But anyway, we’ve got a number of Republicans who favor this and we have people on the left, Dick Durban, Elizabeth Warren, who say-

 Preet Bharara:

So wait, who favored the repeal? Who favor the repeal of overturning this policy?

Blake Zeff:

Okay, so you have something. Then as we know in the years since we left the Senate, it’s become increasingly difficult to have bipartisan support. You have people like Durban on the one hand and conservatives on the other hand, what’s the delay?

That was my question. And so at the end of the film, I talked to Senator Durbin because he’s carrying the bill that would overturn this. He’s a bill called S2598 or the Fresh Start Through Bankruptcy bill and he’s co-sponsoring it with John Cornyn, another Republican that your listeners I’m sure have heard of, Josh Hawley, believe it or not, is co-sponsoring this. So it’s really a bipartisan thing.

And the first thing that has to happen is that Durbin has to bring it to the judiciary committee. A committee a lot about before it can then go to the floor of the Senate. Well, I talked to Senator Durbin and he says, “Well we need Senator Schumer to support this because he ultimately can decide if it goes to the floor.” I talked to Schumer-

 Preet Bharara:

He’s for it, you know that guy.

Blake Zeff:

I do know that guy and that guy, I used to work for him, that guy, and he’s in favor of it. So the next step is Senator Dick Durbin has to bring it to the judiciary committee that he chairs and in the film, he pledges he will do it this year. Well, as we all know, we’ve just got a couple of weeks left, this lame duck session. This is something concrete that Dick Durbin and Congress can do to address student debt while the Supreme Court is dealing with the student debt cancellation. That’s a totally separate issue. This is something that Congress can actually control themselves. Dick Durban has not yet done it. He’s got a couple of weeks left to push forward S2598 to the Judiciary Committee.

 Preet Bharara:

May I allow you at this moment to say your peace if you want, about the lobby that would be in favor of maintaining the provision?

Blake Zeff:

Absolutely. I mean that’s the college lenders you’ve got, Sally Mae, we get into this a little bit In the film, there’s a lot of money that these lenders and this whole student loan industry puts into lobbying members of Congress and the House and Senate.

By the way, both parties, although certainly some members get more than others, and they have a real vested interest in keeping this going.

However, as you noted and as we’ve just discussed, this is now a bipartisan consensus that is forming on this issue. And I think this is really the next frontier that we should look at.

Look, student debt cancellation, that is a retroactive solution. That is for people who already have the debt, right? And that is to give them some kind of relief. And people on different sides will disagree on that. Whether that’s right or not.

This is a prospective looking forward solution that says, because by the way, “Even if you do cancel some debt, people will start accruing new debt next semester. So you still have to have a prospective forward-looking solution that deals with the structural problems of the student lending system.” And the bankruptcy thing wouldn’t fix it on its own. It’s not the only one, but it is something that would, and it’s something that’s very doable in the next few weeks.

 Preet Bharara:

Now, is there some remedy or some solution or some aid that can be brought to bear by the Department of Justice or some other government agency short of an Act of Congress?

Blake Zeff:

Yes, and just recently, Joe Biden’s Department of Justice issued new guidelines when it comes to bankruptcy for these bankruptcy cases that might get brought. Right now, just to be very technical and clear, you theoretically can discharge your federal student debt through bankruptcy if you can demonstrate something called undue hardship.

Now, I’ve talked to a lot of people who have student debt, they all think they have undue hardship. No one thinks that the hardship is due. Having said that, judges seem to think the hardship is due. And we have a bankruptcy lawyer in the movie who says, “Really, unless you’ve got serious cancer, it’s very hard to convince a judge that you have undue hardship.”

Now, Joe Biden’s Justice Department have just issued guidelines saying that their definition of undue hardship will be a little bit more specific. So it’s no longer just some intangible phrase where it has certain conditions and that they’re going to be a little bit more open-minded on it. So that’s important because the Justice Department is the one who essentially will be on the other side of these cases in court.

Having said that, it’s not the same thing as legislation. Legislation will codify something until law permanently and really make it so that you get rid of the undue hardship clause altogether. So what the Justice Department has done is a step in the right direction, but it’s always with these things, the devil will be in the details.

 Preet Bharara:

By the way, in researching this sort of aspect of the student debt crisis, do you or have you formed a view of the merits of a policy advanced by Joe Biden to cancel a subset of student debt?

Blake Zeff:

I have, to be clear, so as I mentioned before, 40,000 is roughly the average that people have. So if you’re looking at $10,000, for a lot of people, that’s really just, if you’re looking at $40,000 in debt or a lot of the people in the movie have a 100,000, 150,000, 10,000 doesn’t really feel like a big difference for them. It’s going to feel like a rounding error for people though who have 10,000 or 20,000. It’ll make a big difference in their lives. And I think that it’s something that really can help them. I support that policy.

And the other thing that we get into in the film for people who might say there are a lot of people with good faith concerns about that, it might say, “I worked my way through college when I was younger.” Yes, but college was $2,000 a year back then.

Now it’s $80,000 a year. Or you took out a loan and why didn’t what you’re getting yourself into, as I mentioned before, these are 17-year-olds who don’t know what compounding interest is. So I think that this is something that makes a lot of sense that could help a lot of people. But the biggest thing I want to remind people is there’s this idea that taxpayers will have to shoulder the burden for this. If we do this. It’s not really the case. We have economists in the film who explain that it’s not a zero sum situation with the budget for the government. It doesn’t mean that this money is going to have to come from some other place. As we saw with the PPP loans, these are the loans that were given out during COVID to businesses to try to keep them afloat.

The overwhelming majority of those loans were forgiven. And that’s fine. I don’t think there are a lot of people saying, demanding, that those businesses pay back their loans. It’s because the government can handle that. So I just want people to know that this is not going to put some major dent in the budget where we have to all of a sudden raise taxes on everyone to pay for it. So given that my answer to your question is yes, I think that it’s a policy that is worthy of support.

 Preet Bharara:

Yeah, I once quipped on Twitter about the comparison between student loan cancellation and PPP loans. In fairness, it’s not quite the same thing.

Blake Zeff:

Mm-hmm.

 Preet Bharara:

The PPP loan program, I get the sentiment, but the PPP loan program was a universalized program in the face of an overwhelming crisis of a pandemic where daily hundreds of people were dying and it was a short-term solution for the purposes of keeping our economy afloat. So a little bit different, but I take the point.

Putting aside the substance and the cost of this issue, do you understand having been an expert in politics and been in politics, why there is some political backlash to student debt cancellation? Do you see the point that the opponents are making?

Blake Zeff:

Absolutely a thousand percent. And really, I really go into this with a very open mind and really trying to take on all the arguments, good faith arguments, that people have on the other side. Like I mentioned before, older generations will often note that they work their way through college. I get that. The circumstances were different and we get into that in the movie or there’s a funny little section where one of the objections seems to be just a general concern that millennials complain about everything and are whiny and we should ignore it for that reason, and we take that on.

 Preet Bharara:

Do you have a view of that? Is that true? Is that true, Blake?

Blake Zeff:

Well, I think that-

 Preet Bharara:

Are you a millennial or are you a Gen X?

Blake Zeff:

Sadly, I’m on the… I think I’m on the bottom edge of Gen X.

 Preet Bharara:

Yeah, sorry about that.

Blake Zeff:

Yeah, thank you. I feel like we kind of are just stuck in the middle there. Like the boomers are fighting with the millennials and we’re just sort of watching the fight happen. But anyway, yeah, I actually totally understand the objections to this and we really try to methodically go through it in a fun, good faith way. That’s the other thing I’d like to mention if I can. This may sound really serious. We’ve been having a serious conversation and obviously of course the ramifications are serious. The movie is really meant to be, believe it or not, somewhat breezy and fun and funny. Sort of in a vein of if you like John Stewart or the Big Short or you like Michael Moore styles of, I’m not comparing myself to these people, but if tonally you like that kind of a thing, that’s sort of how we’ve tried to position this so that if we’re going to make you watch something about bankruptcy and how a bill becomes a law and compounding interest in 1998 legislative history, we want to give you a little bit of fun while you do it.

So we try to do that and we do take on these arguments that you mentioned in a good faith way because I do think that they are, there are a lot of people with open minds, so just don’t have the full context of what’s happening.

 Preet Bharara:

So speaking of fun, last question. Was it fun or something other than fun to interview on camera, our former boss, Chuck Schumer?

Blake Zeff:

It was awesome. I mean, it was really surreal for me because I was his communications director almost 20 years ago. And so I was the one booking these interviews for him and prepping him for them. And now to be on the other side, I was talking to his press people preparing, letting them know what was going to happen and discussing all this.

It was a very weird situation. I felt like, I felt like I should have been on their side of it. And you kind of instantly go back to that mindset when I’m sitting with them and when people watch and when I’m sitting with him doing the interview, I kind of do feel like I’m 25 years old again and working for him. And we still have that kind of relationship to some extent.

And I had to put that aside as a journalist and say, no, this is me interviewing a politician, a very powerful politician who can impact something. And I’ve got to really, I’ve got some questions I really want to ask on behalf of the 45 million people who have student debt and I got to treat it that way, but I think someone like you watching it will probably see me really trying to battle that.

 Preet Bharara:

Did he assign you any work? I think he assigns work to ex staffers too.

Blake Zeff:

He did. He did! He asked me to keep him posted on this and took that very seriously.

 Preet Bharara:

Blake Zeff, congratulations on the documentary Loan Wolves, streaming as we speak on Peacock. Thanks so much.

Blake Zeff:

Thanks so much for having me.

Preet Bharara:

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Stay tuned, as presented by Cafe and the Vox Media Podcast Network. The executive producer is Tamara Sepper. The technical director is David Tatasciore. The senior producer is Adam Waller. The editorial producers are Sam Ozer-Staton and Noa Azulai. The audio producer is Nat Wiener and the Cafe team is Matthew Billy, David Kurlander, Jake Kaplan, Namita Shah and Claudia Hernandez. Our music is by Andrew Dost. I’m your host Preet Bharara. Stay tuned.