Media Exaggerate Student Loan 'Crisis'
It‚Äôs graduation season again. Time for college graduates to go find jobs that will pay their bills, and for many that will include a student loan payment.
Student loans make a college education possible for many people, but some of the companies offering loans to students are under attack by the media.
‚ÄúFor weeks, an investigation of the student loan business has been scrutinizing whether close ties between lenders and colleges have enriched them at the expense of debt-laden students,‚ÄĚ explained the May 29 USA Today.
That investigation has been an anti-industry ‚Äúcrusade‚ÄĚ waged by New York Attorney General Andrew Cuomo, and the media have been fighting alongside him.
The Washington Post called Cuomo‚Äôs findings a ‚Äúcrisis enveloping the loan industry‚ÄĚ on June 2. NBC‚Äôs Brian Williams said ‚Äúa growing scandal has rocked the multibillion-dollar student loan industry‚ÄĚ in a May 10 ‚ÄúNightly News‚ÄĚ report.
In the past couple months, print and broadcast media have accused the student loan industry of bribery, kickbacks, payoffs, and of cozy relationships with financial aid administrators ‚Äúat the expense of students.‚ÄĚ Evidence of wrongdoing has been limited to only two lenders and a handful of college administrators who have resigned, fired or been put on leave.
No criminal charges have been filed. Still, the media act like all lenders and colleges have done irreparable harm to all their students.
At first, Cuomo‚Äôs investigation was limited to the Federal Family Education Loan Program (FFELP), the federal student loan program that works with private lenders to guarantee loans and cap interest rates for students.
But after getting a number of lenders to agree to a new code of conduct ‚Äď and getting a state and federal law passed ‚Äď he expanded the search to look for wrongdoing in the ‚Äúunregulated‚ÄĚ private loan sector.
Most media coverage characterized the few examples of unethical behavior as evidence of widespread wrongdoing on the part of lenders. Several also left out the identification of liberals like Cuomo and ‚Äúconsumer advocates‚ÄĚ U.S. Public Interest Research Group (PIRG).
The media also didn‚Äôt prove any students were harmed; ignored the responsibility of borrowers to make informed decisions; and left out benefits private lenders bring to the program.
Formula for a Story: Blame the Lender
Reports, including a June 10 article in The New York Times, simply repeated Cuomo‚Äôs claims and blamed lenders for students‚Äô mounting debt. They used words like ‚Äúscandal,‚ÄĚ ‚Äúbribing,‚ÄĚ ‚Äúkickback,‚ÄĚ and ‚Äúpayments‚ÄĚ to make the industry look criminal.
‚ÄúPrivate Loans Deepen a Crisis in Student Debt,‚ÄĚ cried the Times headline that began by presenting the situation of Lucia DiPoi, ‚Äúthe first in her immigrant family to attend college.‚ÄĚ
The Times complained that DiPoi ‚Äúgave up her dream‚ÄĚ of working in an overseas refugee camp as a result of too much debt, and now has private loans with high interest rates. But the blame was thrown squarely at the lender: Sallie Mae in this instance.
Nowhere did the Times question DiPoi‚Äôs decision to attend Tufts University, a private school where the tuition, fees, room and board come to $44,500 per year. That‚Äôs nearly three and a half times the average cost of a public college or university, according to the College Board.
Other reports also presented students or graduates struggling to pay off huge amounts of debt without mentioning personal responsibility ‚Äď even saying one student had ‚Äúlittle choice‚ÄĚ but to go deeper in debt.
‚ÄúTake Jen McGowan, a 30-year-old Los Angeles filmmaker. She had little choice, she says, but to pack on private loans after maxing out on federal aid. McGowan owes about $275,000, having borrowed to pay for much of her undergraduate years at New York University and graduate school at the University of Southern California,‚ÄĚ wrote USA Today on May 29.
Journalists often used generalized statements, tarring all lenders and colleges in the process.
On May 20, the Times said Cuomo discovered ‚Äúthat colleges had been receiving payments from lenders that were seeking business from students, and that financial aid administrators had accepted trips from the lenders.‚ÄĚ
Another story in the May 16 USA Today said Congress is ‚Äúalarmed that lenders have been increasingly profiting as students fall deeper in debt.‚ÄĚ
The reporting on Cuomo‚Äôs investigation made wrongdoing on the part of a few lenders and college administrators seem commonplace ‚Äď by leaving out crucial details.
There are 6,000 colleges and universities and roughly 2,000 to 3,000 lenders in the U.S., according to Kevin Bruns of industry group America‚Äôs Student Loan Providers (ASLP).
‚ÄúThe incidents we‚Äôre talking about are a small fraction of schools and lenders. But this is being painted with such a broad brush,‚ÄĚ said Bruns. ‚ÄúThat‚Äôs bad for the industry and for the students who have to make decisions about whether to go to college or not.‚ÄĚ
Andrew Cuomo: Spitzer Wannabe
New York Attorney General Andrew Cuomo has led the charge against lenders in much the same way his predecessor Eliot Spitzer made himself the ‚Äúself-appointed sheriff of Wall Street,‚ÄĚ according to Forbes.com. And he ‚Äúhas found a fat target in the $85 billion student loan industry.‚ÄĚ
It‚Äôs also well-known that Cuomo is a liberal. The Democratic attorney general was the 2002 Liberal Party candidate for governor of New York.
But curiously, The New York Times, a paper that knows Cuomo well (his father is former Democratic New York governor Mario Cuomo) left out his party and the liberal designation in a June 10 story about his expanding investigation.
‚ÄúBut they [new regulations] do nothing to address a problem that many education officials say may have greater consequences ‚Äď more students relying on private loans, which are so unregulated that Attorney General Andrew M. Cuomo of New York recently called them the Wild West of lending,‚ÄĚ wrote Diana Jean Schemo in the Times.
The way she put it made it sound like he‚Äôs some sort of detached expert, when he‚Äôs actually the one making accusations against lenders and college officials and threatening to sue universities.
Schemo, like many other reporters, did not include any critic of regulation or explanation of the benefits private lenders bring to the student loan program.
‚ÄúThere is a lack of recognition of value that private sector companies bring to the federal student loan system: technology, efficency, innovation, all of these things have dramatically improved the student loan program,‚ÄĚ Bruns said.
The Times even gave Cuomo an adoring profile on May 18. The 1,948-word article credited Cuomo with revamping his image, calling him disciplined and cautious.
Reporter Michael Cooper wrote that Cuomo ‚Äúis winning national accolades for exposing what he calls kickbacks in the student loan industry.‚ÄĚ
Just like the Times left out the political leanings of Cuomo, the Times, The Washington Post and USA Today all wrote articles about the ‚Äúscandal‚ÄĚ and included the criticism of ‚Äúconsumer advocates‚ÄĚ U.S. PIRG, but left out their agenda.
On its site, the organization claims to have ‚Äústopped Congress from opening the Artic National Wildlife Refuge to drilling,‚ÄĚ fought against logging and mining, and sued a salmon farm company for its pollution.
First, Do No Harm
Despite all of the accusations from Cuomo parroted by reporters, reports failed to prove significant harm to students.
‚Äú[R]egulators are questioning whether students and alumni have been paying higher loan rates because of the cozy deals,‚ÄĚ said USA Today on May 16.
And again on May 29, USA Today warned: ‚ÄúFor weeks, an investigation of the student loan business has been scrutinizing whether close ties between lenders and colleges have enriched them at the expense of debt-laden students.‚ÄĚ
Both USA Today reports painted lenders in a bad light, but neither mentioned a single person who suffered a higher interest rate for a federal student loan from one of those ‚Äúcozy deals.‚ÄĚ
‚ÄúAs far as I know, I‚Äôve not seen any reports of individual students‚Äô being worse off,‚ÄĚ Kevin Bruns, executive director of ASLP, told the Business & Media Institute. ‚ÄúNo one has shown any real harm to students ‚Ä¶ I‚Äôm not excusing bad behavior, but there is little evidence to show that individual borrowers are worse off because of what happened.‚ÄĚ
Reports also left out the benefits to students that have resulted from the partnership between lenders and the government in the Federal Student Loan Program.
‚ÄúThere have been recent claims that private universities benefit financially from the ‚Äėincentives‚Äô offered by private lenders. The only ‚Äėincentives‚Äô offered by the private lenders we work with are ‚Äėborrower benefits‚Äô for students,‚ÄĚ wrote McWade. An example of borrower benefits is an arrangement in which the lender pays fees the student would otherwise have to pay.