Using background music that would be better suited for a “Dateline” story about a tragic teen death, NBC’s “Today” show launched the latest attack on the student loan industry.
“You would assume that the college you choose would be on your side and find the best interest rate for a loan that you’ll be paying for many years. Well, think again,” said consumer correspondent Janice Lieberman.
As congressional Democrats push to overhaul the industry following an investigation by New York’s liberal attorney general, Lieberman heaped blame and accusations on colleges and lenders in a June 21 segment.
Lieberman began with the assumption that colleges, not students, are responsible for finding the best loan possible. Then she heaped on a broad generalization of misconduct: “college administrators have been taking payments and gifts from some top lenders.”
Not once in the roughly six-minute segment did Lieberman actually state how many colleges or lenders were guilty of such misconduct. She also didn’t say that no criminal charges have been filed against any lenders or schools.
In fact, there have been two documented cases of criminal wrongdoing, said Kevin Bruns, executive director of America’s Student Loan Providers (ASLP). ASLP represents more than 80 private, nonprofit and state-based organizations that provide guaranteed loans through the Federal Family Education Loan Program.
“The reporting [on the two isolated cases] has painted a picture with a broad brush,” Bruns told the Business & Media Institute.
Bruns said it is improper for employees of financial aid offices to accept any payments from lenders, but he only knows of two instances. In each of those cases, Bruns said no one has come forward and proved harm to students.
No one from the student lending industry was included in “Today’s” report.
Lieberman also referred to student loans the size of “mortgages” and urged more government spending.
“With one year at a private university costing an average of $30,000, it’s difficult to foot the bill,” said Lieberman. “Government loans just don’t cover enough of the expenses, so families must turn to a conventional lender.”
To make her point, Lieberman recycled the anecdote of Lucia DiPoi, a borrower who originally appeared in a New York Times story on June 10. According to the Times, DiPoi “gave up her dream” of working in an overseas refugee camp as a result of too much debt, and now has private loans with high interest rates.
Lieberman reported that DiPoi took out $20,000 in private college loans at an interest rate of “over 12 percent,” which meant her monthly payments were an astonishing $774. “Today” didn’t ask if DiPoi could consolidate or negotiate a lower payment for her debt, and didn’t explain whether DiPoi had federal loans in addition to her private loans.
That figure is also much higher than the cost of a $20,000 loan financed over 10 years – the industry standard according to Bruns – at the same interest rate. “At over 10 years, it would be $286 [a month],” Bruns said.
Neither “Today” nor the earlier New York Times story questioned DiPoi’s choice of such an expensive school. According to the New York Times story, DiPoi attended Tufts University, a private school where the tuition, fees, room and board come to $44,500 per year. Lieberman left that out of her story as well.
Students attending such pricey schools make up only 25 percent of all college enrollments, according to a report by the National Center for Educational Statistics. The average yearly cost of tuition at all colleges and universities is only $5,836, according to a story in the October 2006 U.S. News and World Report, which is much lower than the $30,000 price tag reported by Lieberman.
The “Today” report also attacked schools’ lists of preferred lenders. “I asked my daughter to contact the financial aid office at the school and they e-mailed her back with the name of their preferred lender,” said Melissa Engle, a mother of a student borrower. “We just went with that company without realizing we had options.”
“They’re just preferred, not mandatory,” Bruns added.
CLARIFICATION: The first statement from Kevin Bruns has been changed to read "criminal wrongdoing." The original article did not include the word criminal.