'Today' Demonizes Student Loan Companies for Alleged 'Schemes'
Using background music that would be better suited for a âDatelineâ story about a tragic teen death, NBCâs âTodayâ show launched the latest attack on the student loan industry.
âYou would assume that the college you choose would be on your side and find the best interest rate for a loan that youâll be paying for many years. Well, think again,â said consumer correspondent Janice Lieberman.
As congressional Democrats push to overhaul the industry following an investigation by New Yorkâs 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: âcollege administrators have been taking payments and gifts from some top lenders.â
Not once in the roughly six-minute segment did Lieberman actually state how many colleges or lenders were guilty of such misconduct. She also didnât 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 Americaâs 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.
âThe reporting [on the two isolated cases] has painted a picture with a broad brush,â 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 âTodayâsâ report.
Lieberman also referred to student loans the size of âmortgagesâ and urged more government spending.
âWith one year at a private university costing an average of $30,000, itâs difficult to foot the bill,â said Lieberman. âGovernment loans just donât cover enough of the expenses, so families must turn to a conventional lender.â
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 âgave up her dreamâ 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 âover 12 percent,â which meant her monthly payments were an astonishing $774. âTodayâ didnât ask if DiPoi could consolidate or negotiate a lower payment for her debt, and didnât 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 â the industry standard according to Bruns â at the same interest rate. âAt over 10 years, it would be $286 [a month],â Bruns said.
Neither âTodayâ nor the earlier New York Times story questioned DiPoiâs 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 âTodayâ report also attacked schoolsâ lists of preferred lenders. âI 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,â said Melissa Engle, a mother of a student borrower. âWe just went with that company without realizing we had options.â
âTheyâre just preferred, not mandatory,â 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.