The student loan industry has been too cozy with colleges and universities and has harmed students, at least that’s what the media say.
“For 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,” explained the May 29 USA Today.
But that investigation has been an anti-industry “crusade” waged by liberal New York Attorney General Andrew Cuomo, and the media have been fighting alongside him.
The Washington Post called Cuomo’s findings a “crisis enveloping the loan industry” on June 2. NBC’s Brian Williams said “a growing scandal has rocked the multibillion-dollar student loan industry” in a May 10 “Nightly News” 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 “at the expense of students.” 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.
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 “consumer advocates” U.S. Public Interest Research Group (PIRG).
The media also didn’t prove any students were harmed; ignored the responsibility of borrowers to make informed decisions; and left out benefits private lenders bring to the program.
Headlines like “Private Loans Deepen a Crisis in Student Debt,” and words like “scandal,” “bribing,” “kickback,” and “payments” tarred the entire industry.
The media also used examples of students deep in debt, like Lucia DiPoi.
On June 10, The New York Times complained that DiPoi “gave up her dream” of working in an overseas refugee camp as the result of too much debt. While the Times mentioned that DiPoi went to Tufts University, they did not question her decision to go to a school that costs $44,500 per year. That’s nearly three and half times the average cost of a public college or university.
The reporting on Cuomo’s investigation made wrongdoing on the part of a few lenders and college administrators seem commonplace – 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’s Student Loan Providers (ASLP).
“The incidents we’re talking about are a small fraction of schools and lenders. But this is being painted with such a broad brush,” said Bruns. “That’s bad for the industry and for the students who have to make decisions about whether to go to college or not.”
Despite all of the accusations from Cuomo parroted by reporters, reports failed to prove significant harm to students.
“[R]egulators are questioning whether students and alumni have been paying higher loan rates because of the cozy deals,” said USA Today on May 16.
And again on May 29, USA Today warned: “For 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.”
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 “cozy deals.”
Also, the benefits from competition and innovation of private lenders was completely left out of most reporting.
