CNN Recites Party-Line of the Fed's Student-Loan Takeover, Neglects Consequences
On the morning after the House passed the legislation, CNN Newsroom's Kyra Phillips did dedicate just thirty-four seconds to the government take-over of the student loan program.
"The measure also reaches beyond health care to education. Another one of President Obama's top priorities - it will offer new help to needy college students," Phillips stated.
The segment - tagged "Help for College Students" by the CNN Newsroom - promoted all the alleged benefits to students and families.
"It will actually expand direct-lending from the federal government; students would not have to pay fees to the banks that serve as the middleman; the White House says the expanded program will save the government $61 billion over ten years; and much of that savings will be funneled back into Pell grants - the increase will be pretty modest though - from $5,500 now to $5,700 in 2017," Phillips said.
In fact the federal overhaul presents a myriad of consequences - not only for "needy" college students, but for small-businesses and private lenders, local communities, efficiency and savings, taxpayer costs, and consumer choice and competition in the face of another federal overhaul.
"The changes would see the Department of Education become virtually the sole provider of student loans through a government-backed program that accounts for the vast majority of loans made," Dow Jones Newswire's Corey Boles said March 22.
Kevin Bruns of America's Student Loan Providers (ASLP), a public-private partnership representing 74 percent of the total guaranteed student loan market through the Federal Family Education Loan Program (FFELP), released a statement of opposition to the Congressional goal to end FFELP.
"ASLP members offer low-cost loans and superior levels of service to millions of students and most of the postsecondary institutions that participate in FFELP," Bruns wrote, arguing the need for competition in the financial market.
CNN's report cited a study saying the move would "help" students and save taxpayers' costs. But, according to ASLP's website, although the cost of all entitlement spending increased by 52 percent from 1991-2003, the cost of the private sector program declined by 100 percent.
"If the federal government is given responsibility for making and administering all loans, there the quality of service in loan administration could be poor, presenting challenges for borrowers and colleges," The Heritage Foundation's Dan Lipps wrote in 2009.
And just as all government projections should be taken with a grain-of-salt (if that), the White House estimate cited by Phillips does little to arouse much confidence. Since 2001, the FFELP actually returned more than $12 billion to the Treasury (due to faulty government estimates), and in every year since 1997 the Government Accountability Office found that the Direct Loan program spent more than it collected in fees and interest.
More than 500 schools have left the Direct Loan program to return to private sector programs.
Image via NeoRepublica