Recent college grads are in a tough spot, with student loans that need repayment and an economy that is leaving many of them underemployed or worse. But the network news media have exaggerated individual burdens of student debt by using examples of enormous rather than average debts. They’ve also often ignored systemic problems that have led to the “crisis” of student loan defaults, at the same time that the left has called for bailouts.
When network news stories include college students who talk about how much they owe for their education, the average amount was a whopping $66,833. But the 2012 average student loan debt, was much lower: $27,253.
In the past year of network coverage about student loans there were 12 stories that mentioned how much someone owed. One particular ABC report mentioned three people, who all owe much more than the average. Out of those 12 stories, nine of them cited people who owed far more than the 2012 average $27,000 in debt for an undergraduate degree -- on average 245 percent more! Complicating the issue, reporters didn’t always clarify whether the debts included graduate school loans too.
It is true that overall student debt is mounting: the total outstanding debt crossed the $1 trillion mark in late 2012. Early defaults also rose in 2011 [those who defaulted within two years of their first payment] and President Barack Obama wants to increase eligibility for income-based repayment which would force taxpayers to foot the bill for the balances that would be forgiven after 20 years of minimal payments (less for public sector and nonprofit workers), The Wall Street Journal reported May 10, 2013.
ABC “World News” aired a piece called “Generation Debt” about mounting student debt on May 13, 2012. In it they included three Columbia University graduates, all with higher than average debts: $40,000, more than $100,000, and $120,000. The girl who was $120,000 in debt said, “it's just an investment in your future. It sounds cliche, but it's true.”
While a college education can be an investment in your future, ABC’s report focused on students at the fourth most expensive college with its total annual cost of $58,742, according to rankings by Campus Grotto. The report failed to point that out for viewers, although it did discuss the Occupy Wall Street movement’s complaints regarding student debt.
NBC “Nightly News” focused on millennials being stressed out because of high debts and solicited feedback through facebook for the Feb. 7, 2013 broadcast. Unsurprisingly, the network was contacted by many people including 24- year-old Allie Zimmerman, who has nearly $80,000 in student loans. Nancy Snyderman then turned to Dr. Katherine Nordal from the American Psychological Association who warned, “Many of these students have come out of college or graduate school with horrendous student debt, into a job market where there are not many jobs. This has put their life plans, probably, on hiatus. They may be postponing marriage, postponing having a family.”
CBS “Evening News” also tackled the “growing problem of student loans,” on March 17, 2013. They focused on Anna Espinoza and her $48,000 in art school debt. She has struggled to find a job in interior design and has fallen behind in her loan payments. She wants the system changed.
“There needs to be a change made on how easily they're given out and how high the interest and how long they can keep you in debt for like the rest of your life, really,” Espinoza said.
Complaints like hers fit right in with left-wing clamoring for a student loan bailout. Campus Progress, a project of the left-wing and Soros-funded Center for American Progress, has many articles on the subject including an editorial from Georgetown University’s student publication.
The editorial griped, “Just as the housing crisis trapped millions of Americans in suffocating mortgages, student debt is preventing millions of college graduates from attaining a basic level of financial security and achieving a decent standard of living. Like the toxic no-asset, no-income loans that sparked the economic crisis in 2008, banks hand out huge loans to students, despite grim job prospects that leave little opportunity for repayment. And as the bubble hones in on $1 trillion, private loan agencies continue to rake in the profits. It’s crony capitalism at its very finest.”
Of course liberals love to blame lenders for the people having debt even when no one forced these students to borrow the money. It was their choice. Also, calling it crony capitalism is ironic since the editorial was published in April 2012, years after the 2010 government takeover of the student loan system.
Time magazine reported on April 5, 2010, that if the ObamaCare bill was passed then “the federal government would sweep aside private competitors in the biggest change to the federal student-loan program since its creation in 1965. It’s a legitimate government takeover.” Even before that, the government was very involved in student loans, subsidizing such lending and shouldering much of the burden for defaults.
Around that same time, Jesse Jackson via The Huffington Post was pushing for an even bigger handout. Taking over the industry wasn’t enough for Jackson, “They need a guarantee that the savings realized by cutting out the banks and Sallie Mae go mostly to them. There are lots of hands for the income that direct student lending will generate. Some of it will go to subsidize universal access to health care. But most of it should go to the students themselves.”
Calling the situation the “Second Great Depression,” Jackson opined that “students should not have to worry about loan repayment while they are unemployed and looking for work. Nor should compound interest mount during periods of unemployment.”
Student debt was also one of many complaints of Occupy Wall Street protesters. In the 2012 campaign, Obama often brought up his desire to stop a student loan interest rate hike.
But according to Bloomberg Businessweek student loan defaults are a “needless tragedy” because there are “many good options for debt relief -- deferment, forbearance, or reductions in monthly payments.”
They quoted Mark Kantrowitz, president of MK Consulting and operator of FinAid.org, who said, “There is actually no rational reason for a borrower to be delinquent or default on their loans.” If a borrower is out of work, in the military or back in school, they can request full or partial deferment for up to three years (with federal loans). “For those who have a job but don’t earn enough to cover the monthly payment, there are six options,” the magazine reported.
The Distorted Market for Student Loans
Student borrowers like to complain that college tuition is too high. In some cases tuition is very expensive and climbing, but it important to remember that no student is forced to choose a costly school over a less expensive one. Just as they aren’t forced to borrow for their education.
Neal McCluskey, associate director of Cato Institute’s Center for Educational Freedom, wrote in the American Spectator online in February 2008 that the real inflaters of college tuition lies in Washington which lavishes “aid on students that pushes tuition up, up, up.”
“There are many cost-driving excesses in higher education — luxurious dorms, unused classroom space, growing bureaucracies, expensive academic journals, and the list goes on — that are intermediate causes of the college cost problem. They are all, however, undergirded by a single reality: You can’t charge an arm and a leg unless people can pay it, and to curry favor with colleges, kids, and parents Washington ensures that those limbs keep coming, taking them from taxpayers and giving them to students and schools,” McCluskey wrote. He then cited the growth of federal student aid which “ballooned from $48.7 billion in the 1996-97 academic years to almost $86.3 billion in 2006-07, a 77 percent leap.”
Similarly Mary Kate Cary wrote in USNews and World Report online in late 2011, that in the 1980s the limit for borrowing for federal student loans in a year was $2,500. By 2011, it was $31,000 for four years. “The more money the federal government pumps into financial aid, the more money the colleges charge for tuition.”
Another problem is that unlike most kinds of loans, student loans are offered regardless of whether that person is a good credit risk. As Bloomberg Businessweek noted: “[S]ome of these student borrowers were probably lousy bets for repayment in the first place. The federal government, which holds 85 percent of outstanding student debt, doesn’t make loans to students based on their ability to repay them. That may sound crazy, but it is designed to ensure that students of all backgrounds and income levels get a shot at a college degree.”
A noble goal perhaps, but the consequence has been increasing defaults especially in recent years as graduates struggle to find work.
Jackson Toby, professor of sociology emeritus at Rutgers University and adjunct school for AEI, wrote for The American that “Too many have enrolled in college believing they could have four years of fun and graduate from any four-year college after majoring in any field — gender studies, sociology, ethnic studies — and obtain well-paying jobs easily. Unfortunately for them, the market for college graduates has changed.”
The bailout plan in Obama’s budget would only make the problem worse according to some. University of Maryland economist Peter Morici wrote that “Debt forgiveness simply encourages young people and parents to continue poor choices and borrow too much, and colleges to push up tuition-things the nation can't afford. It certainly won't help graduates find jobs.”
The Wall Street Journal noted that critics of the plan also say the administration is underestimating how much it will cost taxpayers. “Economists at Barclays BARC.LN +0.55% PLC said the current program, along with loan defaults, could cost the government $300 billion between now and 2020. Barclays hasn't released an estimate of the Obama proposal's costs.”
The same article said, “some GOP lawmakers and private analysts have criticized the current income-based repayment program. In their view, it encourages students to take on big debt, knowing much of it will be forgiven, and enables schools to raise tuition, relying on the government to pick up the tab.”