Tax stuff I think is interesting. It is either copied from my primary blog on forbes.com http://www.forbes.com/sites/peterjreilly/ or stuff that I did not put there because being on forbes is a good gig and they have, you know, standards. Also some guest posts.
Saturday, August 30, 2014
Is There a Media Blackout of the Student Loan Crisis ?
Originally Published on forbes.com on January 30th,2012
I was lucky enough to break what has turned out to be the most widely reported higher education media story of the last couple of years. Namely, this was the fact that we now owe more on student loansthan we do on credit cards, nationally. While citizen tips, apparently, don’t merit full credit for stories such as these from the mainstream media, I did manage to earn a short quote in the story for my efforts (WSJ, 8/9/10). I used this opportunity to decry the astonishing lack of media coverage on the student loan issue, and backed up my claim with research showing a 15-to- 1 disparity between coverage of credit card related issues and student loan stories.
Well, flash forward a couple of years to the present. We’ve seen our national student loan indebtedness blow past the $1 Trillion mark, seen the colleges raise their prices at record breaking rates, and even witnessed thousands of citizens (myself included) literally camping out in protest at public spaces across the country out of anger about the state of our economy, with student loans frequently mentioned first or second among the driving issues for these occupations.
Recently, after being snubbed yet again by NPR on a student loan piece they decided to shelve (this was the 5th or 6 th time I’ve worked with them on stories that never made it to air), I repeated my disparity analysis. This time, the ratio was better, at about 8- to-1, but still nowhere near parity. Most importantly, what has been made up for in quantity still lacks badly in quality. The standard “NPR” angles are non-starters. They waver between an artificial “White Hat, Black Hat” contest between public andprivate student loans, or get bent badly into a similar drama concerning non-profit, and for-profit colleges. And of course, there are always the “poor me, I really screwed up” stories that make much hay out of the misery of irresponsible student loan borrowers.
While I single our NPR because they are among the worst offenders, it is fair to say that the media generally, have almost completely failed to investigate the important facts that have come out on this issue over the past year. Facts that compel further investigation, and which would illuminate directions for the solution of this problem. For example, no one has bothered to ask the question: Why has the Department of Education, if it knew the default rate across all schools was greater than 1 in 5 for so many years, failed to warn the public about the true risks they were taking on when signing for their student loans? By my best estimate, the true default rate, today, is flirting with 40%, and may even be higher, actually, but even at 20%, the point remains. Today, as a decade ago, the schools, lenders, and even our Department of Education talk only about “cohort” default rates, which are but a fraction of the true default rate. At the minimum, this is obvious big, bad government stuff that should have been followed up on the day after the initial story broke (and acted upon by the President and Congress, I might add). Another burning question: Why has no one bothered to ask why, when fundamental consumer protections including bankruptcy, statutes of limitations, Truth in Lending laws, and others were erased fromfederal student loans, no one bothered to tell the students about this fact prior to their taking the loans? This has been the case for years, and is a practice which continues to this day. This is tantamount to selling someone a parachute, but not bothering to mention that there was no reserve chute. Something that most people would want to know.
Yet another: why on earth has the media completely failed to follow up on the fact that not only the big lenders and guarantors make money on defaults…even the federal government (Yes, the Department of Education), actually makes money on defaults, and makes more on defaults than on loans which remain in good stead? This has been the case for years, yet where is the media? They’ve been alerted. So now imagine our parachute shop, where not only is the reserve chute missing, but the tight-lipped shopkeeper has actually taken a out life insurance policy on our unwitting customer! If it turned out that Citibank, and their guarantors were making more money from defaulted credit cards than healthy accounts, there would be something like rioting in the streets. Not so for student loans? Even with Uncle Sam a knowing participant in the scheme? These are only a few of the many questions that scream out to be asked, and answered in the mainstream media. Enough of the fluff, non-starting, hand-wringing, or borrower-bashing garbage, folks. Good investigative journalism is most critical to the citizens, be they investors, consumers or otherwise, during times of national distress, which is where we find ourselves now. The country needs the truth at times like these. Not beltway, or Wall Street concoctions designed to promulgate the status quo. Don’t blow it, even if it means taking a nip out of the the hand that feeds you.
Alan mentioned how outraged people might be if it turned out that defaulted credit cards were profitable. You might want to look at this pieceI did on Capital One’s accounting for its late fee income. Any guess as to what the relationship is between late fees and amounts spent on “rewards”.