'Nightly News' Takes Populist Tone on Student Loans

     If you watch the news, you’ll see financial hardship examples for everything – home prices, food prices, energy prices – you name it. “NBC Nightly News” found another downbeat economic problem to harp on – the lack of funds for federal student loans on March 6.


     “More than a dozen lenders have pulled out of the federal student loan program, unable to raise enough money to make loans,” NBC correspondent Tom Costello said. “Now – Pennsylvania, Missouri, Michigan, New Hampshire and Iowa have suspended parts or all of their student loan programs – unprecedented.”


     According to Costello, “many” students could end up with loans that have interest rates “pushing 11 percent.” But according to Bankrate.com, the national overnight average for student loans ranged from 6.8 percent to 8.5 percent. That’s a distant cry from Costello’s dire prediction.


     As a solution to this problem, Costello suggested government intervention. “Pressure is building on the federal government to step in as the lender of last resort,” Costello said.


     Costello ignored certain market pressures, specifically from the federal government, which have forced tuition to rise. As the availability of federal aid has increased, some say it has caused the inflation of college tuition.


     “With more money available for loans, colleges feel a degree of freedom to increase tuition,” a Sept. 28, 2007 Investor’s Business Daily editorial said. “In 1987, when he was secretary of education, William Bennett noted that rising federal aid had ‘enabled colleges and universities to blithely raise their tuitions, confident that federal loan subsidies would help cushion the increase.’”


     The media have shown a tendency to exaggerate the norm in its negative coverage of economic news, making conditions seem worse than they really are. Costello’s story used a family in Connecticut, the Perfettos, as anecdotal evidence to show that people are being hurt by the situation, but without giving necessary context. University of Connecticut – the school that the Perfetto’s children will be attending – is more expensive than average for a public four-year institution. But Costello didn’t mention that.


     The average cost of attending college at a public four-year institution is $6,185 a year, according to CollegeBoard.com. However, the cost to attend the University of Connecticut, with in-state tuition, is $17,692 a year, according to the college’s Web site. It’s even more expensive – $31,636 – for an out-of-state student.