Fox Business host Stuart Varney misleadingly claimed federal student loans are subsidized "at great cost to taxpayers," ignoring the fact that the Congressional Budget Office (CBO) projects that the federal student loan program will contribute more than $50 billion in revenue to the Treasury in 2013 alone.
Varney appeared on Fox & Friends July 18 to discuss a deal reached by a bipartisan group of senators to avert a short-term hike in the interest rates students pay for federally-subsidized loans. While Varney mentioned problems with the high cost of attending college and high levels of indebtedness among college graduates, he claimed the deal doesn't solve "the underlying problem which is we're subsidizing all of these loans at great cost to the taxpayer."
While the rising cost of college and high debt levels for graduates are a serious problem, the fact is according to the CBO subsidized student loans do not cost the federal government any money. On June 16, USA Today reported that the May 2013 CBO projection about the federal student loan program showed that the government could expect "a record $50 billion profit on student loans this year." Although the estimates for future years don't take into account the rates in the new deal, on July 18 USA Today also reported that the new Senate deal is "estimated to reduce the deficit by $715 million over the next decade."
A February post at The Wall Street Journal's Real Time Economics blog explained how the federal government makes a profit by subsidizing student loans:
One reason the government continues to make money off of the programs is that borrowers generally can't discharge student debt through bankruptcy, and the government can garnish wages, tax refunds and even Social Security payments to collect debt. That minimizes losses.
But there's another big factor: The government is borrowing at exceptionally low rates right now, while charging students higher rates to borrow.
The 10-year Treasury yield is currently hovering around 2%, up a bit from the historic lows hit in the last year. Meantime, the government is charging most student borrowers an interest rate of 6.8%, a rate set by Congress and which took effect in 2006. (Some borrowers are charged 3.4%, thanks to temporary subsidies approved by Congress in recent years.)
Thus the spread--the difference between the interest rate the government pays to borrow and what it charges to students--is unusually large right now.
The Washington Post's Wonkblog explained that some economists favor a different method of accounting that would include risk factors similar to private sector loans. Using this so-called "fair value" accounting method, the profits from the federal student loan program would vary by year with some years resulting in deficit and others in surplus. However, even according to this different analysis, in 2013 the program is still projected to result in profit.
Democrats such as Sen. Elizabeth Warren (D-MA) have criticized the federal government for ever making a profit from indebted college graduates, arguing that the program is a public good, but that doesn't give Varney license to mislead in this debate.
Conservative radio host Rush Limbaugh severely misrepresented several years of student loan-related legislation in an attempt to smear Democrats while pushing yet another unfounded conspiracy.
On July 1, interest rates on government-sponsored Stafford Loans automatically doubled from 3.4 to 6.8 percent. Myriad provisions to avoid the rate hike have been advocated by various caucuses in the House and Senate, as well as by the White House.
On the July 1 edition of The Rush Limbaugh Show, Limbaugh stated that "it was Democrat legislation that doubled the student loan interest rate, 3.4 to 6.8 percent." He went on to claim that, originally, "Democrats intentionally wrote law to make student loan interest rates double in an election year" so they could "blame it on the Republicans."
While Limbaugh attempted to pin the automatic rate hike solely on Democrats, the legislation in question -- the College Cost Reduction and Access Act of 2007 -- passed both houses of Congress with broad bipartisan support. On September 7, 2007, the bill passed 292-97 in the House of Representatives with 77 Republican votes before passing 79-12 in the Senate with 33 Republican votes. The legislation did not face so much as a cloture motion from the Republican minority.
Limbaugh's claim that House and Senate Democrats intentionally designed the bill to raise interest rates to previous levels during an election year to help Democrats' election prospects in 2012 is also false. The final rate expiration date specified in the College Cost Reduction and Access Act of 2007 was negotiated with Republicans to go into effect on July 1, 2012 - the original Democratic drafts had the rate cut expiring in 2013.
Last summer, near the height of the election, President Obama and Republican presidential candidate Mitt Romney both lobbied Congress to delay the rate hike for twelve months specifically to avoid making student loan rates an election issue, according to The Washington Post.
Finally, after falsely claiming that Democrats would use the returning issue of student loan rates as a "bludgeon" against Republicans, Limbaugh reiterated a long-debunked claim that the increased revenue from a student loan rate increase would go to fund Obamacare, claiming, "The bottom line is that the student loan rate is going to double. It's gonna go from 3.4% to 6.8%, and here's the reason why: Congress has figured out they need that additional money to spend on Obamacare. "
In the weeks leading up to an automatic doubling of federal student loan interest rates, broadcast and cable nightly and weekend news devoted little time explaining the effects of the rate hike and the expiration of other programs designed to help American students, graduates and families with increasingly high education costs.
In 2007, Congress passed a law to reduce interest rates on federal subsidized student loans, the Stafford Loan program, to 3.4 percent. The law was intended to reduce college costs and increase access to higher education. The Budget Control Act of 2011 ended several provisions of previous law; foremost setting an expiration date of July 1, 2013, for Stafford Loan interest rates. Today, those rates automatically double to their previous 6.8 percent.
Media Matters research found the looming student loan deadline has been largely ignored by major news networks in the past several weeks. Since May 23, the date the House of Representatives passed a party line student loan plan of its own, primetime and weekend television news has offered just 13 brief segments on student loan issues.
Absent from media analysis has been any real discussion of economists' recommendations for dealing with student debt. Many economists, including Nobel Prize winners Joseph Stiglitz and Paul Krugman, have supported various efforts to defray college costs, expand federal funding, and provide restructuring and refinancing options for student and family borrowers.
In May, the Consumer Financial Protection Bureau released a report on student loan affordability. It found that expanded refinancing options for student debt could have a simulative effect on economic growth, household formation and homeownership among borrowers. The Federal Reserve Bank of New York had previously found that student debt was a driving force in decreasing home and automotive purchases among recent graduates.
The rate increase set to take effect on July 1 will directly affect millions of Americans while making college less affordable for prospective students. The Congressional Research Service estimated that the higher rate could cost average borrowers more than $1,000 to take out a subsidized federal loan. College graduates are saddled with an enormous debt burden - more than $1 trillion through 2013, according to The New York Times.
Media Matters conducted a Nexis search of transcripts of Sunday and evening (defined as 5 p.m. through 11 p.m.) programs on CNN, Fox News, MSNBC, and network broadcast news from May 23 through June 30. We identified and reviewed all segments that included any of the following keywords: student loan, college loan, student debt, college debt, student, debt, loan, and college.
The following programs were included in the data: World News with Diane Sawyer, This Week with George Stephanopoulos, Evening News (CBS), Face the Nation, Nightly News with Brian Williams, Meet the Press with David Gregory, Fox News Sunday, The Situation Room, Erin Burnett OutFront, Anderson Cooper 360, Piers Morgan Live, The Five, Special Report with Bret Baier, The O'Reilly Factor, Hannity, On the Record with Greta Van Susteren, Hardball with Chris Matthews, Politics Nation with Al Sharpton, All In with Chris Hayes, The Rachel Maddow Show, and The Last Word with Lawrence O'Donnell. For shows that air re-runs (such as Anderson Cooper 360 and Hardball with Chris Matthews), only the first airing was included in data retrieval.
Media Matters only included segments that had substantial discussion of increasing student debt or the July 1 interest rate deadline. We did not include teasers or clips of news events, and re-broadcasts of news packages that were already counted on their initial broadcast in the 5p.m. to 11p.m. window.
While the five largest network and cable Sunday shows underreported economic developments in the past month, MSNBC's Melissa Harris-Perry provided ample discussion of the economy.
A Media Matters analysis of Sunday show coverage from May 12 to June 9 found that ABC, CBS, CNN, FOX and NBC devoted less than 36 total minutes to the economy. This lapse in coverage occurred despite multiple economic developments emerging over that period.
Of the Sunday shows analyzed, MSNBC's Melissa Harris-Perry stood out for its economic coverage. In five weeks, the show dedicated almost three hours to discussion on the economy -- by far the most coverage of the seven shows Media Matters analyzed. Melissa Harris-Perry was almost five times more likely to discuss the economy than CNN and network Sunday shows combined.
The show's discussion of the economy was diverse, touching on a range of topics including poverty in America, food insecurity, student loan reform, and the recent rebound of the housing market.
The show's ample and diverse economic coverage comes at a critical time -- according to a May 7 Gallup poll, a majority of Americans view an array of economic issues as high priorities.
Fox Business host Liz Claman suggested that students should attend less expensive colleges as a solution to the mounting student debt problem, a recommendation that does not comport with facts about higher education costs.
Commenting on President Obama's speech concerning the importance of finding loan solutions for students and families, Claman argued that parents ought to prioritize "finding a less expensive college" during their university search. From the May 31 edition of Fox News' America's Newsroom:
Claman's argument that aspiring college students should base their choices on tuition costs has little value since education costs are increasing across the board. According to the National Center for Education Statistics (NCES), the average cost of attendance (tuition, room and board) for the 2010-11 academic year at a public university was about $13,600. This rate represented a 42 percent inflation-adjusted increase from the 2000-01 year.
The growing costs have already altered students' choices about where to attend school. More than four in 10 college students are already choosing less selective college options to avoid mountains of debt. Many students opt for public over private universities based on cost calculations, but they still graduate with too much debt and too few employment options.
Claman's argument is even less valuable to the more than 37 million American students and parents who already carry student loans. According to data from the Federal Reserve Bank of New York, the share of 25 year olds with outstanding student debt increased from just 25 percent in 2003 to 43 percent in 2012. The average debt balance-per-student increased from $10,649 to $20,326 during that period -- a 91 percent increase.
Meanwhile, median annual earnings among full-time workers aged 25 to 34 with a bachelor's degree have dropped -- from 2000-2010, earnings fell 12.2 percent among men and 9.5 percent among women.
With interest rates set to double on July 1, from 3.4 to 6.8 percent on subsidized federal loans, tens of millions of Americans need real time solutions, not empty suggestions that ignore reality.
The Las Vegas Review-Journal promoted a plan to create a merit pay system for teachers, but failed to note that merit-based pay schemes have not succeeded and could hurt students in low-income areas.
In the May 1 editorial, the paper claims that criteria such as "teacher experience, credentialing, and graduate degrees do not translate to higher student achievement" and should no longer be the basis for pay increases. Instead, it advocates for a merit pay system, as proposed by former Nevada State Superintendent James Guthrie, which would increase teacher pay based on a testing criteria. The top earners would make $200,000 a year, which, in Guthrie's estimation, would attract some of the nation's top teachers and "rescue Nevada public education."
Teachers are currently paid less than comparable workers and their pay has been declining. However, switching to a merit based system is not a proven solution. A study by the RAND corporation which looked at a merit pay system that gave bonuses to better performing teachers, found that, while students performed better over the course of the study, "students of teachers randomly assigned to the treatment group (eligible for bonuses) did not outperform students whose teachers were assigned to the control group (not eligible for bonuses)." A similar RAND study analyzing New York City's experiment with bonuses for teachers found similar results, causing Education Week's blog to claim that it "put the final nail in the coffin" for the NYC program. According to Education Week, the study confirmed that the bonus incentive wasn't achieving its desired outcome:
Apparently the RAND study, commissioned by New York City's education department, was the final straw. The RAND researchers, like those in the previous studies, found the program did not raise student achievement in mathematics or reading in any grade, nor did it improve teacher job satisfaction. The findings led to the city's decision last week to eliminate the program.
Researchers suggested that the program had not adequately motivated staff to understand the program or buy in to the criteria for the bonuses, and noticed that both participating and control schools already faced intense pressure to improve because of the city's accountability measures.
Fox News hosts have been dismissing the effects of the across-the-board government spending cuts known as sequestration, claiming that "nothing is happening" following the cuts taking effect. But the cuts are already having negative economic consequences that will continue unless the cuts are replaced.
Fox News figures are reviving the myth that the Head Start education program is a failure, in light of reports that the program may lose funding. In fact, research shows the program benefits disadvantaged children in that it has a positive impact both early and later on in their lives.
Fox News political contributor Karl Rove attacked President Obama's proposal to expand pre-kindergarten education as too costly, despite the fact that investment in pre-k education returns more money than it costs. Rover further disregarded the reality that federal spending, including the 2009 stimulus, can often result in net savings.
On the February 13 edition of Fox News' Happening Now, host Jon Scott asked Rove about the pre-k education proposal the president outlined in his State of the Union address. Rove acknowledged that he has no evidence detailing the cost of the president's proposal, but claimed that similar plans would cost $25 billion. When Scott pointed out the return on investment, Rove dismissed it:
SCOTT: But you heard especially with regard to that universal pre daycare kind of thing, universal pre-kindergarten kind of thing the president said that for every dollar you spend on that kind of a program, you get something like $14 back.
ROVE: Well that's how we justify everything. The president justified the stimulus by saying if we spent money on the stimulus, 800 and some odd billion dollars that it would grow the economy. Look, we have tried this idea that we can spend our way to prosperity for four years.
Contrary to Rove's assertion, economists agree that the stimulus has a successful record of creating jobs and preventing a deeper economic recession. Rove also failed to take into account the economic benefits of pre-k programs specifically. For instance, according to Scholastic, "Economists say that the return for every dollar invested in preschool can be anywhere from $2 to $17 when you total the drop in special education, grade repetition, and crime, and add the value of a more productive workforce." A 2005 study by the University of Texas' Children's Learning Institute estimates the return on investment at somewhere between $7 and $8 for every dollar spent, and National Head Start Association study pegs the benefits at $9 returned for every $1 invested in Head Start alone.
From the Children's Learning Institute:
From the February 8 edition of Fox News' The Five:
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Ohio media reporting on Gov. John Kasich's (R) new education funding plan neglected to inform readers that the plan funnels millions of dollars in increased spending to private schools and charter schools whose operators have donated millions in campaign contributions to Kasich and Republicans in the state legislature.
The Akron Beacon Journal reported on the Kasich plan's significant enrichment of private school operators and the charter school management industry (emphasis added):
The $8.5 million expansion in the first year represents a 7 percent increase in allocations for vouchers. Based on the average voucher cost of $5,997, the additional funding could afford scholarships for more than 2,800 children by the end of the budget cycle in 2015.
The budget also expands funding for charter schools, adding an additional $100 per pupil for facility improvements at the privately operated alternative schools. That's an additional $11.9 million for charter schools based on the Beacon Journal's projection of 2011-2012 student enrollment figures.
The Beacon Journal didn't mention that the additional $11.9 million for charter schools represents a significant return on the investments of for-profit charter school operators who have helped fund Republican campaigns in Ohio for years. One such operator is David Brennan, whose White Hat Management is among the largest for-profit charter school operators in the state. Brennan and his immediate family contributed over $430,000 to Ohio Republicans in 2010, including $46,000 to Kasich's gubernatorial campaign, according to a Plunderbund.com review of state campaign disclosures. Brennan and another for-profit charter school operator, William Lager, have reportedly funneled over $4 million to Ohio Republicans since 2001.
Ohio's largest print news outlets -- including the Columbus Dispatch, Cincinnati Enquirer, Cleveland Plain Dealer, Dayton Daily News, Toledo Blade, and the Beacon Journal -- not only ignored the financial connections between Kasich's charter-friendly plan and his campaign donors, they also failed to note that the charter school industry is receiving this boon despite consistently performing well below Ohio's traditional public school districts. Recently released report cards for the 2011-12 school year indicated that "while 92 percent of the state's public school districts scored effective or higher...only 26 percent of charter schools did."
Brennan's White Hat Management has a particularly poor record of academic success, according to reporting by NPR.org. NPR's examination found that for the 2010-11 school year, no White Hat school in Ohio earned higher than a "C" on the state report card, and most received a rating of "D" or "F." White Hat was also sued by the schools it manages for pocketing "at least 95 percent of the schools' tax funding."
Nevertheless, White Hat stands to benefit from Kasich's new plan. Unfortunately, Ohio's parents and students are not benefitting from adequate media focus on Kasich's continued financial conflicts of interest.
Media outlets cherry-picked facts from a recent Health and Human Services report on the Head Start education program to promote the myth that the program is a failure. However, neither the HHS report nor other studies confirm those claims, and reports actually show the program has had a positive impact both early on and later in students' lives.
From the December 12 edition of Fox News' Fox & Friends:
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Fox misrepresented the effect of a Massachusetts plan to provide access to its state colleges for some immigrants in order to falsely suggest that this plan would be a burden on other students and taxpayers.
On November 19, Massachusetts Gov. Deval Patrick reiterated a policy granting undocumented students the ability to qualify for state resident tuition rates at state colleges. The Massachusetts DREAM Act would allow young people who meet federal Deferred Action for Childhood Arrivals criteria to receive in-state tuition rates if they meet residency requirements.
On the December 3 edition of Fox & Friends, co-host Brian Kilmeade opened by misrepresenting the law, asking, "Should illegals be allowed to get a break on in-state tuition on the backs of legal students?" He followed up by claiming Massachusetts had made this possible. Kilmeade hosted Massachusetts State Rep. James Lyons who asserted that the law forces "struggling taxpayers of Massachusetts to subsidize those who are breaking the rules." Co-host Kilmeade agreed with Lyon: "[Y]ou believe you should actually be an in-state resident and legal in order to receive [in-state tuition]. What a novel thought." From the show:
From the November 30 edition of Fox News' The Five:
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