The college-cost denial industry

For the last few years, even higher education’s most ardent boosters have admitted the industry has a serious cost problem. They try to console borrowers with stories about the value — both transcendent and practical — of a college diploma. The best salespeople liberally sprinkle in empathy for families who are paying truly outrageous attendance costs. As student debt grows unabated, however, we’re now witnessing the emergence of a new line: The problem is not so bad.

Earlier this week, a report from the Brookings Institution made waves for implying that the answer to its titular question “Is a Student Loan Crisis on the Horizon?” is “no.” The report’s authors Beth Akers and Matthew Chingos conclude, after a very narrow evaluation of cherry-picked data sets, that borrowers can afford the cost of higher education, and that the system is not out of whack. David Leonhardt, managing editor of the New York Times explainer vertical The Upshot, more or less reprinted a dissent-free summary of the report as fact on the paper’s third page — near-perfect traction for Brookings.

Some other commentators have poked holes in the Brookings report, but the Times placement means it’s probably too late. Already in offices and classrooms and bars across the nation, citizens who fancy themselves well informed are no doubt third-hand-explaining away the student debt crisis. Maybe the incoming class of 2018 took a deep sigh of relief when they opened Tuesday’s paper and emailed it around. Akers and Chingos have changed the conversation on student loans, but not for the better. At least not for borrowers.

The statistic that Leonhardt led with is the most dramatic, and one of the weakest in the Brookings report. “Only 7 percent of young-adult households with education debt have $50,000 or more of it,” he wrote. “By contrast, 58 percent of such households have less than $10,000 in debt, and an additional 18 percent have between $10,000 and $20,000.” The report uses data from a 2010 New York Federal Reserve household survey and labels it “distribution of debt.” But when Donghood Lee, a senior economist at the New York Fed itself, presented findings on household debt in 2013, he used a different measure, with a much different result. The 2012 distribution of student debt according to the New York Fed Consumer Credit Panel found that 12.7 percent of debts are over $50,000, with only 40 percent of loads under $10,000. We can (and should) debate the differences and comparative validity of these measures, but Akers and Chingos didn’t. Instead, they appear to have started with an agenda and searched out the few statistics that seem to support their point.

The Brookings report isn’t so much inaccurate as it is misleading, and it isn’t the first think tank study to use smoke and mirrors to underplay the student loan situation. A much-publicized policy brief by Jason Delisle of the New America Foundation in March begins with the leading question “Is America’s student debt problem due more to expensive graduate degrees than unaffordable undergraduate educations?” The answer, no matter what data you look at, including Delisle’s, is “no,” but he never says that. Instead, with the most superficial historical comparison of graduate students’ total debts, he suggests the government can right the ship by instituting limits for graduate student loans. It’s a surprisingly shoddy effort, especially given the legitimacy the press has accorded Delisle, but he’s been very effective at disrupting the narrative around higher education costs.

One thing Brookings and New America have in common, besides a conclusion, is a funder. Both have been recently linked to the nonprofit Lumina Foundation, which was founded on $770 million from the sale of student lender USA Group to Sallie Mae in 2000. Lumina, Buzzfeed reports, has given Delisle’s New American Foundation nearly $3 million since 2008. Salon reported earlier this month that Chingos has received $500,000 from Lumina, $300,000 of it granted to him and Akers during the past year. Brookings received more than $1 million from Lumina in 2013 alone. Despite all the coverage for both the Brookings and New America papers, other reporters haven’t bothered to dig into these relationships and ask why a foundation that emerged from Sallie Mae stock options is so interested — now more than $1 billion interested — in making the rapidly expanding student debt crisis look sustainable.

It’s not hard to figure out why lenders want borrowers and policymakers not to panic. When the Obama administration nationalized 85 percent of higher education lending in 2010, executives like the ones who now sit on the Lumina Foundation board were the big losers. Since then, college costs have continued skyrocketing, but the tens of billions in profits have gone to the Department of Education instead of private lenders. If you were them, and you were angling to get back in the game, the first step would be to edge the government out, either by getting the feds to withdraw or by keeping costs rising faster and higher than DoE loan limits. Graduate loans are a great place to start in a divide-and-conquer strategy, so it’s no surprise that Delisle concludes in favor of shrinking the government’s role. Nor is it surprising that Akers and Chingos can’t find a cost crisis, even though theirs is a fringe minority opinion among higher education analysts and investors.

There’s an agenda here, it’s well funded and knows just how to attract the right kind of attention. Brookings, New America and other think tanks provide perfect fodder for explainer sites such as The Upshot and Vox, where single-source reporting seems to be in vogue. Still, these reports are right about one thing: The student debt bubble isn’t going to explode like the housing bubble. Instead, it’s going to fill slowly as it grows over decades, burdening borrowers further and further into the future. As Roosevelt Institute fellow Mike Konczal points out, though the Brookings paper celebrates stability in the size of month-to-month payments over time, the average repayment period has nearly doubled. A recent analysis by Leonhardt’s colleague Anna Bahr shows how a new Obama administration repayment plan costs the average debtor more in the long run than the standard models. Instead of buying homes and cars, borrowers are paying down debt so colleges can buy more dorms and student centers. Though they only get to enjoy them for only a handful of years as students, they pay on a long installment plan.

This is the lender agenda: Costs stay on the same path, repayment periods (and interest totals) increase, and the federal government’s market share slowly dilutes. That’s how private lenders can regain their place in the higher education sector, but it works only if the public doesn’t stop them. Think tanks and the click-hungry journalists who love them are the perfect vector for distributing an authoritatively calm message to an anxious public. I wouldn’t go so far as to call Chingos a “right-wing stooge” the way Salon did, but he, Akers and Delisle are in the service of profiteers, and no amount of hemming and hawing about which big pile of money comes from where can obscure that. We’re a skeptical public, with more access to primary source data and modes of public communication than ever before, and we won’t be so easily led astray by palace courtiers such as these.