WaPo’s Student Loan Crisis

Another story in The Washington Post, under the title of “Student loans seen as potential ‘next debt bomb’ for U.S. economy,” continues the paper’s practice of ignoring how a Post subsidiary is contributing to the problem.

The student “debt bomb” is a real problem. The Post article is based on a report entitled, “The Student Loan ‘Debt Bomb:’ America’s Next Mortgage-Style Economic Crisis?,” which was published by the National Association of Consumer Bankruptcy Attorneys  and examines the fallout from higher tuition, higher interest rates and a bad job market for graduates. Total outstanding student loans exceeded $1 trillion for the first time last year, it says. But it is not just a problem stemming from practices at state-funded or public colleges and universities.

Rusty Weiss, who  wrote the AIM investigative piece, “Scandal at The Washington Post: Fraud, Lobbying & Insider Trading,” says, “Today’s article on student loans becoming the ‘next debt bomb’ on the U.S. economy is yet another example of the Post reporting on an industry-wide problem, while ignoring the role of one of their own in the process. They speak of the perils of student loan defaults without ever mentioning the company’s personal lobbying efforts to allow default rates at for-profit colleges, such as Kaplan, to rise as high as 40 percent annually.”

The Post story is by Eric Pianin, identified as “Washington editor for the Fiscal Times, an independent news organization that provides original reporting and analysis on fiscal and economic matters.” The Fiscal Times is owned and funded by Peter G. Peterson, a respected businessman who serves as senior chairman and co-founder of The Blackstone Group, founding chairman of the Institute for International Economics, Chairman Emeritus of the Council on Foreign Relations, and founding president of The Concord Coalition. The latter is devoted to fiscal discipline and eliminating federal deficits.

Although Pianin is writing for Fiscal Times, he is a former Washington Post editor and budget reporter and is in a position to understand how the Post subsidiary known as Kaplan has come under scrutiny for its questionable educational practices. Indeed, Pianin worked for the Post for 28 years, leaving in 2009, and benefited from Kaplan subsidies for the paper. The Post Company bought Kaplan from its founder, Stanley Kaplan, in 1984 for $45 million.

Kaplan “has provided the handsome profits that have helped to cover this newspaper’s operating losses,” admitted Post reporter Steven Pearlstein. “Although we in the Post newsroom have nothing to do with Kaplan, we’ve all benefited from its financial success.”

But the Weiss piece notes that the profits have come at a cost of putting many students into deep debt with degrees that don’t translate into good jobs. Weiss documents how the Post, including Chairman Donald E. Graham, lobbied to water down federal regulations which would have cleaned up the way the company does business and protected students from rip-offs.

One of the chief complaints against Kaplan has been that it enrolls students using federal loans that leave low-income students indebted and unemployed. Congressional hearings featuring victims of the company have been held and lawsuits have been filed over its practices.

Weiss noted, “Any company, such as Kaplan, that has been subject to so many government investigations and lawsuits, would be reported on by most responsible news organizations. Why does the Post bury its head in the sand on the Kaplan story, and is Graham personally responsible for suppressing such information?”

Calling this scandal The Washington Post’s Watergate, we have argued that the paper’s reporters have a vested interest in ignoring the serious nature of the scandal because the bad news could affect Post profits and their livelihoods, even their jobs.

Ignoring Kaplan, the Pianin article in the Post, courtesy of Fiscal Times, emphasizes the case of David Ingham, a 70-year-old disabled Vietnam War veteran, who co-signed about $50,000 worth of student loans for his son to attend a fine-arts school in Minneapolis as well as Catholic University in Washington.

The article notes, “Ingham’s son held a couple of jobs after he left Catholic University, but he was laid off in October 2009 and has not found work since. When his son could not repay his loans, a Sallie Mae collection agency took the family to court, seeking to place a lien on the Inghams’ condominium in suburban Edina.”

Heart-wrenching stories can also be found regarding Kaplan, as Weiss detailed in his article.

A search of the Fiscal Times website discloses that, rather than subject Kaplan and other for-profit educational companies to such scrutiny, it has gone so far as to question the official attention that has been paid to them. “Assault on For-Profit Education Will Hurt Economy” is one notorious example. The article by Liz Peek stated, “Undoubtedly, some career schools engage in deceptive and fraudulent recruitment and financing practices, which are illegal and should be stamped out. However, we should not undermine the prospect of significantly widening educational opportunity.” Peek is a former Wall Street research analyst.

This is essentially the same line that has been taken by Post chairman Graham, who is trying to protect his profits while claiming to crack down on questionable practices at Kaplan. The company hired former Obama aide Anita Dunn to lobby on its behalf.

Weiss argues that the Post in particular has a pressing obligation to report on problems in this area. However, he says, “Despite student loan default rates over 30 percent, recruiting tactics which prey on an individual’s ‘pain and fear,’ and a history of generating massive profits while saddling their most vulnerable students with massive debt, Kaplan University continues to escape scrutiny by their parent company, the Washington Post.”

He adds, “What is worse here?  The fraudulent tactics and questionable lobbying efforts, or the journalistic malpractice being exercised in failing to report on Kaplan?”

Cliff Kincaid is the Director of the AIM Center for Investigative Journalism, and can be contacted at cliff.kincaid@aim.org.

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