Students Increasingly Choosing Private Student Loans
According to analysis of Department of Education data released last week, the number of college students taking out private student loans over the last five years has risen sharply.
Analysis by student advocacy group The Project on Student Debt revealed that the percentage of all undergraduates who took out private student loans last school year jumped to 14 percent from 5 percent during the 2003–04 academic year (“New Data Show Big Increases in Private Student Loan Borrowing,” The Project on Student Debt press release, April 21, 2009).
The data showed that students attending schools that charge more than $10,000 in tuition and fees were more likely to use private student loans than were students attending less costly institutions. In fact, these for-profit colleges and universities saw the percentage of students who took out private student loan skyrocket to 42 percent last year compared to 13 percent five years ago.
The Project on Student Debt also found that slightly more than a quarter of private student loan borrowers didn’t take out federal student loans: 14 percent didn’t even apply for federal financial aid, and 12 percent filled out the Free Application for Federal Student Aid but chose not to take out a federal Stafford student loan.
These federal student loan statistics are particularly concerning, said Laura Asher, acting president of the Institute for College Access & Success, which runs The Project on Student Debt, because federal loans are available to nearly all students, regardless of their income, and because federal loans tend to have more favorable interest rates and repayment terms than private student loans.
“Too many students,” Asher said, “are missing out on federal loans and going straight to one of the riskiest borrowing options.
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