A recent study by the Institute for Higher Education Policy (IHEP) finds that private loans are becoming an essential part of financing higher education for an increasing number of students. “The Future of Private Loans: Who Is Borrowing, and Why?” reveals that more and more borrowers are turning to private loans to help subsidize their education costs, with more than three-quarters of private loan borrowers also receiving federal aid through the Stafford loan program.
The national report examines both the private loan industry and characteristics of borrowers, as well as trends that could impact the future growth of private loans, aiming to increase understanding among consumers and policy makers about the burgeoning industry.
Some of the key findings reached by the study include:
- Private loans account for 19 percent (as of 2004) of all student loans awarded – an increase of 14 percent in the past 10 years.
- Rising tuition costs coupled with stagnant federal loan limits are leaving students with greater unmet financial needs.
- The competition and variable interest rates on private loans translate directly into significant differences in eligibility and pricing.
- The majority of private loan borrowers take out the maximum amount of Stafford loans.
- More than 20 percent of private loan borrowers do not take out federal loans – believing that private loans are more convenient or that initially low interest rates are more in their favor.
To learn more about private loans visit the Nelnet College Planning Web site.
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