WASHINGTON, D.C.
As incoming college students continue to borrow from private lenders to combat rising tuition costs, low-income undergraduate students are among the least informed about the financial aid process, according to a new report released today (Friday) by the Institute for Higher Education Policy.
In “The Future of Private Loans: Who Is Borrowing, and Why?” the authors say it is crucial for these students to learn about the pros and cons of private loan borrowing before continuing their postsecondary education.
“Independent students tend to be low-income students,” says lead author Courtney McSwain. “There is a lot of concern that they don’t have access to information at various levels.”
Students are turning to the booming private loan industry because of rising tuition costs, limited federal loans and insufficient grant awards. The report says federal and private loans differ in structure, default risks, interest rates and fees, among other things.
Currently, the report says, 83 percent of private loan borrowers are undergraduate students, 9 percent are graduate students, 7 percent are professional students and 1 percent are postbaccalaureate students not in a degree program. Students seeking professional degrees tend to borrow the most money, nearly $11,000 a year, according to the report. By comparison, graduate students borrow more than $8,000 a year and undergraduates borrow about $6,000.
McSwain also says it’s important to note that, across the degree fields, many private loan borrowers attend private institutions.
