5 Private Student Loan Statistics | 08.06.12
Student loans have been all over the news in the past year, and borrowers are researching college financing options more than ever. In light of this, it’s important to know the facts so you can make better-informed decisions about paying for college.
- 90% of private loans require school certification
- More than 90% of approved applicants applied with a cosigner
- Private student loans make up less than 15% of outstanding student loan debt
- The average private loan interest rate in 2011 was about 8%
- More than 40% of PSL borrowers fail to exhaust their Stafford Loans
Schools must approve a loan based on the student’s cost of attendance. This ensures that borrowers aren’t taking out more than they need, keeping them out of further debt.
Because many students have little to no credit history, most loans will require a credit-worthy cosigner to be approved. The good news is that cosigner release is now common among private loan lenders, allowing the cosigner to be released from obligation after a certain number of on-time monthly payments.
With all the news about student loans flooding the media, it’s important to keep things in perspective. The vast majority of outstanding debt is made up of federal loans, which tend to have more allowances and repayment options for borrowers.
Federal Stafford loan interest rates are 3.4% and 6.8% for subsidized and unsubsidized loans respectively. Federal PLUS loan rates are even higher at 7.9%. Private loans aren’t much different, with an 8% average. The minimum rate on variable rate loans has been just above 2% for the past couple of years, making private loans an affordable option for some borrowers.
Private loans are a great option to help fill the gap after federal student aid has been maxed out. However, some students still do not exhaust their federal aid. Federal aid has a lot of great benefits that many private loans don’t offer, including a variety of repayment options and benefits. While private loans are a helpful way to fill the gap, make sure to look into all federal options before applying.
Source: Private Student Loans Report, Consumer Financial Protection Bureau
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