Menu
Share
 
Switch to Desktop Site

Private student loan report: Is subprime mortgage crisis comparison fair?

Next Previous

Page 2 of 3

About these ads

“The report is a call to action to protect students and families from risky private loans, provide relief for those who are now trapped because of reckless and deceptive private lending, and encourage the use of safer federal loans,” said Lauren Asher, president of The Institute for College Access & Success, in a statement.

Casting private lenders in a negative light with the use of terms like “subprime” isn’t necessarily fair, given that the federal government, which makes a far larger volume of student loans, also lent to most of the same borrowers who turned to private loans, says Jason Delisle, director of the Federal Education Budget Project at the New America Foundation in Washington.

Students, by definition, often have low credit scores or no credit history. “Does that mean the federal government is a subprime lender? Policymakers should be careful in how we characterize this [issue] because [it could] undermine support for the federal student loan program,” Mr. Delisle says.

Some students with federal loans do have the option to defer payments or lower them if they are unemployed or have low incomes. But neither federal nor private education loans can be discharged in bankruptcy, Delisle says.

One recommendation of the report is for lawmakers to consider how borrowers might be able to restructure their debt through the bankruptcy process.

The report acknowledges that many of the trends and problems it describes have changed since the financial crisis hit in the wider economy. Lending standards have changed, for instance, so that lenders can’t as easily sell off the loans they make to students. 

In 2011, 90 percent of private student loans had a creditworthy co-signer, up from 67 percent in 2008.

More than 90 percent of private loans are now reviewed by a school financial aid office to make sure that the aid matches the need. In 2008, just under 30 percent of the undergraduate loans were school certified.

Next Previous

Page:   1   |   2   |   3


Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.

Loading...