Even though they qualify for the lower-cost federal loan, an increasing number of students are turning to the private loan industry. Out of all independent private loan borrowers, 49 percent are low-income, with a family income of less than $20,000.
Students are also taking out private loans, in part, because of rising tuition costs, limited federal loans and insufficient grant awards. Students at expensive private schools often find themselves up against the borrowing limits for federal loans, necessitating the private loan.
However, the report says not all borrowers take out the maximum amount of federal Stafford aid available to them, and some don’t take out a Stafford loan at all. According to data collected by the U.S. Department of Education in 2003-2004, 82 percent of dependent private borrowers and 53 percent of independent private borrowers received the maximum Stafford amount.
The report says it is difficult to predict the future of private loans, but students will continue to supplement financial aid with private loans as long as there is a continuing gap between financial aid packages and tuition costs.
— By Shilpa Banerji
© Copyright 2005 by DiverseEducation.com
