Many students turn to private student loans after exhausting the federal aid options they have available to attend college. Because of bad credit or no credit, private student loans usually require a co-signer as an eligibility requirement for lower interest rates and sometimes to even be considered for the loans.
Roughly $864 billion is outstanding in federal student loan debt, while the remaining $150 billion is in private student loans, the Consumer Finance Protection Bureau estimated in its July 2012 report.
The origination volume for academic year 2011-2012 was $8.1 billion, which was flat compared to the prior year, but down 67.7 percent from the 2007-2008 academic year, despite the significant rise in enrollment levels and college costs over that time period, according to a Jan 31 report from Fitch Ratings.
The report, titled “Student Loan Industry: A Review Session,” says that the decline in private loans was not only because of the economy, but also due to weaker underwriting practices, a decline in the co-sign rate, a reduction in school certifications, which ensures that loan funds were actually used for tuition expenditures, and the inability to discharge private loans in bankruptcy.
Similarly, private loans with co-signers do not have to be forgiven in cases of disability or death of the student.
Angela Smith and Ella Edwards had to fight this battle as co-signers after they lost their sons. Smith’s son, Donte Newsome, was murdered outside a nightclub on July 5, 2008 in his college town of Huntington, W.Va. In 2009, Ella Edwards lost her son, Jermaine Edwards, when he died of natural causes as he slept.
