Use of Private Loans to Pay for College Drops by Half Between 2008-09 and 2011-12

The percentage of undergraduate students who took out education loans from private lenders fell from 14 percent in 2007-08 to 6 percent in 2011-12, according to a new report.

The National Center for Education Statistics, in the Institute of Education Sciences, released a new Statistics in Brief report today (Nov. 29), entitled Use of Private Loans by Postsecondary Students: Selected Years 2003–04 through 2011–12. The report examines the use of private education loans by both undergraduate and graduate students over time.

Private student loans are education loans from private lenders as opposed to the loans originated from the Federal Government. Unlike federal loans, eligibility, interest rates and other terms are based on credit history and market conditions. The study found that:

•    After peaking in 2007–08 at 14 percent, the percentage of undergraduate students who borrowed from private sources dropped by about half in 2011–12 to 6 percent. In contrast, the percentage of undergraduates borrowing from the federal government through the Stafford Loan program was higher increasing from 35 percent to 40 percent;

•    The lower rate of borrowing from private sources between 2007–08 and 2011–12 occurred among students in all types of institutions, regardless of the amount of tuition those institutions charged, and across students of all income levels; and

•    Similar to undergraduates, the percentage of graduate students who borrowed from private sources was also lower between 2007–08 and 2011–12, changing from 11 percent to 4 percent.