For better or worse -- and from the hubbub that surrounds them, it is clear the jury is still out -- private loans are becoming a central part of the student financial aid landscape.

A report released today by the Institute for Higher Education Policy is not the first to document that fact; studies in recent months by the College Board and Richard Colvin, prepared for a conference at the American Enterprise Institute, noted the explosive growth of private loans, which are also called alternative or non-federal loans. The loans have been controversial, particularly because of concerns that they are being marketed in ways that make them seem more attractive and less costly than they are.

But despite the contention, "The Future of Private Loans: Who Is Borrowing, and Why?" offers a sweeping and largely dispassionate look at how these loans, which are not guaranteed or subsidized by the government and frequently have higher interest rates and fewer protections for student borrowers, have captured a steadily increasing share of the student loan market (19 percent as of 2004, up from 4 percent a decade ago, the report notes).

The report found that the vast majority (83 percent) of students with private loans are undergraduates, while 9 percent are graduate students and 7 percent professional students. Yet professional students, proportionally, are much likelier than undergraduate or graduate students to take out private loans: 24 percent of professional students had private loans in 2003-4, compared to 5 percent of both undergraduate and graduate students.

In addition, nearly 80 percent of undergraduates who borrow privately also hold federal Stafford loans, lending credence to the notion that many people turn to private loans mainly because their rising college costs and borrowing needs exceed the U.S. government's limits on federal loan amounts.

But the report's authors acknowledge that they were surprised by the fact that more than 20 percent of private loan borrowers do not take out federal loans, either because they may believe doing so is more convenient that going through the rigorous federal financial aid process or because they are wooed by the "initially low interest rate" that private lenders may offer to "those with the best credit histories," the report says.

The institute's report does not say much about the rates on private loans, "because they can vary so much," said Courtney McSwain, a research analyst who co-wrote the report with Alisa F. Cunningham, the institute's managing director of research and evaluation. But other reports on the industry have shown that interest rates on private loans can soar into the 15-18 percent range, so borrowers' misperception that private loans are more affordable than federal loans is likely to trouble some policy makers. And the conclusion that some private loan borrowers perceive the federal loan process as inaccessible or too cumbersome seems destined to support calls, like that of Education Secretary Margaret Spellings, to simplify the process of applying for federal financial assistance.

The report contains a slew of other data about the loans and who uses them, with the overall aim of increasing understanding among consumers and policy makers alike about an emerging industry that, the study notes, "could exceed federal subsidized Stafford loans by the end of the decade."

"Given that the private loan industry is expected to become more dominated by direct-to-consumer marketing, students will be faced with increasingly complex decisions about funding their postsecondary education and how to fill any remaining need," the authors conclude.