As enrollment at for-profit colleges boomed and the economy weakened, more students took out private loans, according to a report released Tuesday by the Education Department's National Center for Education Statistics. Between 2003-4 and 2007-8, the percentage of undergraduates with private student loans rose from 5 percent to 14 percent. The increase was steepest at for-profit colleges, where 13 percent of students took out private loans in 2003-4, and 42 percent did so in 2007-8. “In general, the higher the tuition, the higher the rate of private borrowing,” the report’s authors wrote, noting that private nonprofit colleges also saw a sharp increase (from 11 percent of students taking out private loans in 2003-4 to 25 percent in 2007-8).
Many of those students had not exhausted federal student loan programs, which often offer better rates than do private lenders: only 46 percent of private-loan borrowers had borrowed the maximum from Stafford loan programs before turning to private loans. The Education Department strongly recommends that students use federal student loans before turning to private borrowers, and regulations on private borrowing that took effect in 2010 include new disclosure requirements. The NCES data predate the new regulations.
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