The State of Lending in Americaand its Impact on U.S. Households
Student Loans
Sonia GarrisonDecember 12, 2012
©Center for Responsible Lending
The high cost of higher education
• More than $1 trillion in student debt • 37 million borrowers
20 million borrowers repaying
Almost 1 in 3 borrowers is behind on their student loan
27%
73%
Delinquent Student Loan Borrowers in the Repayment Cycle
(2011Q3)
Past due balanceCurrent
Important differences between Federal and Private Loans
Federal Loans:• Directly from federal
government• Fixed interest rates –
subsidized (current rate 3.4%) and unsubsidized
• Grace period and other repayment protections
Private Loans:• From banks, other financial
institutions, and schools directly
• Variable interest rates, and other loan terms vary by lender
• Often lack protections available with federal loans
65% of students surveyed say they misunderstood or were surprised by aspects of their student loans or the loan process
Private Loans are More Expensive
40% of students taking out private loans did not take out all the lower-cost federal loans they were eligible for first
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$229 $268
$348
$450
Monthly Payment Comparison for Student Loan Borrowers With Lower Credit Scores: Federal Stafford vs. Private loans
FY2005 FY20080.0%
5.0%
10.0%
15.0%
20.0%
25.0%
4.2%6.8%7.1%
9.7%
17.2%
22.3%
Private colleges Public Colleges For-Profit CollegesSource: The Senate Committee on Health, Education, Labor and Pensions
For-Profit college loans are drivingthe jump in defaults
Student Loan Reforms
• Require school certification of private loans.
• Allow private student loan debt to be discharged in bankruptcy.
• Increase oversight of for-profit educational institutions.
For More Information
Contact us:Kathleen Day (DC): 202-349-1871Graciela Aponte (CA): 510-379-5518Ginna Green (SC): 510-866-5989
