One important aspect of college students’ lives is dealing with
financial issues, even after graduation.
A report from Indiana
Public Interest Research Group, a public interest organization based at
IU, stated that Indiana college students are facing unnecessary
financial risks by relying on unregulated private student loans to pay
for college. On average, students graduate with $3,556 in non-federal
student loans.
Stephanie Gogul, an INPIRG organizer, said private
loans carry the risk of high-penalty fees and interest rates.
“A
lot of students, especially those who go to for-profit schools, have
private or non-federal loans,” Gogul said. “Those loans look more
convenient to apply for, but they have no upper limit on their interest
rates.”
According to the report, private-student lenders charge
annual percentage rates as high as 18 percent, three times the average
federal loan APR.
Gogul said that aggressive marketing strategies
of private loan institutions contribute to the gross rise in private
student loan borrowers. According to the report, nearly half of students
at for-profit schools had private loans in 2008.
Gogul said
private loans are different from federal government-subsidized loans
because they start to accumulate interest once they are accepted, while
federal loans do not collect in-school interests.
Gogul said
students who go to for-profit schools usually take less time to finish
their degrees, so they are highly vulnerable to private loans.
The
INPIRG report found that students who attend for-profit colleges have,
on average, higher debt levels than those who attend public colleges;
$32,650 to $17,700, respectively.
The report suggests there’s no
agency that serves as a watchdog to make sure borrowers are treated
fairly. Gogul has called on Sen. Evan Bayh, D-Ind., to support the
creation of a Consumer Financial Protection Agency, which would ensure
that private student loans are fair and transparent to a borrower.
According
to the report, if Congress enacts a strong Consumer Financial
Protection Agency, it’s possible that Indiana students will enjoy fairer
pricing and interest rates.
According to
StudentLoanBorrowerAssistance.org, the private loans don’t have the more
affordable, fixed rates and flexible repayment options that federal
loans have.
According to the Web site, unregulated rates and
terms make private student loans highly expensive and risky.
Associate
Vice Provost Susan Pugh, who is also director of the Office of Student
Financial Assistance, said the average default rate on Federal Family
Education Loans and Federal Direct loans from 1992 to 2007 was 3.4
percent.
IU is ranked as a high-performing school because it has
a lower default average, which is 5 percent nationally.
Pugh
said that no public information on the default rates of these private
educational loans has been released, and they have no data on the topic
because the loans are collected privately.
