From the Newhouse News Service today:
Proliferating Private Loans Put Crushing Burden on Students
With the cost of higher education skyrocketing and federal student loans capped at 1992 levels, more students are turning to private loans to pay for trade schools and even traditional colleges. The loans are the fastest growing type of student aid, and lenders are scurrying to cash in on the highly profitable products, offering easy online access or jockeying to get on a school's list of preferred lenders.
The trend alarms financial aid advisers who fear students are unwittingly taking on too much debt. Some, like Perry, eventually fail to repay the loans on time. That trend could worsen if interest rates continue to rise.
Some trade schools have deliberately pushed private loans to expand their market to students with poor credit histories, and they're coming under increasing regulatory scrutiny about their recruiting and loan disclosure practices.
Financial aid counselors worry that students unwittingly get themselves too deep in debt with private loans and will default in coming years, particularly if they get a low-wage job or go through a protracted layoff.
Interest rates on these loans can go as high as 26.5% !!! And students (and parents) often don't know the difference between these private loans and regular federal loans.