Background 

The One Big Beautiful Bill Act (OBBBA) of 2025 made a series of changes to federal financial aid policies, including eliminating the Graduate PLUS loan program, instituting new loan limits for graduate/professional Direct Unsubsidized Loans and Parent PLUS loans, creating a new overall lifetime borrowing cap, removing additional Direct Unsubsidized Loan borrowing limits for certain health professions programs, and prorating loan amounts for students who are enrolled less than full time. 

As a result of these federal loan policy changes, funding gaps may emerge for certain types of students. Students affected by these gaps may be unable to enroll or may need to seek alternative funding sources, such as private education loans, to bridge the shortfall. Financial aid practitioners will require timely, clear, and actionable guidance to effectively support students, families, and institutional leadership during this transition, including information on the responsible use of private education loan options. 

In previous decades, private loans were a significant source of funding for both students and parents. However, following the 2008 financial market collapse, the landscape shifted considerably. Tighter credit standards, along with changes in underwriting and marketing practices, contributed to a substantial decrease in private education loan volume. The introduction of the Graduate PLUS program in 2006 added to the decline. As a result, many aid administrators have limited experience with private education loans. 

More recently, private loan volume has shown signs of growth, albeit within a markedly different policy environment. Additional increases may occur as a result of the new federal loan limits affecting the Parent PLUS program, graduate and professional Direct Unsubsidized Loans, and overall lifetime borrowing caps, along with the elimination of Graduate PLUS — particularly after legacy eligibility provisions expire in 2029. In this evolving landscape, it is critical for aid administrators to understand the current private loan market and to help students and families negotiate the benefits, risks, and long-term implications of these borrowing decisions.

The goal of this planning brief is to provide an overview of both historical trends in private education lending and the current landscape. 

Defining Private Education Loans

Private education loans may also be referred to as personal student loans, alternative student loans, or private educational loans. These loans are offered by private lenders to provide funds to pay for educational expenses. A private education loan is defined in 12 CFR 226.46(b)(5) as "a loan provided by a private educational lender that is not a title IV loan and that is issued expressly for postsecondary education expenses to a borrower, regardless of whether the loan is provided through the educational institution that the student attends or directly to the borrower from the private educational lender."¹  

Trends in Private Loans

There are several sources of data on private loans. For example, the College Board’s annual "Trends in Student Aid"² report  tracks nonfederal loans, including private loans issued by banks, credit unions, and other lenders, as well as loans to students from states and institutions. Overall, in 2024 dollars, nonfederal loans peaked in 2007-08 at $33.8 billion, then fell dramatically to $11.1 billion in 2010-11; nonfederal loans had a gradual resurgence to $16.9 billion by 2019-20, followed by a smaller decline to $13.9 billion in 2024-25 (Figure 1). Meanwhile, as a proportion of all student loans (federal and nonfederal), since 2011-12 nonfederal loans have gradually increased to 14% in 2024-25. 

According to the Consumer Financial Protection Board (CFPB),³  in the years leading up to the peak volume (2005-07), several significant shifts occurred. Lenders increasingly marketed and disbursed loans directly to students, without requiring institutional certification of eligibility,⁴  and were more likely to originate loans to borrowers with lower credit scores than in prior years. The decrease in private loans that started in 2008 was a result of a "virtual collapse of the asset-backed securities market for PSLs [private student loans]" and tightening credit standards.⁵  After 2008, lenders changed their underwriting and marketing practices, including increasing the percentage of loans made with a co-signer and reducing lending to nonprime borrowers.⁶ The College Board data also show that after the rapid decline between 2007-08 and 2009-10, there have been periods of continuing growth in private loans.⁷ 

The College Board report partially draws on data from Enterval Analytics, which gathers information from a data cooperative of five of the largest private education loan lenders and holders, as well as other contributors, collectively representing 78% of the active in-school private education loan lender market in the United States.⁸ In addition to information on private loan volume, the annual Enterval report provides performance metrics and portfolio indicators, such as the distribution of private loan balances by loan status (Figure 2), which showed that 73.8% of the outstanding balance was in repayment status in 2025 Q3.  

In addition, the Enterval report shows that the percentage of origination volume that was school-certified increased from 73% in academic year 2008-09 to over 99% by 2014-15 and is now 100%. The percentage of origination volume that was cosigned increased from 73% in 2008-09 to 94% by 2025-26. The cosign rate differed by level of program, with 97% for undergraduate borrowers in 2025-26 compared to 74% for graduate borrowers.⁹  

It is important to note that both the College Board and Enterval reports focus on in-school lending. In recent years, however, private refinance loans — where new private education loans replace existing education loans — represent a significant portion, so the total private loan volume may be understated.¹⁰  

The National Postsecondary Student Aid Study (NPSAS)¹¹ examines private loans from the student perspective, although the most recent data is for 2019-20. As with trends in other data sources, the percentage of undergraduate students obtaining private loans peaked at 14% in 2007-08 but decreased to 6% in 2019-20; for graduate/professional students, the percentages were 11% and 5%, respectively. The proportion varied by type of institution, dependency status, and income (Figure 3) — in 2019-20, for example, undergraduates at private nonprofit four-year institutions had a higher percentage obtaining private loans and a higher average amount than those at other types of institutions. Dependent undergraduates with lower incomes tended to have relatively low percentages with private loans, whereas graduate/professional students with low incomes appeared to have higher percentages and higher average amounts of private loans.

Figure 3: Percentage of students obtaining private loans and average amount received, 2019-20, by sector, dependency status, and income

Source: NPSAS 1999-2020. Note: Based on student survey responses. Reported private loan amounts were edited to exceed the price of attendance.

Overview of the Current Landscape

Types of private lenders

Private education loan lenders include traditional financial institutions — both depository and nondepository — such as large banks and credit unions. In addition, nonprofit, state-affiliated lenders offer private loan products that differ from those provided by banks, and some institutions extend loans to their own students using institutional funds.¹² Private education loans are also issued by nontraditional providers, including smaller banks, fintech firms, and other nonbank lenders. Finally, certain credit products are marketed for educational purposes but do not meet the Truth in Lending Act (TILA) definition of a private education loan, such as revolving lines of credit promoted as a means to finance college expenses.¹³   

Income-share agreements (ISAs) are a type of credit product or private education loan where the borrower receives funding for college expenses and makes payments based on a percentage of income until a defined amount has been repaid, or a specified period has elapsed.¹⁴ 

Terms and conditions

Private loans are not part of the federal student loan programs and are not federally guaranteed. They carry a wide range of terms and conditions, but generally do not offer the flexible repayment options or borrower protections available through federal student loans. With limited exceptions, such as short-term forbearance, private loans typically lack robust risk-mitigation tools and are often placed in default once a borrower is 120 days past due.¹⁵  

The interest rate and fees for private loans generally vary widely based on an assessment of the creditworthiness of the borrower. This process, called underwriting, evaluates factors such as credit history, existing debt, income, or credit score. In addition, most private loans have a variable interest rate that may change over time. Student borrowers may have little credit history; to get a better interest rate and loan terms, a borrower may apply with a co-signer who has a good credit history to compensate for the additional risk.

Compliance 

There are various federal and state laws and regulations about the types of disclosures that must be provided to a private education loan borrower. For example, the Truth in Lending Act (TILA) provides rules on disclosures (§1026.46), limitations on changes in terms after approval (§1026.48), the right to cancel the loan (§1026.47), and limitations on co-branding in the marketing of private education loans (§1026.48).¹⁶ 

NASFAA thanks Alisa Federico Cunningham for her assistance in researching and drafting this planning brief.

[1] CFR § 601.2(b) Institution and Lender Requirements Relating to Education Loans
A private education loan does not include—
(1) An extension of credit under an open end consumer credit plan, a reverse mortgage transaction, a residential mortgage transaction, or any other loan that is secured by real property or a dwelling; or
(2) An extension of credit in which the educational institution is the lender if—
(i) The term of the extension of credit is 90 days or less; or
(ii) An interest rate will not be applied to the credit balance and the term of the extension of credit is one year or less, even if the credit is payable in more than four installments.
[2] College Board, 2025, Trends in Student Aid, report and data tables.
[3] CFPB, 2012, Private Student Loans, August 12.
[4] “Direct-to-Consumer (“DTC”) lending circumvented the school’s financial aid office, marketing instead through mass media, online advertising, and direct media. Funds were generally disbursed directly to the student, instead of to the school. The school did not certify the borrower’s financial need, and the lender instead imposed a cap of the lesser of total cost of attendance or a fixed amount.” CFPB, 2012
[5] National Credit Union Administration (NCUA), 2013, Supervisory Guidance on Private Student Loans, December.
[6] CFPB, 2012
[7] Cooper Luce and Michael Murto, 2025, Private Student Loans Remain a Significant Source of Educational Debt, Consumer Financial Protection Bureau Office of Research Working Paper No. 25-08, April.
[8] Enterval Analytics LLC, 2026, Private Student Loan Semi Annual Report Ending Q3 2025. The Enterval Private Student Loan Consortium, a data cooperative of five of the largest student loan lenders and holders, includes Citizens Bank, N.A., College Ave, Navient, PNC Bank, N.A. and Sallie Mae Bank. The other contributors include Navy Federal Credit Union, SoFi and nine members from the Education Finance Council.
[9] Enterval Analytics LLC, 2026
[10] Luce and Murto 2025
[11] National Postsecondary Student Aid Study (NPSAS), 2019-2020, data extracted through Data Lab Powerstats.
[12] CFPB, 2012
[13] Student Borrower Protection Center (SBPC), 2020, 2020 Highlights Report 
[14] CFPB, 2024, What are private loans?
[15] CFPB, 2012
[16] CFPB, 2015, Truth in Lending Act