Percentage of Students Borrowing from Private Lenders Increases Three-Fold in 4 Years

The percentage of undergraduates taking out private loans nearly tripled from 5 percent in 2003–04 to 14 percent in 2007–08, according to a report by the National Center for Education Statistics. 

The statistical report, The Expansion of Private Loans in Postsecondary Education, examines trends in private student loans and in combination of both federal and private loans, as well as the characteristics of private student loan borrowers.

The average loan amount from all sources, including Parent PLUS loans, also increased, from $6,900 in 2003–04 to $8,100 in 2007–08. The rate of any undergraduate borrowing rose from 34 percent to 39 percent.

The report found that of all institutions, students at for-profit institutions comprise the largest share of borrowers of private loans or private and public loans. Students from middle-income families also comprise a larger share of borrowers of private loans, compared to students from low- and high-income families.

The report details the following trends and characteristics:


  • Type of Institution - The largest proportion, 42 percent, of undergraduate borrowers, who took out private loans either exclusively or in combination with public loans, attended for-profit institutions; that’s compared to 13 percent in 2003-04. In 2007-08, 25 percent of undergraduates who borrowed attended four-year private nonprofit, 14 percent attended four-year public and 4 percent attended two-year public institutions.  The percentage of students borrowing increased across all types of institutions from 2003-04 to 2007-08.
  • Family Income - The report also found a higher proportion, 41 percent, of middle-income undergraduates borrowed from private lenders in 2007-08, compared to 15 percent of students from low-income families and 16 percent of students from high-income families. 
  • Federal vs. Private - In 2007-08, a substantial proportion, 46 percent, of undergraduate private loan borrowers exhausted their annual eligibility for Stafford loans and took out private loans. 
  • FAFSA - Among undergraduates who took out private loans, 12 percent did not apply for federal financial aid. Another 11 percent applied for federal aid, but did not obtain a Stafford loan.
  • Graduate Students - Trends among graduate students were less stark, but that may owe in part to the expansion of the federal PLUS loan program in 2006 to include graduate students.  “This gave graduate students another source of loans from a government-guaranteed program with competitive, fixed-interest rates, which was intended to eliminate some of the need for private loans,” according to the report. From 2003–04 to 2007–08, the rate at which graduate students took out private loans rose from 7 percent to 11 percent.