NASFAA Mention: 'Small Resurgence' in Private Student Loan Market as Tuition Rises, Lenders Relax

"The reason for the increase in noncosigned applications is hard to pinpoint, though it could be attributed to a "general philosophical debate" about who is responsible for subsidizing the cost of higher education, said Justin Draeger, president and CEO of National Association of Student Financial Aid Administrators," Education Dive reports.

"That tension is reflected in continued efforts by private colleges to discount or altogether lower posted tuition prices, and by public institutions to offer free or significantly reduced tuition for some or all students.

Students have been taking out less debt each year to pay for school since borrowing peaked in 2010-11, according to data from the College Board. But they are relying more on certain types of financing. 

Nonfederal loans increased from 7% of the total amount borrowed in 2010-11 to 11% in 2017-18. That's significantly lower than its 25% share in 2007-08, knocked down by a standstill in the credit markets and a tightening of lenders' requirements. 

But Draeger suggests rising college costs and economic recovery has spurred 'a small resurgence​' in demand for private student loans and lenders' willingness to serve them.

Another driver is the addition of more flexible repayment terms and conditions by private lenders in response to competition from federal loans, Draeger said. That includes deferment and forbearance options, as well as income-based repayment. 

'[T]o the extent that private student loan products are looking at those benefits and trying to mimic them, that would be a win for students,' he said."

NASFAA's "Notable Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented.

 

Publication Date: 7/22/2019

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