New Study Shows 1 in 5 College Students Overpays for Loans

Angela Januzzi

August 22, 2007 

In a recent American Council on Education study, results showed one out of five undergraduates eligible for federal loans did not apply for that form of aid. Instead, they borrowed private loans, and ultimately will pay higher, unfixed interest rates. 

Financial aid experts agree that private loans should supplement federal loans, not function as the primary source of aid. After grants are deducted, borrowers of private loans must confront face higher educational costs than their peers who borrow federally. The rising trend in private loan borrowing is alarming to experts, who are warning schools to make their lending guidance of students more transparent and accessible. 

Jacqueline King, director of ACE's Center for Policy Analysis, pointed out why, more than ever, schools must restructure their lending programs to include a clear and honest system of lending advice. "The private loan industry has experienced tremendous growth over the past few years and has recently been under the watchful eye of Congress and the New York attorney general, so understanding who uses these loans is more important than ever," King stated.

 Source: www.acenet.edu. “Many Private Loan Borrowers Forgo Less Expensive Federal Options, ACE Analysis Finds.” Posted: August 21, 2007.