College students who have exhausted all other avenues of paying for college are starting to turn towards more expensive private institution loans to pay for the increasing costs associated with attending private and public universities in the United States.
Despite a college loan crisis that has ballooned to more than $1.5 trillion in outstanding government-backed student loans, there are also now more than $100 billion in private students loans that have been taken out by 1.4 million borrowers.Student loan financial comparison company LendEDU says in a new report that students typically seek federal student loans that don’t require a credit check or a co-signer. Those loans, the company notes, charge lower interest rates with better repayment terms.
Private loans pose various problems for borrowers and often required co-signers who promise to back loan repayments should the recent graduate or drop out fail to repay their original loan.
The study notes that only about one-third of recent private college loans were approved with a co-signer and only one-in-10 were approved without a co-signer. LendEDU studied the loan application for approximately 200,000 potential borrowers who used its services between 2016 through the first half of 2019. To put private loans into perspective, the average interest rate in 2018 and 2019 sites at 10.2% or nearly double the average prime rate. Take out a $25,000 loan and in 10-years you will have paid $40,000. Sadly, LendEDU notes that as the cost of college continues to swell, students are being forced to turn their attention to secondary, more expensive, loan market to pay for the ballooning cost of earning a college degree.