The State of Lending in Americaand its Impact on U.S. Households

Student Loans

Sonia GarrisonDecember 12, 2012

©Center for Responsible Lending

The high cost of higher education

• More than $1 trillion in student debt • 37 million borrowers

20 million borrowers repaying

Almost 1 in 3 borrowers is behind on their student loan

27%

73%

Delinquent Student Loan Borrowers in the Repayment Cycle

(2011Q3)

Past due balanceCurrent

Important differences between Federal and Private Loans

Federal Loans:• Directly from federal

government• Fixed interest rates –

subsidized (current rate 3.4%) and unsubsidized

• Grace period and other repayment protections

Private Loans:• From banks, other financial

institutions, and schools directly

• Variable interest rates, and other loan terms vary by lender

• Often lack protections available with federal loans

65% of students surveyed say they misunderstood or were surprised by aspects of their student loans or the loan process

Private Loans are More Expensive

40% of students taking out private loans did not take out all the lower-cost federal loans they were eligible for first

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$229 $268

$348

$450

Monthly Payment Comparison for Student Loan Borrowers With Lower Credit Scores: Federal Stafford vs. Private loans

FY2005 FY20080.0%

5.0%

10.0%

15.0%

20.0%

25.0%

4.2%6.8%7.1%

9.7%

17.2%

22.3%

Private colleges Public Colleges For-Profit CollegesSource: The Senate Committee on Health, Education, Labor and Pensions

For-Profit college loans are drivingthe jump in defaults

Student Loan Reforms

• Require school certification of private loans.

• Allow private student loan debt to be discharged in bankruptcy.

• Increase oversight of for-profit educational institutions.

For More Information

Contact us:Kathleen Day (DC): 202-349-1871Graciela Aponte (CA): 510-379-5518Ginna Green (SC): 510-866-5989