Need For Better Information On Private Loans: Higher Ed Watch Blog

Higher Ed Watch Blog highlights the need for better information on private student loans.  It notes that the NCES survey, recently cited here, comes out only once every four years.  The blog post describes the shortcoming of such intermittent reporting:

"...student aid analysts and policymakers have had to rely on five year old data to try to understand student loan trends, even though there has been an explosion in private loan borrowing during that period of time."

This explosion in private loan borrowing has been captured at a macro-level by the College Board statistics, which are reported annually.  For example, while the Project on Student Debt analysis showed the prevalence of private loans jumping from 5% to 14% between 2003-04 and 2007-08, the College Board data on private sector private loans showed a dramatic 66% increase from $10.6 billion to $17.6 billion. 

Obviously, what gets missed in this headline number is what is happening beneath the surface:

"The latest study shows that the percentage of students at proprietary schools taking out private loans has skyrocketed in recent years, from 13 percent in 2003-04 to 42 percent in 2007-08."

The blog post bemoans the lack of granular private loan information, such as at the university level and  recommends incorporating it into the NSLDS.  Why is this important?  Well, that same Project on Student Debt analysis found that 26% of students taking out private loans had not taken out Stafford loans.  Having information on both loan types in one central database would create better opportunities for enhanced and targeted counseling.  That metric "percentage of students taking out private loans without a Stafford" could be a useful measurement for financial aid offices to gauge the effectiveness of their efforts to get families to complete the FAFSA and loan counseling programs. 

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While we are on the topic of private loan information, I am always surprised by how few schools have reliable data on private loan approval rates by lender.  This data is a critical element to the lender evaluation process, as a low priced private loan is not very valuable if only a very small percentage of loan seekers are approved.  For those lenders that say they don't have this data available, ask them why other schools seem to be able to get it and why other lenders seem more willing to provide it.  Let's not forget that you are a customer!  If you are reviewing a new lender with no experience at your school, make that a requirement for consideration.  One other important point:  get this approval information on a timely and ongoing basis from lenders since the dynamics in the market are so changeable.  Ensure that lenders on your lender lists are actually lending to your students.