June 6, 2012

Predatory, High-Interest Private Student Loans

Private Student Loan Rates Nearly Equal Rates of Credit Cards!
“Unlike the federal student-loan program, which lets consumers borrow at fixed rates directly from the government, private loans from at least 30 banks and other private lenders feature mostly variable rates that can be more than twice what some people pay in the U.S. program, according to a Bloomberg News analysis yesterday. Some private student loans carry rates as high as 10.25 percent. Loans from banks and other private lenders make up about 15 percent of the $1 trillion in outstanding student debt, according to an estimate by Mark Kantrowitz, who runs FinAid.org, a website about college grants and loans. About 2.9 million students have private loans, according to the most recent federal data analyzed by The Institute for College Access and Success, an Oakland, Calif.-based nonprofit group. Private-lending practices are drawing the government’s attention as Congress and the Obama administration look to help students avoid predatory, high-interest loans. ‘Like mortgages before the financial crisis, many borrowers took on private student-loan debt with terms and conditions they didn’t fully understand,’ said Rohit Chopra, the student-loan ombudsman at the Consumer Financial Protection Bureau, a federal agency studying the private-loan market. Recent graduates ‘are now fighting to stay afloat because these loans don’t always have the same repayment options as federal student loans,’ he said.” source: American Bankruptcy Institute Bankruptcy Brief June 5, 2012

1 comment:

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