Student loans are commonly referred to as “”good debt”” — the kind of debt people take on for a college degree and the promise of higher income that accompanies it.
But for some, there is nothing good about private student loans. Just ask
Fisher asked her father, John, and her grandmother to co-sign her private loans to attend the
The term “”private student loans”” can be confusing. It’s sometimes used to refer to the Federal Family Education Loan Program (FFEL), the government student-loan program that’s administered by private companies such as
The private loans, or alternative loans that have Nelson and the Fishers scrambling to make debt payments, are different. They work more like credit cards, with variable interest rates as high as 18 percent and terms set by the lenders. Such loans have far fewer protections and guarantees for borrowers than do government-sponsored loans. Some critics consider private student loans to be the subprime products of higher education.
Because the cost of college has grown faster than the amount of federal loan money available, more and more students are relying on private loans to pay a part of their education. Private loan volume grew from
Consumers often “”assume that something being called a student loan makes it inherently safe, and that’s simply not the case,”” said
Asher testified before the
“”At least if you put your tuition on a credit card, it would be dischargeable in bankruptcy should you ever reach the unfortunate point of needing such relief,”” she testified. “”Ironically, private loan creditors remain fully eligible for the bankruptcy protection that their borrowers are now denied,”” she added. Read the full testimony of Asher and others here.
These private loans also aren’t included in any of the recent laws passed to make college more affordable, such as income-based repayment plans and loan forgiveness for certain altruistic occupations.
As the wheels slowly turn on
You can call your lender to explore your options. Both Nelson, 49, and Fisher, 29, have loans with
A spokesman for
Current students should make sure they exhaust their federal student loan options first. If private loans are necessary, research options at studentlendinganalytics.com and finaid.org. Make sure you are clear on how the interest rate is calculated and get your hands on the promissory note, or contract.
Calculate how much debt you can afford to repay. A
Fisher, who lives in
Nelson, of
“”Check on the job outlook for what you’re going to school for,”” Nelson said. “”Art wasn’t a good idea.””
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