Last year, college-bound students found themselves largely shut out of the loan market as the financial markets melted down. But the situation has improved this year. More 
banks are again offering private student loans.
To attract students, banks are marketing more favorable terms including:
- Interest rates of up to 2% lower than last year
- Low or no origination fees
- More options and discounts for automated payments
Last year, the $94.5 billion student loan industry was comprised of the following lenders:
- Subsidized Stafford Loans 34%
- Unsubsidized Stafford Loans 41%
- Parents PLUS Loans 8%
- Grad PLUS Loans 4%
- Nonfederal Loans 13%
The nonfederal or private student loan percentage in 2009 of 13% marked an enormous drop from the 25% level the previous year. Banks expect that federal student loan limits will not be increased this year. However, the tuition rates will increase even as schools cut financial aid. These factors will contribute to a rising demand for private student loans.
Financial services companies are also competing in this market. P.K. Parekh, director and general manager of Discover Student Loans says “[w]e recently reduced the lowest eligible interest rate on our Certified Private Loans to help families cope with the rising costs of higher education, and as an extra benefit, we give students a 2% Graduation Reward.”
As students head to college, banks and other financial services firms may be increasing their advertising to this market.
[Source: Private Student LoanRates Drop, Lending Terms Improve. SimpleTuition.com. 10 Aug. 2010. Web. 16 Aug. 2; Trends in Higher Education Series. Types of Loans. CollegeBoard.com. n.d. Web. 12 Aug. 2010]
Thursday, Aug 19, 2010
Kathy Crosett