Analyses of the data published last week by the National Center for Education Statistics are already starting to emerge. The Project on Student Debt has announced that a significantly larger portion of students borrowed private loans in the 2007-2008 academic year than in 2003-2004, according to the NCES survey.
Private loan borrowing increased by 9 percentage points, with 14 percent of students now relying on private loans, as opposed to 5 percent in 2003-2004. Not surprisingly, more expensive schools saw the biggest increase in private student loans. At for-profit colleges, the percentage of students borrowing private loans increased from 14 percent to 43 percent, while private non-profit colleges also saw a substantial increase. Overall, 32 percent of students at schools charging more than $10,000 per year in tuition wound up borrowing private loans in 2007-2008.
While the credit crunch may slow the rate of private borrowing in the near future, these student loans still are regarded as the best or only option by some students. According to the Project on Student Debt's analysis, 26 percent of private loan borrowers did not take out any Stafford Loans first, and 14 percent did not even complete the FAFSA.
Private loans generally carry the highest interest rates and least flexible repayment terms out of all student loans and most experts encourage students to avoid them if possible. Explore other options for financial aid first, especially grants and scholarships. You will also want to consider your potential debt loand when choosing a college. Since students at more expensive schools are more likely to have to borrow private loans, students with limited financial resources should think carefully about the relative merits of a private college as opposed to a state college or community college before committing themselves to private loan debt.