Private education loans carry higher variable interest rates and have fewer protections against economic hardship than federally guaranteed loans, which carry fixed interest rates and have a variety of repayment options.
Here's one problem with private loans. There is no reliable source for exact information on total borrowing in the private loan market, according to the College Board, which tracks college cost trends. The board conducts an annual survey of private lenders to compile an estimate of this lending. This year, it was able to collect more data because of assistance from Consumer Bankers Association and major credit unions. Using this information, the board estimates that private loans constituted $6 billion of education borrowing.
The consumer bureau is asking students, families, the higher education community, and the student loan industry - both lenders and servicers - to address a number of issues, including:
- Why aren't families exhausting their federal loan options, including those that require filling out a Free Application for Federal Student Aid form, before turning to private education loans?
- How effective are the disclosures provided by private education lenders? The bureau is looking for - What approaches would best assist recent graduates facing (or about to face) difficulty making private education loan payments?
- The bureau is particularly interested in hearing about schools with specific programs or practices that educate students about their debt loads and ability to afford their loan payments, as well as any evidence concerning the impact of such initiatives.
You may submit comments by e-mail to CFPB_StudentsFedReg@cfpb.gov. Or mail them to Monica Jackson, Office of the Executive Secretary, Consumer Financial Protection Bureau, 1500 Pennsylvania Ave., NW, (Attn: 1801 L Street), Washington, D.C., 20220. Include the docket number CFPB-2011-0037.
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