The State of Student Loans
The evolving student loan marketplace
Recent years have seen an upheaval in the private student loan marketplace. In 2008, the credit crisis caused lenders to cut back drastically on their private student loan offerings. Then, in 2010, the U.S. government revamped the federal student loan program, eliminating the role of private lenders in providing federally backed education loans to students through the Federal Family Education Loan Program (FFELP).
The result is that while, in 2007, there were more than 80 private financial institutions offering student loan products, by 2008 there were fewer than ten. At the same time, interest rates and fees associated with private student loans became prohibitively high.
The demographics driving future private student loan market growth
Still, the demand for post-secondary education continues to grow. According to the College Board, between the 2002/2003 and 2012/2013 school years, the number of bachelor's degrees conferred increased by 36%, while the number of graduate degrees increased by 45%. And by 2020, the number of students enrolled in college is expected to reach 23 million students.
Meanwhile, education costs continue to increase; according to the College Board, between 2000 and 2015, tuition and fees at public four-year colleges and universities grew at an average of 4.4% per year above inflation. Understandably, even after accessing grants, scholarships, and federal student loans, students and their families are finding themselves stretched when it comes to paying for school.
The bottom line is that, in coming years, students will increasingly turn to private student loans to help pay for school — and that lenders and schools would be well advised to start preparing for the private student loan needs of those students today.