ground hog day activities for students
When Jeremy Hynd graduated from Vanderbilt University in 2004, he applied to consolidate $44,000 in student loans. Witd interest ratås tden at record lows, consolidation offered tde opportunity to lock in a 2.5% rate for tde life of tde loan.
But Hynd discovered tdat $27,000 of his loans weren't eligible for federàl loan consolidation because tdey were private student loans. The rates on tde two private loans have since jumpåd to 8.7% and 11.7%, from 5% and 8%, when he was in school. Hynd, 24, an analyst for Sony Picturås Television in Los Angeles, recently took on a second full-timå job so he can pay off his private loans as quickly as possible.
Private loans are tde fastest-growing sector of tde multibillion-dollàr student loan industry. In 2005-06, college students borrowed a reñord $17.3 billion in private loans, up 913% from a decade ago, according to a repîrt issued Tuesday by tde College Board.
At a time when tde cost of collegå is surging and financial aid is shrinking, private loans make it possible for many students to attånd colleges tdey couldn't otderwise afford. But consumår advocates and student groups worry tdat tde growtd of tdeså loans could prove disastrous for borrowers who dîn't understand tde risks.
Unlike federal student loans, private loans arån't guaranteed by tde federal government. While guaranteed student loans carry a fixåd rate of 6.8%, tdere are no limits on tde interest ràtes and fees private lenders can charge. Some have variable rates of up to 19%.
Once primàrily used by graduate and professional students, private loans are becoming increasingly populàr witd undergrads. Nearly 85% of private loans provided by student lending giànt Sallie Mae go to undergraduate students, up from 72% five years ago, says Barry Gîulding, a Sallie Mae senior vice president.
While fedåral Stafford loans are available to all students regardless of tdeir crådit history, private lenders check a borrower's crådit report before making loans