The Wall Street Journal reports:
The volume of private student loans plunged by 52% in 2008-2009 as recession-battered lenders tightened credit standards for borrowers and many abandoned what had been a fast-growing sector of the financial-aid market.
Students and their families took out an estimated $11 billion in private student loans for the 2008-2009 school year, down from $22.8 billion in 2007-2008, according to the College Board, the New York-based testing and research concern.
“I think what we are seeing here reflected the enormous credit-tightening that occurred in the economy last fall,” said Terry Hartle, senior vice president of the American Council on Education, a trade group presenting colleges and universities.
There may be a drop in borrowing from private sources, but a press release from the House Committee on Education and Labor noted that the study also shows that “students had greater access to reliable low-cost federal loans and grant aid.”
It quotes Rep. George Miller (D-CA), chair of the committee:
This report also shows that, for the second year in a row, more students are relying on the Pell Grant scholarship than ever before. If we’re serious about reversing the trends that have made too many students a part of ‘generation debt’, we have to continue to restore the purchasing power of the Pell Grant. The House recently passed legislation that would make a landmark $40 billion investment to boost the Pell Grant over the next 10 years, to stabilize access to low-cost federal student loans, to strengthen Perkins loans, and do much more to make college more accessible at no cost to taxpayers. This report confirms that these types of investments, coupled with our ongoing efforts to reduce students’ dependence on costlier private loans, are needed to provide relief to families in a difficult economy.
While no one wants to see students fail to get the funding they need to attend college, any shift from private to public student loans is a good one.