The State of Private Educational Funding

While less prevalent than in recent years, educational loans from the private sector remain crucial in determining how accessible a university degree is to some students, according to Peter Carroll, General Manager of Overture Technologies’ Student Loan Marketplace.

In a recent interview with Doug Schantz, founder and editor of CheapScholar.org, Mr. Carroll states that these loans, which are provided by local and national banks and credit unions, are often used by students and their families to fill any remaining funding gap after exhausting their financial aid and federal loan options.

Private educational loans, also referred to as private student loans, are less common than in recent years, but are still an important component of paying for college for many students. The total volume of private student loans has dropped from $22 billion to $8.5 billion since its peak in 2007, in part due to an increase in financial aid dollars available to students and an emphasis on utilizing these funds.

As Mr. Carroll notes, students and their families are planning more strategically for college education and making sure to maximize their available grants, scholarships, world-study and Federal loans.

However, there remains a need for private loans in many cases, as not all students and their families are able to secure enough financial aid to cover their full cost of attendance, yet still want the option of attending high quality schools. According to Mr. Carroll, in cases where a funding gap remains after maximizing financial aid, there is a pressing need for private educational funding:

“Generally speaking, if families are able to plan effectively, save money, think hard about the cost and payback of their education, and feel good about their choices, then there is no need for a private student loan.  Then again, there will always be students with great career potential who desire access to high quality education institutions, but have not planned as effectively from a financial perspective or have specific financial or other situations that result in less aid being available to them.  For those students, a private student loan may make sense.”

Mr. Carroll also speaks to the fact that while private educational funding is critical, it has become increasing difficult for students who lack co-signers and good FICO scores to obtain these loans. The credit crisis in recent years has adversely affected the rate at which private education lenders approve students for these loans, making it more important than ever for consumers to shop around with multiple lenders to find a loan and to find the best possible rates and terms.

Mr. Carroll shares additional pertinent information regarding the future of private educational funding in his full interview with Mr. Schantz, which can be read in its entirety at the CheapScholar.org website: The Past, Present & Future of the Private Education Loan Industry.