Use of Private Loans by Postsecondary Students

By Rachel Fenton

In November, the National Center for Education Statistics released its report, Use of Private Loans by Postsecondary Students: Selected Years 2003–04 Through 2011–12.  It used federal data from 2003-04, 2007-08 and 2011-12 to examine how the use of private student loans by undergraduate and graduate students changed over time and whether the changes in use of private loans varied by institution type, tuition amount or income level.

Key findings from the report are below.

  • The rate of private loan borrowing by undergraduates has declined since the Great Recession, which occurred between 2007 until 2009, from 14% of undergraduate students who borrowed private loans in 2007-08 to six percent in 2011-12.
    • The percentage of graduate students who borrowed private loans declined from 11% in 2007-08 to four percent in 2011-12.
  • Nearly one-quarter (27%) of undergraduates borrowed both federal and private loans in 2007-08, compared to 11% who borrowed both in 2003-04 and 2011-12.
  • On average, undergraduate borrowers took out more in private loans in 2003-04 ($7,200) and 2007-08 ($7,000) than they did in 2011-12 ($5,800).
  • Borrowing from private sources followed the same pattern across institution types: Undergraduate students borrowed more in 2007-08 than they did in 2003-04 and 2011-12.
    • Undergraduate students at for-profit institutions had the largest reduction in private loan borrowing between 2007-08 and 2011-12, from 41% with private loans in 2007-08 to 12% in 2011-12.
    • This drop in the rate of private loan borrowing at for-profit institutions corresponds with a decrease in the average tuition from $22,400 in 2007-08 to $19,990 in 2011-12.
  • With regard to income and dependency status, undergraduate borrowers at all income levels and dependency statuses had a higher private borrowing rate in 2007-08 than in 2003-04 or 2011-12.
    • In 2007-08, 15% of dependent undergraduate students took out private loans, compared to seven percent in both 2003-04 and 2011-12. Similarly, 13% of independent undergraduate students took out private loans in 2007-08, compared to three percent in 2003-04 and five percent in 2011-12.
    • In 2007-08, a higher rate of dependent, undergraduate middle-income students (17-18%) took out private loans than their high-income (14%) or low-income (13%) peers.