More than half of private loan borrowers don’t maximize their federal student aid options.

College and university websites should require prospective students to check their eligibility for federal student aid before private loans with ever-changing interest rates are presented as a legitimate option, according to a report from a nonprofit group advocating for greater college access and affordability.

One-on-one counseling, either in face-to-face meetings or over the phone, is the “most effective” way to find college loans that won’t cost student thousands of dollars in exorbitant interest charges, while web-based counseling makes it “too easy [for students] to acknowledge receiving detailed information without actually reading or comprehending it,” said the report, published by The Institute for College Access & Success (TICAS).

TICAS, a California-based nonprofit organization, is a prominent supporter of the Income Based Repayment (IBR) plan, which allows college students to adjust their federal student aid payments according to their reported income. The plan went into effect in 2009.

Matthew Reed, TICAS’s program director, said campus counselors, prospective students, and parents should ensure that all federal loan and grant options are exhausted before resorting to private college loans that—like a credit card—have variable interest rates that can steadily raise a student’s monthly payments. Federal loans have fixed interest rates.

Some colleges, Reed said, include private loan information on official campus websites and mail sent to incoming students.

“It’s a very problematic practice, and it might keep families from looking for other options,” he said. “When it’s there on the page, it’s easy for the student to just accept it. It’s very confusing for students and families. … Many students don’t even realize that some loans are private.”

For-profit colleges are particularly egregious offenders in failing to help incoming students secure affordable federal loans, according to TICAS.

One large for-profit school—unnamed in the report—“responds to requests for private loan certification by approving the request without contacting the student.” That student is then stuck with a private loan that will cost thousands more over the life of the loan.

San Diego State University (SDSU) is among campuses that have made sure students examine their fixed-rate federal loan choices before they resort to private college loans.


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