April 1, 2014 — Report

Predatory private student lending has shattered the dreams of many individuals who sought to better their lives through education. These loans have become a curse, rather than an opportunity, for a large and growing number of private student loan borrowers who are defaulting on their loans. Data is not publicly available on precisely which borrowers are defaulting – we don’t know which lenders, loan terms, or types of schools have led to higher defaults. The available data, however, strongly suggests that a large portion of private student loan (PSL) defaults are attributable to irresponsible lending practices that became particularly widespread up until the credit crisis in 2008. PSL origination during these boom years was driven partly by the demand for student loan asset backed securities (SLABS). These loans were characterized by high volume, lax underwriting, loan amounts higher than the cost of attendance, and variable interest rates with very high margins.