January 28, 2011 — Report

Before the credit crash in 2008, many proprietary schools partnered with third party lenders to provide private student loans to their students. Private student loans are made by lenders to students and families outside of the federal student loan program. They are almost always more expensive than federal student loans.

High rate private student loans were made to many proprietary school students during this time, often with little or no underwriting criteria. When these loans started to fail at devastating rates, nearly all of the third party lenders exited the subprime student loan business and terminated their partnerships with
proprietary schools.

Proprietary school executives faced a dilemma when the credit crisis hit. This report is about the way they responded, focusing on the schools that created their own student loan products.