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Facing dangers of private student loans, people may consider debt consolidation
12/21/2009
Some people who are looking to go to school may consider taking on a private student loan, though a recent report indicates that such forms of credit may present dangers to consumers.
The Massachusetts Public Interest Research Group recently outlined a number of different abuses associated with private student loans. In contrast to federal loans, private student loans have no ceilings on rates, which could result in interest as high as 18 percent.
The group also noted that despite the fact the government lowered interest rates to make lending easy, positive results have not been seen by borrowers who tap into private student loans.
"That's because instead of ceilings, many private loans have rate 'floors' guaranteeing that the borrower's interest rate stays high," the report stated.
Given its findings, the research group is urging that the federal government go forward with the proposed Consumer Financial Protection Agency, which could help monitor the practices associated with private student loans. Recently, the House passed a measure that would create such the agency, while the senate is still considering the matter.
If the CFPA is created, it may still not help people who are already facing high interest rates for private student loans. One option people may consider when dealing with such loans is debt consolidation, though they should keep in mind federal and private loans must be treated separately.
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