A report issued by the National Consumer Law Center on Monday describes how many for-profit schools began making costly private student loans after third-party lenders terminated their partnerships with the schools following the credit crash.
In "Piling It On: The Growth of Proprietary School Loans and the Consequences for Students," Deanne Loonin, director of NCLC's Student Loan Borrower Assistant Project, writes that the main problems with institutional loans include high default rates–more than half of the loans are never repaid–high costs, predatory terms and accounting "tricks and traps."
Loonin explains that such schools must show that at least 10% of revenues come from sources other than Department of Education federal student assistance (the so-called "90-10″ rule), so they make the loans to fill up the 10% category and "[keep] the federal aid pipeline flowing."
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