Key Points
- Private student loans are a relatively small share of the market for higher education finance; however, scaling back the beleaguered federal student loan program would offer an opportunity for expansion.
- Private lenders have a financial incentive to steer students toward higher education options with a better return on investment.
- Private student loan expansion faces impediments, including practical problems with unsecured lending and a hostile regulatory environment.
- Federal student loans to graduate students and parents are the best candidates for privatization. Policymakers could use a portion of the savings from privatization to better support low-income students.
