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How Private Student Lending Can Repair Higher Education

American Enterprise Institute

April 1, 2024

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.

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