MIAMI HERALD: For students at for-profit colleges, wrong mix of loans can be toxic

Career College Central Summary:

  • Kimberly Garrison has been struggling with her student loans for a full decade. Unable to land a job with her computer networking associate’s degree, the Homestead woman missed payments, which led to her wages being garnished — about $700 per month. When Garrison received an inheritance after the death of her grandmother, she put the full $10,000 toward her loan debt, she says, in hopes of getting it under control.
  • Still, the $35,168 she borrowed from 2003 to 2005 to attend the Miami campus of ITT Tech has grown to $62,030.
  • “It ruined my life,” said Garrison, 38, who works as a FedEx driver and has taken on roommates to keep her living expenses down.
  • Garrison’s for-profit college education didn’t lead to a career, and she got in over her head by taking out a mix of federal loans and higher-interest private loans. Garrison’s private loans had interest as high as 9.6 percent.
  • Private loans make up a significant yet often overlooked piece of the nation’s $1.2 trillion student loan debt.
  • Some $150 billion of U.S. student debt comes in the form of private loans, which can be issued by banks or the schools themselves. These loans — which have been called the “Wild West” of student borrowing — represent a potentially dangerous trap for consumers.
  • Financial aid experts say private loans should be a last resort. Private loans demand their own separate monthly payments and the repayment options are less flexible than federal loans. Some private loans have double-digit interest rates, which is like paying for college on a credit card.
  • The federal government has forgiveness programs for federal loans, including a just-unveiled procedure for students who say their college defrauded them. But private loans aren’t eligible for any of that.

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