Nonfederal Student Loans

Pursuant to a congressional request, GAO provided information on private and state student loan programs, focusing on programs serving nontraditional students. GAO found that: (1) in 1991, 31 private and state loan programs provided about $493 million in loans to postsecondary students, with most of the financial aid going to traditional students attending 2- and 4-year institutions; (2) nontraditional students were generally not served by those programs because their family income did not meet the programs' credit requirements, they failed to meet the programs' attendance requirements, and they were more likely to attend proprietary schools; (3) as much as 10 percent of home equity lending was used for educational purposes; (4) the nonfederal programs did not have a federal guarantee to repay lenders in case of default, therefore, they were targeted at borrowers deemed more credit worthy; (5) private programs were funded by private capital, and most state programs were funded by the sale of tax-exempt bonds; (6) some state programs included a residency restriction on borrowers, or restrictions on which schools students may attend; (7) private program loan limits were typically higher than for federal programs; (8) interest rates, either fixed or variable, were generally less than 11 percent; and (9) the programs used 3 repayment methods with no one method predominating.