Student borrowers and their cosigners have more information about lending and loan types available than ever before. With private student lending maintaining a competitive sample of the market, rates are staying low while institutions begin to innovate in this ever-changing environment, including investments in native lending offerings among loan packages and products focused on breaking down barriers in student admissions. Take your seat as we discover and dictate student lending trends for years to come.
Informed Borrowers Means Strategic Borrowing
With the price of higher education increasing every day, and access to information at the fingertips of every college-aged (and younger) borrower, student loan applicants are the most knowledgeable they’ve ever been. This can mean that borrowers are taking alternative approaches to financial aid, such as mitigating loan amounts, mixing loan types, and borrowing for specific areas of education.
Leading student lender, College Ave. encourages borrowers to think diligently about their loan amounts, stating that borrowers may “…borrow up to the total cost of attendance. However, borrowing less than the maximum can help you save money over time.” In addition, many institutions are directly partnering with lenders, or, in some cases, financing student loans in-house.
Buy Here, Pay Here at a National Scale
We’ve seen it at subprime and other auto dealerships for years. The buy-here, pay-here model is now transitioning to higher education. Institutions and partnering lenders looking to adopt this model are focused on enhancing the admissions process with a “one-stop-shop” feel, capturing the attention of college students where they already are.
Even ivy-league colleges like Harvard are providing access to financial aid directly to their students as they apply, or throughout their time with the institution as a “need-based loan with interest paid by Harvard during enrollment, grace, and deferment period.”
This alternative format provides students with an abundance of options as they entertain universities and various degree programs, and has been a part of many online degree programs for years to increase accessibility. Self-funded lending may create increased competition in the higher education sector as universities vie for attention and existing lenders have an opportunity to partner in the early stages of adoption across the United States.
Private v. Federal Rate Competition Continues
Though many graduates have access to some level of student loan forgiveness, fees associated with federal student loans remain high in some cases, giving private lenders an opportunity to market products without origination fees, low introductory rates and more. Additionally, private lenders seem to be objectively more agile than the federal government when it comes to adopting new technologies, and pursuing market trends. While borrowers may continue to focus on federal loans due to lower interest rates (in some cases), private lenders continue to push the market forward and provide access to students that may otherwise be missing out on critical education.
Forbes contributor Zach Friedman underlines this point in that, “Nearly seven in 10 seniors (65%) who graduated from public and private non-profit colleges in 2018 had student loan debt.” and the number of borrowers has continued to grow.
In these early stages of student loan forgiveness, the market does not seem to be heavily impacted by the measures currently in place, but private lenders will continue to look closely at borrower trends to remain competitive.
While we keep an eye on what’s coming next to encourage forward movement in student lending among lenders and institutions, the loan origination software experts at FNI provide ongoing insights and, of course, high-level lending software and service to our loan origination platform partners. If you’re ready for direct access to decision strategy management and more, talk to a loan origination expert.
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