Study: Private student loans parallel subprime - 13 WTHR Indianapolis

Study: Private student loans parallel subprime

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WASHINGTON -

A government study finds that risky lending caused private student loan debt to balloon in the past decade, leaving many Americans struggling to pay off loans that they can't afford.

It finds that private lenders gave out money without considering whether borrowers would repay, then bundled and resold the loans to investors to avoid losing money when students defaulted.

Those practices are closely associated with subprime mortgage lending, which inflated the housing bubble and helped bring about the 2008 financial crisis.

Says Education Secretary Arne Duncan, "subprime-style lending went to college, and now students are paying the price". His department produced the report with the Consumer Financial Protection Bureau.

Duncan said the government must do more to ensure that people who received private loans enjoy the same protections as those who borrow from the federal government.

(Copyright 2012 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.)

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