Increase In Private Student Loans Draws Scrutiny

Ann McClure's picture

JPMorgan Chase & Co. charges Mirella Tovar as much as 10.25 percent annual interest on her student loans - a rate as high as some credit cards.

The aspiring graphic designer, 24, the first in her family to go to college, is among millions paying off high-interest loans to private lenders, among them JPMorgan, SLM Corp. and Discover Financial Services. In a good month, Tovar earns $730 as a hostess in a pizza parlor, and most of that money goes toward her debt of $98,000.

Unlike the federal student-loan program, which lets consumers borrow at fixed rates directly from the government, these loans from at least 30 banks and other private lenders feature mostly variable rates that can be more than twice what some people pay in the U.S. program.

With college costs spiraling, the marketing and interest rates of these loans are drawing increasing complaints from borrowers and regulators, who say teenage consumers often don't understand their terms.

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