Parents in America are taking out loans at interest rates of up to 20% in order to pay for their children’s private K-12 education. The average loan from one provider, Your Tuition Solution, is $14,000, while the Lake Trust Credit Union lets you carry up to $40,000 in loans for your child’s primary and secondary education. Some lenders allow parents to defer payment until their kids graduate college, which is when their college loans are also called in. Annamaria Andriotis writes in Smart Money:
It used to be that families first signed up for education loans when their child enrolled in college, but a growing number of parents are seeking tuition assistance as soon as kindergarten. Though data is scarce, private school experts and the small number of lenders who provide loans for kindergarten through 12th grade say pre-college loans are becoming more popular. Your Tuition Solution, one of the largest lenders in this space, says demand for the upcoming year is already up: This month, the total dollar amount of loans families requested rose 10% compared to a year ago; at that pace, the company expects its total funding to rise to $20 million for 2012-13. Separately, First Marblehead, which exited the market in 2008, reentered last year as demand for loans began to rise.
Much of this demand is coming from high-income families. Roughly 20% of families that applied for aid to pay for their children’s kindergarten through 12th grade private school education had incomes of $150,000 or more, according to 2010-11 data, the latest from the National Association of Independent Schools. That’s up from just 6% in 2002-03. Those who don’t get approved for free aid, like grants, increasingly turn to loans, experts say.
Student Loans on Rise — for Kindergarten (via MeFi)
(Image: Indentured Student – Cartoon, a Creative Commons Attribution (2.0) image from donkeyhotey’s photostream)