10 Disturbing Student Loan Trends Coming to a Kindergarten Near You

Student loans are common among college students, but did you know that pre-college loans are actually a thing? For many families, K-12 private school loans are a financial reality, and let’s be honest, it’s a little disturbing. Read on as we explore 10 unsettling facts and trends about pre-college loans today.

1. They’re starting as early as Kindergarten:These days, student loans no longer start in college. For some families, they’re needed to pay for schooling as young as Kindergarten. Families who send their children to private schools typically pay over $20,000 per school year, and not all can afford to pay cash. So even at the tender age of Kindergarten, children are already racking up student loans in the five figures.
2. K-12 tuition is getting more expensive:Most would argue that private school is expensive enough, but like higher education, its price tag is getting higher and higher every year. The average cost of private school is nearly $22,000 a year, a figure that’s up 26% from what it cost in the 2006 to 2007 school year.
3. More parents are taking out loans:Not at all surprisingly, with the increase in price for K-12 private education, more families are turning to loans to make the private school experience affordable. One pre-college lender, Your Tuition Solution, reports that each year, there’s a 10% higher demand than the year before. And popular scholarship website FinAid.com had so many parents requesting information about scholarships and loans for K-12 education that they started a spin-off site, PrivateSchools.com, to accommodate the need.
4. Lenders specialize in pre-college education loans:There’s such a great need for pre-college loans that there are lenders that specialize in the pre-college market. Your Tuition solution is the leading K-12 lender with about $20 million in pre-college loans each year. But even they can’t deliver all that’s demanded. Lender First Marblehead left the K-12 loan business in 2008, but jumped back in last year due to the demand in the market.
5. Loans are going to high-income families:One might assume that K-12 loans are going to families that want the private school experience for their children, but can’t afford the lifestyle, but the numbers say otherwise. While lower income families can often get scholarships, families with higher income have to turn elsewhere to fund their private education needs. Most of the pre-college loans offered today are going to families with more than $150,000 in annual income because they don’t qualify for free aid.
6. Repayment periods can be lengthy:One of the more disturbing facts about pre-college loans is the fact that their repayment periods can be long and drawn out, often as long as it takes to pay off a car. Most K-12 loans have a repayment period of three to seven years. For some families, that can mean that they’ll be paying for not only K-12 loans, but college at the same time.
7. Schools themselves are offering loans:While specialized lenders enjoy the opportunity to make K-12 loans for families, schools have recently realized they can get in on the profit, too. Many offer payment plans at a fixed rate, and they’re seeing an increase in the number of families who sign up for this option. Experts say that although loans for private school were once taboo, they no longer carry such a stigma as many families and schools now look at it as an “affordability option.”
8. Rates are as high as 20%:For some families, it can be quite expensive to take on a pre-college loan. Although rates can be as low as 4%, they can range as high as 20% as well, depending on the credit score of the parents. The loans can also be fixed or variable, with loan sizes up to $40,000 for one family.
9. Schools are directing families to the loans:Many families don’t realize that student loans exist before college, but they’re finding out from the private schools that their children attend. Some schools will even include brochures from lenders in their acceptance packages.
10. These same families are more likely to take out loans for college, too:Families often hope that with good K-12 schooling, their children will be better prepared to qualify for good scholarships when it comes time to head off to college, but that’s not necessarily the case. Although students from a private school background do typically find more scholarships, it’s often not enough to justify the private school tuition. Research shows that on average, private school students win just $1,000 more in merit-based aid than public school students.