问答题 A good education may be priceless, but in America it is far from cheap—and it is not getting any cheaper. On February 1 st Congress narrowly passed the Deficit Reduction Act, which aims to slim America"s bulging budget deficit by, among other things, lopping $12.7 billion off the federal student-loan programme. Interest rates on student loans will rise while subsidies fall.
Family incomes, grant aid and federal loans have all failed to keep pace with the growth in the cost of tuition. "The funding gap between what students can afford and what higher education costs has got wider and wider," says Claire Mezzanotte of Fitch, a ratings agency. Lenders are rushing to bridge the gap with "private" student loans-loans that are free of government subsidies and guarantees.
Virtually non-existent ten years ago, private student loans in the 2004-2005 school year amounted to $13. g billion—a compound annual growth rate of almost 30%—and they are expected to double in the next three years. According to the College Board, an association of schools and colleges, private student loans now make up nearly 22% of the volume of federal student loans, up from a mere 5% in 1994-1995.
The growth shows little sign of slowing. Education costs continue to climb while pressure on Congress to pare down the budget deficit means federal aid will, at best, stay at current levels. Meanwhile, the number of students attending colleges and trade schools is expected to soar as the children of post-war baby-boomers continue matriculating.
Private student loans are popular with lenders because they are profitable. Lenders charge market rates for the loans (the rates on federal student loans are capped) before adding up-front fees, which can themselves the around 6%-7% of the loan. Sallie Mae, a student-loan company and by far the biggest dispenser of private student loans, disclosed in its most recent report that the average spread on its private student lending was 4.75% , more than three times the 1.31% it made on its federally backed loans.
All of this is good news when lenders are hungry for new areas of growth in the face of a cooling mortgage market. Private student loans, says Matthew Matthew of Friedman, Billings, Ramsey, an investment bank, are probably "the fastest-growing segment of consumer finance—and by far the most profitable one—at a time when finding asset growth is challenging." Last December J.P. Morgan, which already had a sizeable education-finance unit, snapped up Collegiate Funding services, a Virginia-based provider of federal and private student loans. Companies from Bank of America m GMAC, the financing arm of General Motors, have jumped in. Other consumer-finance companies, such as Capital one, are whispered to be eyeing the market.
The road ahead will not be free of bumps. Jack Kopnisky, the chief executive of First Marblehead, a provider of services for companies offering private student loans, likens the business to credit cards. They too saw an influx of competition when margins were fat, only for them to be consolidated into a handful of dominant lenders during the 1990s. "Private student loans, too," says Mr Kopnisky, "are a scale business. Smaller lenders will have a tough time." That may be why Washington Mutual decided to get out of the student—loan business earlier this year.
The market is, after all, relatively new and untested. Students are high-risk borrowers. They have short credit histories and big piles of debt. The College Board estimates that at four-year public colleges, students graduate with (on average) $15,500 of debt; those at private colleges leave school $19,400 in tile red. Who knows how they will fare when interest rates rise, or if the economy slows?
The question is all the more urgent because the growth in private student loans has come through a shift from lending to the top tier of students, often graduate students at elite schools, to a wider and riskier group at community colleges, trade schools and the like. Moving to the mass market is how the credit-card business exploded in volume. Private lenders to students need to work out how to avoid imploding in harder times.

问答题 Why has the funding gap between what students can afford and what higher education costs got wider and wider?

问答题 Why do the more and more student have to turn to private student loans?

问答题 Why are private lenders so interested in student loans?

问答题 Explain the statement "the road ahead will not be free of bumps". (Para.7)