Apollo Group Inc (APOL), ITT Educational Services, Inc. (ESI): Why Rising Student Loan Rates Aren’t the Real Problem

Supply and demand
Of course, there are plenty of interested parties who want the student-loan business to continue to grow in some form. Student-loan specialist Sallie Mae as well as big banks that make student loans earn substantial profits from their loans, and federal guarantees greatly reduce the risk that lenders take on with some loans, making the absolute level of interest rates much less important for certain types of lending.

But the real question going forward is whether students will start making tough decisions about whether traditional nonprofit colleges and universities give them more long-term value than their tuition costs. As long as schools have more people applying for admission than they have spots to fill, it’ll be tough for students to get the pricing power they need in order to drive their tuition costs down. Eventually, though, reining in tuition costs will be the prime determinant of the financial health of students after they graduate — not the rates they pay on student loans.

The article Why Rising Student Loan Rates Aren’t the Real Problem originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool has no position in any of the stocks mentioned.

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