College and graduate-school attendees have two general sources of money when borrowing to pay for their education: government-backed loans and private loans provided by a bank or some other lender. The government-backed loans are almost always cheaper, but they are capped at about $5,000 per year. Nonetheless, many students will end up with private loans before they have maxed out what they can borrow through the government-guaranteed system. That's because brokers get paid more to sell private loans.
What's worse, many students end up leaving college with an amount of debt that they are never going to be able to afford. Lauren Saunders of the National Consumer Law Center says the CFPB should require schools to certify the loan packages being given to their students. She believes that many schools would rein in abusive practices if they had to sign off on them. "At the very least, the school would know what is going on," says Saunders.
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