Private student loans are booming, and a consumer-advocacy group has taken a critical look at those nonfederal loans, which now account for nearly one-quarter of all education loans. The outlook: a feeling of “sad déjà vu” when compared to the subprime-mortgage industry.

In a report released today that outlined some of the dangers of private student loans, the National Consumer Law Center reviewed 28 private loans issued from 2001 to 2006. The group found all the loans to have variable rates, with initial annual percentage rates ranging from 5 percent to 19 percent. The average initial APR was 11.5 percent.

The survey also found an average origination fee of 4.5 percent (the highest origination fee for a loan in the study was 9.9 percent). Federal direct loans now have an origination fee of 2.5 percent.

The survey of the more than two dozen private loans found several other problems, the report says. A number of lenders in the study were unwilling to offer reasonable settlements, and some loans “stated explicitly that there will be no cancellation if the borrower or co-signer dies or becomes disabled.” Some went into default as soon as one payment was missed.

The report outlines many similarities between private student loans and subprime mortgages, including tightening credit lines, risk-based pricing, predatory terms, “push” marketing, and inadequate disclosures. The report states: “We cannot say with certainty that the student-loan market is headed for the same fate as the subprime-mortgage industry, but there are ominous signs.”

“As in the housing market, we are at this point because we allowed our government to outsource some of our most important social goals to the market,” the report concludes. “In many cases, the market works fine and provides the proper incentives to create profits and enhance social goods, but this isn’t always true. The market has been distorted due to investor interests that often conflict with the best interests of borrowers.” —JJ Hermes