Lenders and colleges have been under fire lately for practices that might not be in the best interest of the students who need the money for education.
With literally thousands of lenders to choose from ... colleges often give students a list of recommended lenders. Now colleges including ones in Ohio are being investigated for possibly taking gifts or incentives to recommend a lender.
Here's what parents and students need to know. A list is a starting point. Compare what the lenders on the list have to offer. Also know that you can go to any lender you want ... the college has no say in the matter. And if you plan to consolidate a student loan ... you don't have to go with any of the lenders that already hold your loans.
A recent study shows 80 - 90 percent of college students know nothing about the benefits one lender might have over another when it comes to education loans. Lenders believe students sometimes choose a name they like, or go with a bank that has their checking account.
“It doesn't surprise me. It's so tricky. So hard to do it . You just want to get it over and done with.”
College senior Samantha Hupp has been trying hard to research all of her loan options but admits it's hard to compare apples to apples.
The problem is students loans are a unique product. When we get car loans we ask about the interest rate and payments. But with a student loan, that’s not enough.
“That's only step one. The other part is how do I keep what discount you're offering me. By mandate all the loans start at the same interest rate.”
But after that starting point some lenders will give a discount for on time payments or automatic check withdrawal. Some may have payment schedules and grace periods that are more suitable for your situation. And you have to look for traps.
For instance you might get a discount for agreeing to get a bill via e-mail. But the first time an e-mail bounces back ... you lose the discount.
And remember students should be looking for a way to do an apples to apples comparison.
“Look for a company that's willing to compare whatever loans you're looking at and give you a financial analysis.”
A lender shouldn't be afraid to show you how they stack up to a competitor.
Samantha thinks she has her research covered ... even though she's been bombarded with literally hundreds of offers as she nears graduation.
“Oh absolutely every day and we go through the ones we think aren't worth looking into.”
by the way the lender in this piece was from student lending works ... it's Ohio's only designated non profit lender.
And finally, students also have to decide after graduation if they want to consolidate their loans… May 20th is a key date to remember. The government will set a new interest rate on that date to run from July of 07 to July of 08. if the rate is going down in July ... consolidate after July first.
At this point it looks like there will be very little movement as far as interest rates go. Students in Indiana can get more information by http://www.ismloans.org:8080/ismstat/> clicking here. Kentucky students can get help from the http://www.studentloanpeople.com/> Kentucky Higher Education Student Loan Corperation. And in Ohio, go to http://www.studentlendingworks.org> Student Lending Works.