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There are many providers of student loans these days.
Almost every bank in America offers them.
However, it is especially important to look out for certain characteristics of these loans to make sure you are getting the best deal possible.
Recently, a scandal involving some colleges and lending companies has erupted leaving many to wonder if they got the raw end of a deal. Schools such as UPenn and State University of New York (as well as 2 of the largest lending agencies, Citi and Sallie Mae) have settled lawsuits related to the scandal.
Specifically, state Attorney Generals are indicating that schools may have received kickbacks from the lending companies, in return for financial aid offices giving their loans preferential treatment. Not only does this appear highly illegal, but it means the students are the ones most likely paying for it.
So… what does this mean for you?
Be aware of the loans you are considering or the loans that are being recommended to you. I, personally, spent a great deal of time trying to find the most appropriate loan for my financial situation.
Some key areas that you should pay attention to:
1) Know why a loan is being recommended to you.
Ask the lender or financial aid officer how they are right for you and your situation. Additionally, do some research of your own. Check out the lender’s website or google them to see what others are saying.
2) Compare interest rates.
Look at what the current interest rate is and when the interest will start accruing. For Stafford Loans, this differs between Subsidized and Unsubsidized loans. Additionally, many lenders will give interest rate discounts if you repay your loan using automatic withdrawal from your bank accounts. Also, lenders will tend to give discounts after 1 year if you make timely payments each month. These decreases can end up saving you a decent amount of money in the long run!
3) Watch for upfront discounts.
Many lenders will waive origination fees depending on what type of loan you qualify for. Typically, if you have a federal loan, you shouldn’t have to pay money upfront.
4) Read the fine print.
Much of the important information is in the fine print of each loan agreement. For example, the period before repayment begins, penalties for late payments, and consequences if the beneficiary of the loan falls into hard times are all in the fine print. So read it carefully!!
While there are many other questions you should ask when researching a loan, these are just a few to get you thinking. And remember, despite the scandal involving the financial aid offices, most are a valuable resource to finding the best loan for you.
I’m a Financial Consultant and Personal Financial Representative with experience in financial analysis, strategic planning, presenting, & financial advisory services.