Tips On Choosing the Best Lender for Your College Loan

The Federal Family Education Loan Program includes Stafford and PLUS (parent) loans. Although the federal government has specified the major provisions of these loans, such as how much you are permitted to borrow and what your interest rate will be, there are differences in how lenders treat their clients with respect to the processing of the loan. It is wise to assess the level of service you may expect to receive from your lender before committing yourself to borrow from them--- find out how your lender plans to manage your loan portfolio for the duration of the time you are in school. Listed below are some of the lender service considerations you should take into account when choosing a lender to process your Stafford or PLUS loan.

1. Does the lender offer electronic fund transfer (EFT) processing through Great Lakes Higher Education Corporation? If so, you can expect your loan to be processed in the quickest manner possible, permitting your university bills to be paid automatically with any refund immediately available when you arrive at school.

2. If you are planning to borrow an unsubsidized Stafford loan, how often does the lender capitalize interest? Lenders that capitalize only once at the beginning of the repayment period will save you money over those that capitalize more frequently while you are enrolled in school (such as quarterly or annually).

3. Does the lender offer special "prompt-repayment" incentives that will reduce the amount of interest you repay for making on-time or automatically-withheld payments? Some lenders offer these programs or sell loans to secondary markets that offer them, but unless they do this in a timely manner within 60 days after you terminate your studies, the opportunity for you to take advantage of these incentives may be lost. Check out UWSP's Special Opportunity Lender List to learn which lenders offer these benefits.

Ask if these prompt-repayment incentives will be available to you in one form or another. These incentives can reduce your loan principle by as much as 8% ($1,600 saved on a $20,000 loan), so this is an important benefit. Find out if you will have this opportunity and how much you might be expected to save by participating in the incentive program that is offered.

4. How accessible is your lender to you for questions and advice? Some lenders offer toll-free phone numbers for borrowers to reach lenders and servicers. Others provide debt counseling materials and are available to assist with loan entrance and exit counseling.

5. How long has the lender been in the student loan business, and what is the prognosis for future involvement? Will you be able to rely on the lender to be there offering Stafford loans throughout your educational career?

Be wise about your borrowing, and only borrow what you need. Also, be wise about choosing the best lender, and know what kind of relationship you are getting into. In the long run you’ll be glad you made the effort.