August 14, 2007

Schools still sending out preferred lender lists

Posted in Student Loan News, The Financial Aid Process at 10:03 AM by Joe From Boston

Even with the threat of legal action from Mr. Cuomo and from Congress, many schools are still sending out preferred lender lists to students desperate to find last-minute loans.

Take a look at this article from US News & World Report.

…Four months ago, most major lenders agreed to stop making payments to either schools or financial aid officers to win placement on the influential lists. In addition, many schools have agreed to codes of conduct that are supposed to open up the lists to lenders that offer the best deals.

U.S. News found, however, that the lowest-cost lenders are still omitted from many colleges’ lists. That means many borrowers don’t realize they could save hundreds and, in some cases, thousands of dollars by borrowing from a lender not recommended by the school.

Many of the low-cost lenders, for example, will waive the 2.5 percent upfront origination and default fees typically charged students who borrow through the federal Stafford program. That saves students up to $237.50.

And many low-cost lenders are also offering to knock as much as 2.25 percentage points off the federally mandated 6.8 percent ceiling on Stafford loans.

Those numbers may sound small, but they quickly add up to significant savings. For a student who takes out $19,000 in federal Stafford loans—the typical level of debt for college graduates who borrow—reducing the interest rate of a 10-year Stafford loan by just 1 percentage point saves more than $1,000 over the life of the loan. The savings for parents borrowing through the federal PLUS program could be even greater, since they often borrow more. Here are some tips on finding the best educational loan deals.

Read the whole article here.