Preferred Lender Lists
Many colleges publish lists of recommended lenders, called preferred lender lists. Usually there are several lists, with each list focusing on a different category of loans. The preferred lender lists can include lists for undergraduate Stafford loans, parent PLUS loans, graduate Stafford loans, graduate PLUS loans, consolidation loans, and private student loans. Most preferred lender lists include 4 to 10 lenders.
No Uniform Criteria
Each college sets its own criteria for which lenders will appear on its preferred lender list. Although the process is in most cases objective and unbiased, it is not necessarily focused solely on cost. Many colleges consider other factors, such as the quality of customer service, the speed of problem resolution, and counseling activities. For example, most students want 24/7 customer service via toll free phone numbers and online interfaces, but don't realize this until later. Likewise, when alumni encounter problems with a lender, they usually turn to the financial aid office at their alma mater for help.
Borrowers May Pick Any Lender
Federal law requires colleges to certify federal education loans without regard to the borrower's choice of lender or the guarantee agency used by the lender. So you can choose any lender, including those that are not on the college's list of recommended lenders. Colleges are prohibited from introducing artificial delays into the loan certification process.
If a college or lender provides you with a loan application that has the lender name and code already filled in, you are not required to use that lender. You can substitute the lender of your choice.
So while a college's preferred lender list is a good starting point, prospective borrowers should also look at other lenders, such as lenders that advertise in print, on air, online and by mail. Which lender you choose does make a difference, as lenders offer loan discounts that can save you hundreds or thousands of dollars of interest over the lifetime of the loans.
FinAid has comprehensive lists of education lenders, including lists of education lenders, student loan discounts and private student loans. State guarantee agencies and non-profit lenders sometimes have some of the lowest interest rates on federal and private student loans. These rates may be restricted to students who are state residents or attend a college in the state. Be sure to compare these rates with the rates available from banks and other for-profit lenders.
So do a little research on the lenders, instead of blindly picking the first lender on the preferred lender list. Visit the lender web sites for the latest information on their discounts and services, and put together a chart comparing and contrasting the lenders according to the features that are important to you.
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