Excerpt from: Higher Education Perspectives
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| April 22, 2009 | | With award letters on their way, many students are determining how to pay for their educations. How can they find private loans that they can afford to repay after graduation? | Having recently graduated from college, many of my friends are starting to return to school for their graduate degrees. When they receive their acceptance letters, the first thing they do is carefully read everything in the admissions and financial aid packets cover-to-cover. Ok, so maybe not. However, once the celebration is over, they get down to business and begin to worry about how to pay for two to four more years of school without being saddled with debt for the rest of their lives. This is when my phone rings.
The calls from friends seeking advice on finding good student loans for themselves or undergraduate siblings tend to start in mid-March and continue through September. The conversation is always the same: How-are-you-I’m-great-say-hello-to-your-family-for-me-and-oh-by-the-way-(deep breath)...where can I get a loan for school that I can actually afford? At this point, it’s my turn to take a deep breath and attempt to explain the often baffling financial aid process.
After ensuring that they have followed the basic steps of financial aid, from filling out the FAFSA to maximizing grants, scholarships, work-study and federal loan options (including PLUS/Grad PLUS if they can), the conversation shifts to filling their aid gap with private loans. At this point, I always advise my friends to consider all available private loan options. Why? Because the wide range of potential rates out there is staggering!
Tim Ranzetta of Student Lending Analytics recently applied as a co-signer for private loans from six different lenders (Wells Fargo, Chase, Citibank, Sallie Mae, Discover and SunTrust) – and found that “the range of interest rates they offered [him] varied from 7.0% to 12.125%.” That’s a spread of over five points – enough to make a difference of thousands of dollars over the life of a loan.
Given this great disparity in potential rates, what is a borrower to do? Apart from reconsidering their choice of college, they can take control of their situation by shopping around for private loans. It is more important than ever for borrowers to be fully informed of their options before taking out a private loan. With FICO recently announcing that shopping around for student loans within a reasonable timeframe will have little to no impact on credit scores, the time has never been better for students to make the extra effort and save themselves some money.
So how do my friends react when I tell them to start shopping? They usually groan and semi-sarcastically thank me, realizing that I’ve both given them good advice and created a lot of extra work for them. Fortunately, I will soon be able to help them solve that problem when Overture launches the Student Loan Marketplace, our new service that will provide borrowers with a comparison of reliable private loan products and terms from multiple lenders. To learn more about the Marketplace and how it can benefit your students, take a look at our press release or our product web site today!
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