Student Loan Facts & Figures
Choose the Lender That's Right for You
Choosing a lender can be one of the most important decisions you'll make when borrowing
money to pay for school. Be sure to take into account the savings offered by each lender such as origination
fee discounts, interest rate reductions, or rebates. To help you make the best possible choice, consider the
following information.
Under federal guidelines, lenders are allowed by law to charge an origination fee of up to
1% of your gross loan amount. Some lenders offer you discounts on this fee, while others may offer special
discounts or rebates for making a number of consecutive on-time payments. Loan costs change periodically, so you should contact
the lender for the most current information.
Alabama Stafford Lender Borrower Benefit Comparison Chart
Following are important questions to ask about lenders you are considering for your student loan.
Does the lender provide origination fee discounts, interest rate reductions, forgiveness of
principal, or other incentives?
The bottom line is that discounts and other incentives can save you money!
Does the lender sell its student loans?
Many lenders sell their loans to other holders or secondary markets after
the loans have been disbursed. When your loan changes ownership, the servicer may also change multiple times
during the life of your loan. It is important that you stay in touch with your loan holder and/or servicer
to ensure you fulfill your repayment obligations.
Does the lender use a servicer?
Many lenders use loan servicing agencies, or servicers, to handle the day-to-day
work on their student loans. Servicers handle not only borrowers' questions about their loans, but
also repayment and deferment issues. Since the borrower/servicer relationship is often long-term, it is
important for you, the borrower, to know who you are dealing with. Some lenders service their loans locally
and some use out-of-state or national servicers.
Does the lender require a credit check?
Federal regulations require that credit checks be performed for all Federal PLUS Loan
borrowers.
Does the lender require a "customer relationship"?
Some lending institutions, such as credit unions, require that you are a member
before they will accept your application.
Does the lender offer Federal Consolidation Loans?
You are required to make payments to each lender that makes a student loan for you. If,
throughout the course of your education, you borrow from more than one lender, you may be eligible to
consolidate those various loans into one loan. By doing so, you will only have one payment to make to one
lender each month. You may also reduce the amount of your monthly payments once your Consolidation Loan is
approved. However, you may lose certain other benefits, such as deferment options, so consider these carefully
before consolidating your loans.
As an alternative to a Consolidation Loan, some lenders are willing to buy or
sell your loans from/to other lenders. This allows you to retain the same benefits on your loans and make
one monthly payment. You should contact your lenders to determine if this is an option for you.
What is a preferred lender list?
Many colleges provide student borrowers a list of lenders to consider. These
lists are developed by the colleges under a wide variety of objectives which may include some of the following:
(1) prior service provided to borrowers at that school, (2) discounts or other borrower savings provided
at loan origination time, (3) savings provided to borrowers during repayment of the loan, (4) proximity of
banks/lenders in the area where the college is located, (5) electronic processes offered to student borrowers
and the college financial aid office necessary for efficient and timely delivery of funds, and (6)
cancellation provisions for borrowers who enter certain professions after graduation. These lists are
suggestions and are provided as a convenience to the borrower for consideration. As a borrower, the ultimate
decision on which lender to use rests with you—compare the origination fees, discounts, and other savings
each lender offers and choose the one that is best for you.
Once I've compared lenders and the benefits they offer, how can I make sure I get the
benefits I'm looking for?
Different lenders may have several different Lender ID Codes, and each code
may have different benefits associated with it. Be sure to use the correct Lender ID Code when you fill out
your loan application.
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