Student Loan Dodgers

You know the old saying: “It pays to comparison shop.” The saying is true, and it applies to more than just goods in the stores. It also applies to student loans. Saving a quarter-point on interest rates over the lifetime of a 10- or 20-year loan can mean huge savings for borrowers, so it definitely pays not only to comparison shop, but also to take advantage of whatever incentives you can find that will reduce your interest rates and eliminate fees.

New student loan lending regulations may be making it harder for students to do some quick but effective comparisons on student loan rates. Since October 1, colleges and universities, which had provided “preferred lender lists” to students must provide prospective borrowers with multiple lender options, if they still want to make recommendations. Some colleges and universities have shied away from this approach to avoid future problems with government regulators.

Unfortunately, the college or university is one of the places students often turn to for assistance in finding financial aid. In the absence of direction from a student’s college or university, students must do more research on their own, which doesn’t often produce the most cost-effective options for students.

To get the most of out of the process, students should take the time to compare student loan rates. The rate, along with a loan’s fees, will determine how much comes out of a borrower’s pocket when the loan enters repayment. Colleges and universities sometimes take other factors into account, like loan servicing, when considering lenders. These other factors may or may not be of value to you, and you may not want to pay premiums for these services. On the other hand, you and your lender are going to be together for awhile, so you might want to consider some of the differences between loan products that may reduce or increase your loan costs.

Aside from the interest rate on a loan, consider the impact of interest rate reductions for direct debit/automated payments for your loans. Be sure to calculate the discounts over the loan’s lifetime to see if this approach makes sense for you. Check for other benefits like on-time payment incentives, fee refunds and other events or actions that may trigger credits to the borrower. Determine what’s most important to you and rate your prospective lenders accordingly.