It’s June and many of you have either already received your financial aid award packages or will be getting them soon from your school. If you are a part of the student majority, you likely will not receive enough from federal student aid to fully cover your tuition.
Although scholarships are an excellent way to shave money off this financial aid gap, in most cases, a private student loan is unavoidable. Here are some useful tips when comparing student loan lenders so that you don’t rack up more debt than you have to:
1) Apply at more than one lender to weigh your options.
New FICO regulations over the past few years have increased your “shopping” window to roughly 30-45 days past your first credit inquiry. As long as the applications are all completed within that range of days, it will not hurt your credit (past the first application) to apply at multiple banks for a loan.
2) Pay special attention to the index and modifier used to compute the APR.
If you have no idea what the jargon above means, read my blog on interest rates. It is important to pick an index that is not volatile, as private student loans have variable APRs and depending on the economy, can fluctuate quite a bit from year to year. Also, try to find the lowest modifier possible… anything above + 2.5% is probably bad news.
3) Pay attention to the benefits from each lender.
Benefits have become a big talking point for lenders to push their product over the competition in recent years. Things like co-signer release, graduation rewards and interest rate reductions are starting to pop up all over the place. Take advantage of the lender’s offerings, you’ll only be helping yourself in the long run.
Otherwise, just be smart about your loan and shop for it like you would any major purchase. Research the lender online, read some reviews of their customer service and make sure to get ALL of your questions answered before you sign the promissory note.
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