How To Choose A Student Loan Lender

Checklist | Choosing a Lender | Preferred Lenders

When you take out your first student loan, you begin a relationship with your lender that will last for many years. That is why it's so important to get all the facts and choose your lender with care.

Here are some things you should know about the lender you choose:

Does the lender offer money-saving benefits?
Choose a lender that offers competitive benefits such as discounts on the interest rate when payments are made on time. Compare different lenders to see which can save you the most money in the long run.
Will the lender sell your student loans?
Many lenders sell their loans to other lenders and to the secondary market. The secondary market is made up of many private and state-run organizations that specialize in buying student loans. Although there is nothing wrong with this practice, it can be confusing to students. Each time your loan is sold, you will be dealing with a new owner and their policies, and not the people who gave you the loan. But rest assured, the interest rate and terms of your loan will not change.

Tip: To avoid confusion, choose a lender that sells to only one secondary market - and use that lender for all your student loans. That way, all your loans will be in the same place.

How does the lender capitalize interest payments?
With capitalization, interest payments are added to your principal (the amount you borrow) on your unsubsidized Federal Stafford loans. This increases your balance (the amount you owe) and your monthly payments. A lender may choose to capitalize your interest every three months; every six months; once each year; or just one time, when repayment begins.

Tip: To save big money, choose a lender that offers one-time capitalization at repayment.

Is the lender easy to contact?
Look for lenders that offer 24/7 service through Internet account access.

Last Updated: 3/4/10

How To Choose A Student Loan Lender

Does the lender offer money-saving benefits?

Will the lender sell your student loans?

How does the lender capitalize interest payments?

Is the lender easy to contact?