Be A Wise Consumer of Student Loans
Forrest Stuart, Director of Financial Aid
The news media is full of information about higher education costs and financial aid as Congress is considering lowering Stafford Loan interest rates over the next five years. Higher education institutions are coming under fire as some individuals in the student loan industry are claiming that colleges and universities receive “kickbacks” from student loan lenders in exchange for these lenders receiving a place on schools’ preferred lender lists.
Undoubtedly, there are a few institutions which have crossed that line of ethical behavior -- very few, however. The great majority of colleges and universities use excellent judgment and good research when deciding which lenders they recommend to students and parents. Rhodes is no different.
Because Rhodes has such a low Stafford Loan cohort default rate (percentage of students who fail to repay their Stafford Loan), many lenders are anxious to be the lender of choice for our students and parents. The Financial Aid Office researches the benefits that many lenders offer student and parent borrowers. The volume of lenders is such that our “Rhodes Frequently Used Lenders” compilation on the web site prevents all potential lenders from being listed.
Because the federal government sets the interest rate for Stafford Loans, we investigate whether student and parent borrowers may be eligible for certain benefits upon repayment. For example, some lenders will rebate a certain percentage of the principal after twelve on-time payments by the student. Most offer a quarter of a percentage point interest rate reduction for students and parents who make student loan payments via auto-debit.
Another aspect of choosing which lenders we recommend is service. Nothing is more frustrating than poor service by a lender to our students and parents. When a pattern of poor service is established, that lender may find that we no longer recommend it to parents and students.
Students and parents are free to choose any lender with whom they want to do business. Our goal is to provide accurate information for that selection.
- The 2007-08 Free Application for Federal Student Aid (FAFSA) may now be completed online at http://www.fafsa.ed.gov/.
- The Tennessee Education Lottery Scholarships (TELS) require that students complete the FAFSA each academic year as part of the eligibility determination for TELS. More information is available at http://www.collegepaystn.com/.