Choosing a Lender
When choosing a lender, it’s important to recognize you may have a business
relationship with this lender for 10 years or even longer after you leave school.
While all lenders offer Federal Stafford loans at the same beginning interest rate,
many lenders offer discounts on loan fees as well as rebates and other incentives
once you receive your loan disbursement or enter repayment. It pays to shop around
before selecting a lender.
We recommend you review the websites of various lenders and compare borrower benefits. You may also want to call two
or three lenders and ask them why you should choose them as your student loan lender.
By investing a little time in comparing lenders’ policies and services, you may
save money over the life of your loan.
Do Lender Policies Differ?
Yes. Some lenders retain ownership of your loan throughout the
life of the loan. Others may sell your loan and immediately transfer
it to another holder, called a secondary market. The terms of the
loan will always remain the same, but you make payments to the new
holder. Ideally, you want a lender that collects its own loans or
sells to only one secondary market. If a lender sells its loans
to different secondary markets, you may
have to make monthly payments of at least $50 at repayment to each
secondary market that holds one of your loans. Avoid
this by finding out if your lender sells its loans and to whom.
What Is A Servicer
and How Does It Affect Me?
Some lenders service your loan account themselves when you are
in school and contract with outside agencies to service your loan
account when you enter repayment. Other lenders use servicers while
you are in school as well as in repayment. You communicate
with this servicer, not your lender, when you have questions on
your loan status, amounts owed or changes in your enrollment status
or address. You are notified of where to direct your questions
with each sale. Ask your lender about their servicing policies.
I Stay With One Lender?
In general, you should borrow all of your loans from one
lender because it will simplify your repayment process. Different
lenders use various servicers and secondary markets; if you change
lenders during your school program, your loans may end up at different
sites, resulting in multiple payments and correspondence to different
sources. However, if all of your same-type loans are serviced in
one place, they can be combined into one monthly payment. In many
cases, a combination of loan payments results in a lower monthly
payment. Ask your lender about its servicing policy. If your lender
uses more than one secondary market or servicer, ask if all of your
loans will be kept together at the same servicing site.
What is Loan Consolidation?
Loan Consolidation is an opportunity to combine multiple loans into a 'new' single loan with one monthly payment. If you choose loan consolidation your new loan will have a fixed interest rate and new terms. Consolidation is not right for everyone so consider your decision carefully. For general information on consolidation you may visit EdFund's Loan Consolidation website.