Gretchen Morgenson, a business reporter for The New York Times, warns high school seniors applying for private college loans (which sometimes fill the gap between federal loans and college tuition and other costs) to read the fine print before settling on a lender.
Morgenson’s story, published today, mentions a Web site, Student Lending Analytics, that allows consumers to scrutinize various lenders — their fees (openly disclosed or not), the ins and outs of their interest rates and other policies that might catch a college grad off-guard, years later. She writes:
As with all borrowing, making the right decision on a student loan is paramount. But lenders make this harder than it should be.
The top three private lenders are Sallie Mae, which underwrote $6.3 billion in loans during 2008; Citibank, with $1.8 billion in loans last year; and Chase, which made $1.1 billion in loans during 2007.
But disclosures on various lending practices differ vastly. For example, lenders do not disclose all fees charged in the servicing and collection of student loans, and loan contracts do not always include benefits that are promised in lender advertisements — like the possibility of a lower interest rate after graduation.
Most troubling, some lenders ask students to sign promissory notes obliging them to pay off their loans before they are told what interest rate they will be charged.
You can find the Times story here.