Important, College Loans: Watch Out Before You Apply

Important, College Loans: Watch Out Before You Apply by Jimmy Chuang

Selecting college student loans is always a bit of a stressful time, there are so many options, so many different terms and even some very attractive looking offers.

However, those student loans that seem "too good to be true" are generally just that, so good that something is fishy.

Every year hundreds if not thousands of college student loans are issued that look like a good deal on the surface, but without reading the fine print and understanding exactly what you are getting into you may find out you have cost yourself thousands of dollars in interest or fees over time. Key things to look for in college student loans, in particular with private school or education loans include:


How the interest is calculated, as well as vague information on the loan's interest rate. If at all possible look at loans that allow you to lock in the interest rate if the rate is good at the time of the loan. Not locking in a rate can result in either a really good option if the interest rates are more favorable to borrowers, but it can also go the other way and have the lender make a lot of money.

The amount of money borrowed and the interest rate are both affected by your credit score. Be very leery of lenders that promise low rates no matter what your credit score is or if you have bad credit.

While it looks promising, the additional fees, other services, and costs that you end up paying are not so nice. Most commonly, these costs exceed a slightly higher interest rate in the long run.

• College student loans that promise you money for non-educational items or that indicate they have a loan that falls in a loophole to get around the policies.

This is both illegal and against the Higher Education Act policies and typically these types of scams are exposed, often too late for unsuspecting students.

While it may not seem important, ask if your loan will be sold, as many smaller lenders do, because this can ultimately leaving you with someone other than the original lender to deal with and possibly resulting in different interest rates and terms.

A reputable lender will put information about the selling of the loan in writing and will also guarantee that the original terms will continue to apply.

Although these new companies offering student loans may be appealing, a proven track record with a positive history of previous students is a much better option to choose.



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