Student Loans : Who Can you Trust?

If you're a parent or student plotting a strategy to pay college tuition, add one more worry to your list. Recent reports indicate that there have been unethical arrangements quietly occurring between lenders and universities. The unfortunate news has college families asking, "Who can you trust?"

Student loans have given many high school graduates the opportunity to pursue a higher education and better life. According to recent media reports, however, these loans have also been providing university officials across the country with a better life-one that's financed by kickbacks and revenue sharing. Students and parents must learn how to protect themselves when it comes to getting financial aid.

Preferred lender problem
The main crux of the problem is the "preferred lender" lists that colleges provide to their students. Because there are so many private lenders vying for loans in the huge college market, many financial institutions offer lower rates and revenue-sharing deals to any college that includes them on the preferred lender list.

Many schools take the money and return it to students in the form of financial aid. But there are accusations that financial aid directors at several schools have received some rather questionable consulting fees. There are also reports of lenders offering paid trips in return for high placement on this list.

Politicians to the rescue?
Politicians have been quick to offer solutions to this problem, proposing a variety of fixes and new programs. Some include cutting the interest subsidies that the federal government currently pays to lenders. Others encourage schools to do the private lending themselves. Overall, there has been a call for tighter scrutiny of these programs, which school officials fear may inhibit their desire to broker better deals.

Take matters into your own hands
The best line of defense is for students and parents to protect themselves. To do this, they'll have to do something that students are quite familiar with: homework. First, compare the programs of anyone on the preferred lender list with lenders who aren't on the list. Don't assume that the best rates will only come from the former.

Next, pick up as much information on shopping for student loans as you can. Tap into the Internet and scour up anything and everything you can find.

Finally, carefully read through and understand the loan agreement. If the financial language proves too difficult, find a family friend or lawyer who understands the fine print and can give you some advice.

For prospective college students, the recent announcement of the cozy relationship between lenders and colleges serves as a life lesson: When it comes to financial matters, don't blindly trust anyone. Do your own research, and understand the financial transaction you're entering into. Ultimately, this whole controversy serves as a perfect example of why it pays to do your homework.

Student Loans: Who Can you Trust?
By: MortgageLoan.com | May 01, 2007