What Student Loan Lender Should You Choose?

If
your college
participates in the direct-student loan program then the choice is
made. You
should get your loan through the college. But if you're looking for a
private
lender there can be vast differences among the various institutions
that offer
student loans. Be sure to ask any lender you're considering the
following
questions:
How
frequently do you
calculate interest on the loan?
The
more often interest is calculated; the
bigger your child's debt will be when it's time to pay up. For
instance, on a
$14,000 unsubsidized ,
if interest is
calculated quarterly over four years instead of just once at the time
repayment
starts students graduate owing hundreds more.
Do
you offer repayment
rewards?
Banks
don't like to chase defaulters, so some offer incentives for on-time
payments.
National lender Sallie
Mae
(888-272-5543) and Nellie
Mae
(800-634-9308), a New England lending agency,
will reduce your rate by 25 basis points if you authorize automatic
monthly
deductions from your bank account and by another 2% when you make your
first 48
payments on time (for loans taken out before June 30, 2002). For loans
taken
out after July 1, 2002, you'll get a cash-back reward equal to 3.3% of
your
original loan amount after you make 33 consecutive on-time payments.
Ask your
lender if it has any of these programs or offers its own incentives.