Choosing a Lender

Part of the process of completing a loan application involves choosing a lender, and you should pay particularly close attention to your options.

You may be asking, "Aren’t all lenders the same? Why is this important? All I need is the loan check." The differences between lenders and their loan incentives, however, may determine how much money you save on the total cost of your student loan.

The student aid office at your school will often have a "preferred" lender list which names lenders who the school trusts and feels offers attractive benefits to their students. Often the school will encourage you to choose from this list as it allows you the most convenient and expedient loan processing. You need to understand, however, that it is your legal right to request any lender you want.

You may elect to use one of the school’s preferred lenders simply because it will save you time and trouble in researching loan programs yourself. If you have checked out the different loan options lending institutions offer, however, and have found a lender who offers you benefits that your school’s "preferred" lenders do not, you have every right to request your loan be certified using your requested lender not a preferred lender. The processing of your loan may take longer, but you have the prerogative to make this request.

Loan Benefits

Below is a listing of many of the benefits a lender might offer student-borrowers who secure loans through them. Some benefits are front-end and some are back-end. Front-end benefits mean that you save money at the very beginning of the loan process. Likewise, back-end benefits save you money during the repayment period.

Typically you can get information about benefits either from your campus’ financial aid office or from the lender’s Website.

Front-end Benefits

• Low origination fee (a fee you pay for taking out the loan and typically deducted from your loan check directly)
• Low or no guaranty fee (a fee you pay for a third-party who ensures you will repay your loan)
• Online application and/or electronic fund transmission (for faster processing)

Back-end Benefits

• Reduced interest rate for consecutive, on-time payments
• Reduced interest rate for direct debit of your student loan payments
• Round-the-clock customer service
• Online payment options and customer service

Loan Certification

You are probably aware by now that there are several steps involved with getting student loans. While many programs exist to help with borrowing money for your education, these programs have rules and regulations to ensure that the programs are administered fairly and accurately. One of these steps involves loan certification.

Loan certification simply means that your school verifies your enrollment status to the lender or guarantor administering your student loan program. They verify that you are indeed eligible to receive the loan you have requested. You cannot receive any loan funds, however, until your enrollment has been verified.

Loan certification can be done one of two ways: electronically or manually.

Electronically – many financial aid offices load their enrollment information into a special, secure database called the National Student Loan Clearinghouse (NSLC). The NSLC stores students’ enrollment information so that at any time a registered lender or guarantor can look up your record and determine where you are a student and what kind of enrollment you’re in (full-time, half-time, etc.). While the NSLC is a very convenient way for your loan to be certified, not all schools participate nor do all schools update the database at the same time. This means that there is a chance that the request to certify your loan could be processed using inaccurate information.

If your school does not participate in the NSLC or your enrollment information has changed since the last update to the NSLC, you might have to use the second certification type:

Manually – many campuses have a standard form for verifying enrollment and certifying your loan. This form requires some information from you and some information from your financial aid or student aid office. Your school may offer to send the completed form on your behalf, or they may expect you to take the time and absorb the expense necessary to send the form. You should check with the financial aid office to find out what the procedure is.

Tips for Loan Certification

Be proactive! One of the most important things you can do to help keep the certification process on track is to keep your information up-to-date with your school.

• Make sure your contact information is accurate (address, phone, etc.), as well as your enrollment information.
• If you wait until the last minute to sign up for classes, the school’s records may not reflect your intentions to return the next semester OR may inaccurately list your full-time or half-time status, and this could impact your loan certification.

Stay alert! If you receive paperwork from your school that lists inaccurate information about your enrollment, call immediately to see what can be done to resolve the issue.

• Letting the wrong information sit on your record or trusting that "the system" will work it all out sooner or later may mean that your student loan lender or guarantor receives the wrong data about you.

Letting a lender or guarantor process your loan with the wrong information about your enrollment may mean that you receive a different loan amount than what you are expecting/need.