Your Lender, Your Choice
You are free to choose any participating lender for your Federal Stafford or Federal PLUS loan! In order to provide you with the best available service, Metropolitan State University, together with regional guaranty agencies Great Lakes Higher Education Corporation and Educational Assistance Corporation, have developed on-line application and automated certification processes for the Federal Stafford and PLUS loan programs. These electronic processes help to insure that your loans are processed timely and accurately. Only certain lenders participate in these electronic processes. We provide you with information on these lenders through our web site. Here we address some common questions about choosing a specific lender for your loans.
Wait- Aren't These Government Loans?
Yes, they are. But these government loans are a partnership between commercial lenders, guaranty agencies, schools and the federal government. The lenders provide the funds for the loans, and in exchange receive insurance against your not paying the loan from the guarantors. Lenders also receive a guaranteed minimum financial return on the loans from the Federal government. Guaranty agencies insure the lenders against non-payment of the loan, and collect loans that are in default. Schools assist with confirming student eligibility for the loans and arrange for disbursement of the loan funds. Together, all four partners work to create financing opportunities that are convenient and cost-effective for you.
What Differences Are There Between Lenders?
Even though these loans are established and insured by the Federal government, lenders do have some flexibility to compete with each other for your business. Lenders can discount the loan fees and interest rates for you in order to make the loan more attractive. Some of these discounts are guaranteed, and some may be based on your meeting certain conditions. For example, a lender that does not charge a loan origination or guaranty fee (essentially paying these on your behalf) is offering a guaranteed discount. That same lender may offer interest rate discounts or rebates provided you make a certain number of monthly payments on time. This would be an example of a conditional benefit. Lenders also differ on the level of service provided to borrowers. Some lenders promise to answer calls with a live customer service representative quickly; others offer 24 hour automated service available through their web sites and automated telephone systems. Since it typically takes a student 8-12 years to pay off student loans, and you may need to request services such as loan deferment or forbearance, you should contact various lenders to see how you like working with their customer service process.
Why Can't I Choose The Federal Direct Loan Program?
Generally, schools choose whether to participate in the Federal Stafford Loan Program or the Federal Direct Loan Program.* In 1994-95 when the Federal Direct Program was launched, Metropolitan State chose to remain in the Federal Stafford loan program. Since that time competition between the loan programs has resulted in lower loan fees, the creation of on-time repayment incentives and significantly improved origination and repayment servicing from Federal Stafford loan lenders. We remain convinced that the Federal Stafford Loan program remains the best financing option for Metropolitan State students.
How Did You Choose The Lenders On Your Suggested Lender List?
In choosing lenders to suggest for students, Metropolitan State University uses the following criteria. Lenders on our suggested list may meet one or more of these criteria:
- use of automated loan origination and disbursement services;
- high quality loan origination and repayment servicing;
- brand name strength; and/or
- significant economic contribution to the State of Minnesota.
Do Lenders Pay You To Be Included On Your List?
Absolutely not. Neither Metropolitan State University nor the staff members of the Office of Student Financial Aid accept payments or gratuities from lenders in exchange for inclusion on our list. The charitable arm of regional banks do from time to time make donations to the Metropolitan State University Foundation; however, at no time has the Foundation sought to influence the decision of the Office of Student Financial Aid staff on the make-up of the suggested lender list.
What Should I Consider When Choosing A Lender?
We recommend you consider the following factors when choosing a lender that is right for you:
- Loan Origination and Default Fees: Are the Loan Origination and Default Fees charged to you, the borrower or paid by the loan program? If these fees are paid by the loan program, this can save you hundreds of dollars each year.
- Quality of Loan Servicing: Before choosing a lender, call the lender’s toll-free customer service number around 12:00 in the afternoon on a Monday, and ask them about their loan program. This test during a typical peak call volume time will give you a good idea about the quality of the lender's customer service.
- Selling Loan Portfolios: When you call the lender, one question to ask is whether the lender sells its student loan portfolio, and if so, to whom? The buyer of the loan portfolio will likely be the entity that services your loan in repayment, and you should test their customer service as well.
- Electronic Application or Paper? The lenders on our lender list participate in electronic application and disbursement, which speeds processing of your loan. A loan from a lender which does not participate in our electronic processing will take some additional time to process.
How Much Should I Borrow?
You may borrow up to the amount listed on your Offer of Financial Assistance. It may not be necessary to borrow that full amount, however. For example, if you are working full time and are already able to meet your living and personal allowance expenses through your earnings, you should only borrow enough to pay for your tuition, fees and book expenses. This is particularly important if you are attending on a half-time basis, because your borrowing under the Federal Stafford loan program is limited to an aggregate maximum of $31,000 for a dependent student and $57,500 for an independent student. That's about 5 years of borrowing at the annual loan limits each year. If it will take you 6 or more years to complete your degree, you should plan to borrow less than the maximum allowed each year in order to preserve eligibility for this loan in your later years of study.
How much you can afford to repay is also an important factor in how much you should borrow. You can go to a Loan Calculator web site to calculate how much your monthly payment will be under various interest rate and repayment period options and find out how much income is recommended in order to keep your loan payments manageable.