Carefully Review Borrower Benefits When Evaluating Student Loans

Many student loan lenders offer Borrower Benefits to help their loan product stand out over a competitor's. These incentives might come in the form of immediate cash back, reduced payments for automatic debit of payments, or reduced principal or interest rate for on time payments. Such benefits can significantly lower the overall cost of the loan, however, industry reports suggest that only 10% - 20% of borrowers actually achieve them.

NEWTON, Mass. (Business Wire EON) October 28, 2007 -- Many student loan lenders offer Borrower Benefits to help their loan product stand out over a competitor’s. These incentives might come in the form of immediate cash back, reduced payments for automatic debit of payments, or reduced principal or interest rate for on time payments. Such benefits can significantly lower the overall cost of the loan, however, industry reports suggest that only 10% – 20% of borrowers actually achieve them.

It's important to weigh Borrower Benefits carefully

And now, due to changing economics on federal student loans, lenders are re-tooling, and in many cases, reducing the Borrower Benefits they offer.

“It’s important to weigh Borrower Benefits carefully,” said Kevin Walker, CEO of SimpleTuition. “Borrowers should read the fine print and pay attention to the obligations expected of them to attain the benefits. Borrower Benefits can potentially save you a lot of money, but the borrower must stay on top of understanding and attaining them.”

Here are some points to keep in mind when investigating the potential savings through Borrower Benefits:

• Understand the potential savings. Get an understanding of the true savings, over the life of the loan, a particular benefit might offer you. It might be substantial – or it might not turn out to be as big a money-saver as you had expected. Sites like www.simpletuition.com can help you run the numbers.
• Be aware that a Lender’s Borrower Benefits can change. Don’t assume that the benefits you got on this year’s federal student loan will be available on a new loan from the same lender. Investigate specifically to see what benefits (if any) are available on new loans.
• Borrower Benefits are easy to lose. Failure to pay on time or discontinuing the use of auto debit for the monthly payment can often result in losing Borrower Benefits. Identify any such provisions before you commit to a loan, and then be sure not to trip them.
• Definition of “on-time” payments can differ from lender to lender. Contact your lender to find out their definition of on-time payments – some lenders offer grace periods; others consider a late payment of even one day grounds to rescind a benefit.
• Borrower Benefits are sometimes subject to cancellation. Before you sign the promissory note ask your lender if you will lose benefits should the lender sell your loan.

At www.simpletuition.com borrowers can evaluate student and parent loans with and without Borrower Benefits to get a handle on the potential savings they could bring.

Kevin Walker available for interview