College "Preferred Lenders" List Not Always Preferable
Many colleges have preferred lender lists in hopes of helping students who are new to the financial aid process. There are more than 100 lender options, and unbiased advice is the most beneficial to students. To live up to a school’s standards of reliability, preferred lenders should be selected impartiality. Listed lenders should stand out for their ability to provide students with the least expensive and most comprehensive financial options. Because student loan rates are similar, some schools claim to consider help availability, loan regulation clarity, and client privacy when selecting lenders.
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However, allegations of unethical and illegal, inducements have generated questions about the reliability of preferred lender lists. New York Governor and former Attorney General Andrew Cuomo accused countless schools and lenders of mutually benefiting from placing certain lenders on preferred lender lists. In 2007, Matteo Fontana, a general manager working for the Department of Education's Office of Federal Student Aid, was charged with misconduct for owning at least $100,000 worth of stock in Student Loan Xpress, a student lender giant. Since then, over 100 schools and lenders were investigated in an effort to rid the financial aid process of corruption.
Considering the high dependency on preferred lender lists (Cuomo stated that, "90% of the students take the 'preferred lender'"), it is important for both undergraduate and graduate students to be informed. Choosing a lender requires personal research. Ask schools about the options that go beyond their top choices.
There are a number of guidelines that schools should follow when giving loan advice to students. If your school does not comply with any of the following, seek further details.
If a school chooses to create a preferred lender list, make sure a list of not-included lenders is available.
Schools should have equal processing for lenders that are not on the preferred list.
Remember to always check the fine print before singing anything.
When you get acceptance letters from multiple colleges, there’s nothing wrong with taking some time to celebrate. But once the mental confetti has fallen, it’s time to decide: which school do you actually want to attend?
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