Survey: Private student loans vary widely in rates, costs
Do your research and compare to save money
A recent survey of lenders offering private student loans to Iowa students and families highlights a clear lesson: Shop around and do your homework, or risk paying more for your education.
Federal student loans are always the best option for student borrowers. However, many Iowa students will find that scholarships, grants, and federal student loans fail to cover all their costs. Private student loans can close gaps in financial aid packages.
This summer, the Iowa Attorney’s Office surveyed student loan lenders in an effort to better understand the state of private loan lending in Iowa. The lenders surveyed were on lists that Iowa educational institutions provide to students. The AG’s office examined 10,452 loans from 20 lenders that responded to our survey.
Good scores don’t always equal low rates
Data collected in our survey showed that students and cosigners with similar credit scores received widely different interest rates. Although interest rates are often related to credit scores, and borrowers with poor credit receive less competitive rates, Iowans with high credit scores shouldn’t assume they’re always being offered the lowest interest rate.
Our survey found that rates obtained by borrowers or cosigners with similar credit scores varied widely and many borrowers with good or excellent credit scores receive the same high interest rate as students with fair or poor credit scores. Applying for private loans from several lenders gives borrowers the ability to comparison shop without greatly affecting their credit score. (Credit bureaus will typically treat inquiries within a short period of time as a single credit inquiry after the loan is selected.) Iowans should consider applying to a variety of financial institutions, including national or state banks, credit unions, and non-profit lenders, as the rates and terms offered may differ. (more…)