How to Choose a Lender

Most lenders have information on the web. If you do not know if your lender is on the web, go to Google.com and type the name of your lender. Although many of the basic terms and conditions for federal loans are the same, there are a number of factors you should consider before making your choice:

Customer Service

Since you are about to enter into what may be a long-term relationship, it is important to choose a lender with a demonstrated record of excellent customer service.

Borrower Benefits

The term “borrower benefits” is commonly applied to financial incentives provided by individual lenders to reduce the price of a loan over time. There are two categories of these benefits: front end and back end.

Front-End Benefits

• Mandatory front-end fees for Stafford Loans include a 1 percent federal default fee and a 1 percent origination fee. This means you would only get 98 percent of your Stafford Loan money.
• There are lenders who will waive these fees on Federal Stafford Loans, allowing you to receive 100 percent of the loan money.
• The Federal PLUS Loans include a 1 percent federal default fee and a 3 percent origination fee. This means you would receive 96 percent of your PLUS Loan proceeds. Some lenders waive the 1 percent federal default fee, allowing you 97 percent of the loan proceeds for your educational expenses.

Back-End Benefits

These incentives may include an actual reduction in the interest rate or a rebate applied to the principal loan balance. When making your choice, it is important to compare the back-end benefits and ask the following questions:

• What is the actual (calculated) benefit, and how much money will I save?
• Is it easy to qualify for the savings?
• Does the benefit begin immediately without restrictions, or does it go into effect after a certain number of consecutive on-time payments?
• Must I sign up for ACH (automatic withdrawal or “auto debit” from a savings or checking account) in order to qualify for the benefit?
• How could I lose the benefit (thereby losing the savings), and once lost, can I regain the benefit?

NOTE: If you choose to consolidate your loans upon repayment, the borrower benefits don’t apply.

When we send your financial aid award, we will provide you with material that will guide you through the process of selecting a lender who is looking out for your best interests.

We have listed the lenders that are most often used by our students. Yale will process all loans whether or not you choose one of these lenders.