Borrower Beware: Student Loan Scam Alert
College tuition is rising, loans are shrinking and financial aid is tightening. It’s no wonder so many companies use deceptive marketing to push private educational loans on parents and students, sending mail that looks like it’s from the government and offering prizes just for applying. But not anymore.
On Monday, New York Attorney General Andrew Cuomo reached a settlementwith Goal Financial, one of nine student loan companies that has agreed to follow a new “code of conduct” when advertising student loans. But you don’t need to wait for the government to regulate the loan industry – you can be confident you’re getting the best deal if you follow the three steps Carmen laid out on Monday’s show:
1. Exhaust all public loan options. Public loans are preferred because they have fixed interest rates and flexible payment options. FinAid.orgoffers examples of different types of public loans offered.
2. If you do apply for a private loan, stick with big banks. You will rest easier knowing your loan is coming from an established institution with a good reputation. Bankrate allows you to compare your different options and pick loans with the lowest rates and best payment plans.
3. If it sounds too good to be true, it usually is. Like with anything, always read the fine print (and if a free iPod is involved, be extra studious). It’s also best to approach your financial aid office for recommendations before heading out on your own.
Not all private loans are inherently bad and misleading, Carmen stressed. But now more than ever, it pays to be vigilant.