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Loan to Learn or Bait and Hook?

Published:  September 22, 2006
Issues:  

Private college loan provider "Loan to Learn" has sent an "open letter" to the nations student financial aid administrators that could rank as one of the more cynical attempts by the student loan industry to exploit students and taxpayers.

Loan to Learns letter, which attempts to ingratiate itself with college aid officials by defending them against another lenders charges of kickbacks and payola (as if Loan to Learn doesn't participate in related unsavory activities), might be more credible if Loan to Learn itself were not trying to profit by implicitly maligning and undermining the nations student financial aid delivery system.

Loan to Learn's own promotional materials suggest none too subtly that students face extraordinary troubles with financial aid offices and would be well served by bypassing the whole federal financial aid system.

* Loan to Learn advertises that hundreds of thousands of FAFSA applications are RETURNED FOR ERRORS each year and suggests that students instead can get private loans quickly and directly from Loan to Learn, as if that were a better option.

But seldom, if ever, is a private loan in the best financial interest of students as compared to a federal student loan. In fact, Loan to Learn offers a particularly bad deal, according to this market survey. On top of upfront fees that equal up to 10% of principal borrowed, Loan to Learns interest rates reach up to 16% per year. In contrast, the federal Stafford Loan interest rate is 6.8% per year and the federal PLUS loan interest rate is 8.5% per year.

* Loan to Learn advertises that "our loans cover more than just tuition" as if lower interest federal student loans do not. In fact, not only do federal Stafford loans cover total cost of attendance, including books, room, and board, but federal PLUS loans have no borrowing limit.

Other private loan providers, including Sallie Mae, acknowledge that private loans should be considered only after federal loan eligibility has been exhausted. Loan to Learn does not.

Loan to Learn says in their open letter to the financial aid community that the company will continue to work closely with financial aid professionals and serve the best interests of students and their families.

Really?

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