How to Compare the Benefits of Stafford Loan Lenders

Stafford loan lenders offer unique borrower benefits as an incentive to retain borrowers. These benefits are designed to entice students into electing one lender over another, and they typically involve terms and savings. While you should always be vigilant of "too good to be true" offers, there are a number of actual benefits you can attain through smart loan shopping.

Interest Rate Reductions vs. Principal Reductions

Many lenders offer interest rate reductions each year to responsible borrowers. Others will offer principal reductions. Most of the time, principal reductions are a one-time offer. On the other hand, interest rate reductions can occur regularly throughout the life of the loan. These reductions are essentially a chance to refinance the loan without penalty. Interest rate reductions are usually a better benefit. However, a principal reduction can be better for a short loan. Since the interest rate on short loans is already low, there is rarely a large benefit to a minor quarter-point or half-point reduction. 

Multiple Prepayment Elections

Most Stafford loan lenders offer the standard four repayment elections: standard, extended, graduated and income based. However, some lenders will exclude one or more of these options. Lenders may try to convince you that lacking options is not important if they offer the payment plan you would like to use. Because federal student loans can be refinanced and consolidated in the future, it is important not to limit your options in the beginning. Even if you think you will need a standard plan, you may find the extended option is essential if your financial situation changes. 

Automatic Debit Options

Your lender should offer an easy way to make your loan payments. This includes an automatic debit option and online resources instead of always requiring a paper billing cycle. If you have to pay a fee to view or pay your bills online, then you should opt for a different lender. The ability to pay bills online without a fee may seem like a very small benefit. However, college students are often traveling and may even spend time abroad. Having the ability to quickly view and pay bills is essential in preventing delinquencies. Students who always have to access a physical bank or post office to pay bills run the risk of late payments. 

Ease of Application

You will want to work with a federally approved lender when you are seeking Stafford loans. This means you will only have to submit one application for the entire process instead of applying to a private lender then to the federal loan program. In addition, it is important to note Stafford loans must be paid each term instead of all at once. They are issued in the amount of tuition required in a given term. When it comes time to apply for a new loan amount for a new term, you want the easiest process possible. Some lenders will save all of your application information in an easy to manage website for your use. You can then access this information and move forward with the new application easily. 

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