 Student loans are coveted by lenders. They're viewed as a gateway into the financial affairs of college graduates, a foot in the door with long-term ramifications for a lender. By getting to a young professional early, lenders hope that they'll have the inside track for selling other types of financial products, including mortgages, auto loans, credit cards, and investments.
Lenders use discounts as a carrot to attract college students. Generally these discounts include rate reductions for on-time payments, and the waiving of loan fees. Nevertheless, these discounts tend to have strict guidelines, and require careful examination on the part of the borrower.
The world of student loan discounts
Usually the most common discounts involve interest rate reductions for on-time payments. For instance, a lender may provide a 25 percent interest rate reduction if a borrower signs up for monthly loan payments. Other on-time discounts contain a 1 percent interest rate reduction on consolidation and plus loans if payments are made on time, and a 2 percent reduction for Stafford loans for prompt payments for 48 consecutive months.
There are also such popular discounts as fees. Many lenders will waive the origination fees on Stafford Loans, and they may also choose to skip the 1 percent default fee.
Studying the small print
The college student who does the required reading usually pulls in the best grades in school. The same holds true for loans, where discounts generally include conditions buried in the agreement's small print.
For instance, the on-time loan repayment discount has some rather strict requirements. In general, the payments must be consecutive, so a single missed payment could end the discount. If you're fresh out of college and just getting used to managing your finances, making these regular payments requires a kind of discipline that could challenge some graduates.
The fine print doesn't stop there. If you select to consolidate your loan with another financial institution, your original lender may require that you repay any discounts you've received within a certain time frame.
Making the right solution
It is recommended to find discounts for shorter periods of consecutive payments, no matter how timely you are with paying bills. You'll also want to concentrate on ones that are granted sooner than later. Seek for the front-end discounts-ones such as signing up for direct debits or immediate fee rebates. It is better to avoid those that require repayment if you consolidate with another institution.
Lenders are always examine student loan borrowers, and they'll bend over backwards to offer you the best discounts. You're in the driver's seat-but you need to scrutinize all those discount stipulations. Review these options, and do your research to get the best deal on the market. It's a best way to feast on all the financial carrots lenders have to offer.
| 
