Private Student Loans: How To Spot Deceptive Offers
July 2 (NAPSI)-An education beyond high school can be expensive and could require
you or your family to take out loans to help pay for it.
Student loans fall into two categories: federal loans and private loans.
Federal loans are subject to oversight and regulation by the federal
government. Private loans, sometimes called “alternative loans,”
are offered by private lenders and do not include the benefits and
protections available with federal loans.
The Federal Trade Commission (FTC), the nation’s consumer protection
agency, and the U.S. Department of Education (ED), the agency that oversees
federal student loans, say it pays to learn about student loans so you can
make an informed decision about financing your education.
Private Loans
Private companies may offer you loans and other forms of financial
assistance for your education. They often use direct mail marketing,
telemarketing, television, radio and online advertising to promote their
products.
Comparing the costs of different ways to finance your education is
important. Private loans tend to have higher fees and interest rates than
federal government loans. Generally, they do not offer the opportunities for
cancellation or forgiveness that are available on many federal loan programs.
So it makes good financial sense to exhaust your federal loan options (as
well as grants and scholarships) before considering loans from any private
companies.
If you are thinking about a private student loan, it’s important to
know whom you’re doing business with and the terms of the loan. The FTC
and ED offer these tips to help you recognize questionable claims and
practices related to private student loans:
• Some private lenders and their marketers use names, seals, logos
or other representations similar to those of government agencies to create
the false or misleading impression that they are part of or affiliated with
the federal government and its student loan programs.
• ED does not send advertisements or mailers or otherwise solicit
consumers to borrow money. If you receive a student loan solicitation, it is
not from ED.
• Don’t let promotions or incentives like gift cards, credit
cards and sweepstakes prizes divert you from assessing whether the key terms
of the loan are reasonable.
• Don’t give out personal information on the phone, through
the mail or over the Internet unless you know with whom you are dealing.
• Private student lenders typically ask for your student account
number-often your Social Security number (SSN) or Personal Identification
Number (PIN)-saying they need it to help determine your eligibility. However,
because scam artists who purport to be private student lenders can misuse
this information, it is critical to provide it or other personal information
only if you have confidence in the private student lender with whom you are
dealing.
To learn more, see “Student Loans: Avoiding Deceptive Offers”
at www.ftc.govwww.FederalStudentAid.ed.gov. and visit
Comparing the costs of different ways of financing your education is
important.
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