Ohio University College of Osteopathic Medicine

 Federal Stafford loan selection criteria for the 2009-10 academic year

OU-COM will be listing 8 lenders on the OU-COM Financial Aid Application for the 2009-10 processing year.  However, we will process loans from any lender selected by the student.  Our selection process is described below:

Background:

The loan industry is becoming ever more confusing and competitive offering an array of front and back end borrower benefits that sometimes defy comparison from one lender to another. In addition, at this point in the economy, many lenders have pulled out of the student loan business, which narrows the number of lenders available. In our search for the most competitive lenders we turned to October 2008 issue of the Greentree Gazette’s, Student Loan Buying Guide, Business Intelligence for Higher Education. This Buying Guide lists a table of 52 Stafford loans from which we pulled 12 agencies that make loans to graduate and professional students.  This table provided a foundation to begin our analysis and selection of a preferred lender list.  The preferred lender list reflects our decisions made as of 6/1/2009.

Step 1

From the guide above we selected the 11 lenders who still make subsidized and unsubsidized Stafford Loans to graduate and professional students. To this list we added Student Lending Works (the State of Ohio’s Designated Nonprofit Student Loan Lender).

Step 2

Next we sent out a Request for Information (attached) to the 12 agencies, soliciting critical information from which we could make an educated decision on the companies giving the best service, rates, products, etc.

Step 3

Analyze the data.

Here are the steps and criteria we used to select the preferred lenders for 2008-09:

#1  Lenders were eliminated.  CitiBank declined to respond because of a tight turnaround time for response to Request for Information.  Student Lending works was eliminated because it is charging a .5% origination fee and a 1% default fee.  This was more than any of the other lenders.  We did not receive a response from MOHELA or CSLF/Susie Mae.  This left us with 8 lenders to compare.

#2 The loan should reflect the lowest fees available. Of the 8 lenders remaining 7 charged the same fees:  .5% origination.  Discover, a new player in the student loan business, offered a 0% fee.

# 3  Identify lenders who work with the Texas Guaranteed Student Loan Corporation because they are charging 0% guarantee fees as opposed to ASA that went up to 1%.  This provides a savings for the student.

#4  Identify lenders offering significant back end benefits.  In this highly volatile economic climate, lenders were not competitive and offered the same back end benefits. Back end benefits must be earned by the borrower. Historically they have a high “breakage” meaning that if the borrower missed a payment they lose the benefit. Many reports estimate that as few as 15% of the borrowers end up receiving these benefits either because they refuse ACH payment or miss a payment or the payment by ACH bounces in their checking account.

Note: it is difficult to analyze the impact of these benefits if borrower behavior is in compliance because and interest rate reduction is impacted by the length of repayment. Credit balance reductions are more stable but still make it impossible to estimate for an individual borrower.

#5 The loan does not capitalize until after the deferment periods provided the borrower applies continuous deferments. Given our borrower population applies for as many as 3 annual deferments prior to entering into practice this is a significant savings to the borrower.

All lenders on this met this criteria.

#5  All lenders who charged no greater than a .5% origination fee and who worked with guarantee agencies who charged no default fee were included in the list.

These lenders were selected for our preferred lending list with the understanding that we will process any Federal Stafford loan a student requests.

SUMMARY OF CRITERIA USED TO BUILD

OU-COM STUDENT LOAN LENDER LIST

The Ohio University College of Osteopathic Medicine’s decision to include lenders in the following list is based on several factors.  You, the student, has the right to choose the lender, whether on this list or elsewhere.  We welcome your feedback on experiences with the lenders.  Just stop by Student Affairs and share the good and the bad in dealing with the lender’s services.

The ultimate decision to include a lender on OU-COM’s list was based on:

·         Terms and conditions of the loan products (interest rate, front end and back end benefits, etc.)

·         The lender’s long-term presence in the student loan industry as a measure of experience and commitment to customer service

·         Compatibility with the College’s systems and processes

·         Presence of additional loan products for graduate/professional students

·         Our past experience with the lender’s customer service operations and client representatives, regardless of whether the lender had been on our list in the past

·         Services offered to the student (toll free number, expanded hours, on-line application, educational products to calculate loan repayment, etc.)