Preferred Lender Selection & Criteria

Which Lender Should A Student Select For Their Loan?

What criteria should a student or parent use to determine which lending organization is best for them. Here are a few suggestions. This by no means should be considered a complete list of items to consider.

1. Who decides what lending institution my student loan will come from?

   You do. You may select any participating lender of your choice.

2. Does the lending institution participate in the Federal Family Education Loan Program (FFELP)?

   You might want to contact the financial institution with which you or your family does business to see if they participate in the student loan program. Not all lenders participate in FFELP. You may also request a list of participating lenders from LU, view the eligible lender list on the MDHE website at http://www.dhe.mo.gov/currenteligiblelenderlist.shtml, or view the national lender list provided by the Department of Education by clicking here.

3. Does the lending institution pay any of the student loan fees?

   Federal law allows origination and guarantee fees to be charged to student loan borrowers. The origination fee is 3 percent of the loan amount and the guarantee fee is 1 percent of the loan amount. Normally, your lender will deduct these fees from your original student loan amount. This reduces the total funds available to the student to pay for their educational costs.

   There are many lenders and some guarantee agencies that pay all or part of these fees for the student. As a result of the lender paying these fees for the student, the student receives more funds to apply toward his/her educational costs.

4. Does the lending institution sell the student loan to another agency?

   Many times loans are sold and the borrower benefits change. This primarily impacts repayment options and deferment of repayment. Therefore, you need to keep in mind, if the lender does sell their loans, will the borrower benefits they offer continue with the new loan holder?

5. What kind of customer service does the lending institution offer to the student?

   Consider customer service hours, availability to contact through the internet or email, do their informational handouts thoroughly explain the loan, loan options, loan repayment options, deferment options and deferment request procedures.

6. Does the lending institution provide any borrower benefits?

   Consider repayment options and offers to repay portions of the loan in particular situations. Additionally, some lenders reduce interest rates for signing up for auto-debit repayment.

7. Does the guarantee agency provide any incentives?

   Some guarantee agencies have an additional interest rate reduction if you choose them as the guarantor for the student loan. So finding out who your lender will use to guarantee the loan can have a big impact on the total interest accumulated on a student loan. For example, the College Board has a 1.5% interest rate reduction program and the Missouri Department of Higher Education (MDHE) has a .5% additional interest rate reduction when they are the guarantor.

Preferred Lender List Selection Criteria

Currently, Lincoln University has seven lenders on our Preferred Lender List:

1. Wachovia (lender code: 830005-50)
2. Commerce Bank (lender code: 813979-50)
3. US Bank (lender code: 814548-50)
4. SmartFUNDS (lender code: 806773-50)
5. Citibank (lender code: 826878-50)

We have selected Commerce Bank, US Bank, and SmartFUNDS for the following reasons:

1. They currently pay the origination and guarantee fees for the student
2. MOHELA is their guarantee agency and, as a result, the student loan interest rate is reduced by .5%.
3. If the student signs-up for MOHELA’s auto-debit repayment program the interest rate is further reduced.
4. All five lending institutions and MOHELA offer extensive customer service capabilities to help the student through the lifetime of the loan.

We have selected all five of the lending institutions for the following reasons:

1. Historically, students have requested to use these lenders.
2. Some have branch locations in our service area.
3. To offer wider options to the student, as far as lender benefits and repayment options.
4. They all demonstrate superior customer service.
5. Their loans can be processed electronically through LU’s computer system and the Missouri Direct Education Loan (MODEL) web site which allows the student real-time access to monitor status of their loans.
6. Their loan funds are electronically transferred through our normal EFT processes (ATOM) which allows funds to be applied to their account quicker compared to processing a paper check for endorsement.
7. Processing their loans does not require LU to process student loans outside of our normal procedures i.e. through batch processing and minimal manual intervention, which allows a quicker turn around time for funds to be applied to the student's account.

We review the lender’s Request for Proposals (RFPs) annually beginning November for each upcoming academic year. Academic years start in August and run through July. The RFPs are reviewed by the Student Aid & Scholarship Committee.

Student Aid on the Web also provides information on  Informed Borrowing: Selecting Loans and Selecting Lenders.   Click here for more.