A Guide to Student Loan Lenders
When it comes to student loans, the federal government does the lion’s share of the work, according to the Consumer Financial Protection Bureau (CFPB). In the summer of 2013, for example, the CFPB reported that the total student loan market had approached the $1.2 trillion mark, with federal loans making up $1 trillion of that amount.
While it’s clear that most students head to federal sources when they need to borrow money for school, there are other lenders in the private sector that are ready and willing to help, although these lenders might not be familiar to all students who need some sort of financial assistance for school.
Fewer Big Banks
At one time, large banks were major players in the student loan market. They could hand out their own allowances from their own funds to qualified students, or they could disburse funds from the federal market and act as the administrator for those funds. Much of that changed a few years ago, when the government chose to administer money directly. At that time, the government also began tightening restrictions on the requirements borrowers would need to face and overcome.
As a result of these changes, many banks have chosen to bow out of the marketplace. In September of 2013, for example, JPMorgan Chase and Company announced a retirement from the student loan business, due to concerns about the profitability of the marketplace over the long-term, according to Reuters. The regulations and competition from the government just made student loans less profitable for the bank, and it chose not to hand out more loans to students. Other banks, such as Bank of America, Citigroup and U.S. Bank, have also left the marketplace due to profitability concerns.
There are still a number of large organizations that handle private student loans, however, and these banks don’t seem eager to ease up on the loan process. Wells Fargo is an active force in the marketplace. This bank finds that student loans are a good part of the business model, and with other banks leaving the game, Wells Fargo may be able to find new customers with ease, and perhaps make more money in the process. Wells Fargo may face competition, however, as the private lender Sallie Mae is also an active force in the student loan marketplace. Sallie Mae acts as the servicer for many Department of Education student loans.
Making a comprehensive list of all active banks that provide student loans is difficult, as the list might change from moment to moment, but a few representatives that haven’t yet been mentioned include:
- Citizens Bank
- Sallie Mae
- Wells Fargo
Other Innovative Choices
Just because larger banks are leaving the marketplace doesn’t mean that smaller banks won’t leap in to fill the gap. In fact, an article produced by Forbes suggests that credit unions began to provide student loans in 2010, and since those early experiments brought back positive results, others are now joining in and helping students in need.
Credit unions and smaller banks may not have the deep pockets that a bigger financial institution might, and as a result, the money that come from these sources might also be a little smaller. They may not cover each and every need a student has during school, for example, or they may not offer loans to people who aren’t members of the union, and membership might come with a fee. But the loan terms can sometimes be so attractive that these little concerns seem to fade in importance.
Again, making a comprehensive list is difficult, as small banks might not even publicize the fact that they hand out loans to students in need, but a few examples of other loan options and providers that haven’t yet been mentioned include:
- Student Loans of North Dakota
Making a Choice
With so many options available, it can be hard for students to understand which might be right for them. While there are many different factors to consider, it’s sometimes best to start with the basic attributes, including its:
- Interest rate
- Monthly payment
- Origination fee
- Total cost
A side-by-side comparison is always best, as this allows a student to compare two different types and make an informed choice about what option makes the most sense for that student’s future.