Student Loans
About Student Loan Borrower Benefits
Lenders often offer incentives to make their loan products different from their competition. These are called “Borrower Benefits.” While these benefits can save you money over the life of a loan, consider them carefully for restrictions and qualifications.
1. Interest rate reductions can save you more than principal reductions. Typically, you get the benefit of an interest rate reduction each year, rather than just once in a principal reduction. But, if you plan to repay the loan very soon, a principal reduction could be better. Additionally, a principal reduction is often a benefit that can’t be “unearned,” but an interest rate reduction could be taken away from you if you don’t meet the criteria set by the lender.
2. Review the fine print very carefully. Borrower Benefits sometimes have limits or restrictions. Make sure to speak with your lender and check your promissory note or promotional material for the details. Ask if there are ways the lender can take away the benefits (for example, if they sell your loan to another lending company).
3. Hold up your end of the deal. It is your responsibility to make sure you comply with the requirements of earning borrower benefits. The most common requirements are a certain number of on-time payments and automatic debit of your monthly payment (like using an auto-pay feature from your checking account). If you don’t do either, you could lose the borrower benefits and lose money in the process.
4. Set up auto debit from a checking or savings account for your monthly payment in the way the lender requires. This should be easy to comply with – don’t forget or you could miss the benefit.
5. Make monthly payments on time. Know how your lender defines “on time.” With some lenders, just being a day late could disqualify you from getting the benefit. This is part of the fine print you definitely need to understand.
Borrower Benefits are common on both federal student loans and private student loans, so it is worthwhile for you to do some research and shop around.
