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Better Business Bureau ®
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San Diego, Orange and Imperial Counties

Educational Consumer Tips

Deciding how to pay for your education may be the first serious financial decision you make. 
Education is a major investment, and a large majority of students require financial aid to pay for school. 
Before you get bamboozled by the fast-talking financial aid officers, know the facts." />
Student Loans

Author: Better Business Bureau
Category: Finance

Federal loans, which are subject to oversight and regulation by the federal government, include:

o   Direct Loans: the U.S. Department of Education is the lender;
o   Federal Family Education Loans (FFEL): private lenders make loans backed by the federal government;
o   Federal Perkins Loans.

Private loans, sometimes referenced as “alternative
loans,” are offered by private lenders and do not include the benefits and
protections available with federal loans. 
Private loans tend to have higher fees and interest rates than federal
government loans. Private loans also do not offer the opportunities for
cancellation or loan forgiveness that are available on many federal loan
programs. Therefore, it is in the best interest of the consumer to utilize as
many federal student loan options as possible before seeking private loans.

Buyer beware of private 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

·         The Department of Education does not send
advertisements or mailers, or otherwise solicit consumers to borrow money.  If you receive an advertisement or mailer, it
did not come from the Dept of Edu.

Beware of incentives that may divert the
consumer’s attention from the loan terms

·         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.

·         Be cautious about consolidating federal
loans and private loans into one private loan. The result of consolidating all
loans into one nonfederal private loan means that you lose all the benefits and
protections provided in the federal loan programs.

·         Consolidating a Perkins loan may not be in
your best interest. You may lose unique deferment and cancellation rights
available to Perkins loan borrowers. For more information about these rights go

To learn about student loans, contact:
U.S. Department of Education
Federal Student Aid Information Center
P.O. Box 84
Washington, DC 20044-0084
800-4-FED-AID (TTY: 800-730-8913)


Consumer Financial Protection Bureau
P.O. Box 4503
Iowa City, IA 52244
(855) 411-2372
Website: http://www.consumerfinance.govl