GW students now can use new “preferred lenders” for their Stafford loans, allowing student borrowers to save possibly hundreds or thousands of dollars on the payment of their debt, said administrators in the Office of Student Financial Assistance.
An agreement between the University and two lenders – Northstar Guarantee Inc. and Academic Management Systems Education Loan Trust (A.M.S.) – allows GW undergraduates to use the companies to service their Stafford loans. Graduate students can use A.M.S. and Access Group as preferred lenders for their loans.
Borrowing from these preferred lenders, especially through Northstar’s Total Higher Education (T.H.E.) loan program, can mean a savings for undergraduate students using the federal loan program, said Director of Student Financial Assistance Dan Small.
“On paper, T.H.E. provides a scenario in which, if you go through their company for a Stafford loan, you save from the point of view of interest rates,” Small said.
T.H.E. creates savings for students in three ways, Small said. Origination fees are reduced and guarantee fees are eliminated for Stafford loans. But the bulk of the savings comes from interest rates reduced for timely payment of the loans.
“The idea behind T.H.E. is not only some of the up-front discounts,” Small said. “It’s more into the repayment process. As long as you make your payments at a certain point in time, you actually end up paying less than if you went through a normal Stafford loan.”
With most lending institutions, little room is allowed to miss payments and still qualify for an interest rate reduction. But that is not the case with T.H.E., said Taige Thornton, the president of the education funding division of Northstar.
“As long as you haven’t defaulted on the loan, you qualify for the bonus return,” Thornton said. “(Students) are going to get the residual or profit that other institutions take for themselves. The interest income earnings of a normal provider are being passed back to the student.”
The financial aid office sent fact sheets from both T.H.E. and A.M.S. to all freshmen to inform them of the new choices available for Stafford loans.
For example, T.H.E.’s fact sheet reports a student borrowing $22,000 for four years will save more than $3,800 through fee rebates and interest rate reductions. The fact sheet from A.M.S. promises savings of $2,137 if a student borrows $20,000.
While A.M.S. does not offer the same kind of savings as T.H.E., Small said GW has worked with A.M.S. in the past and is confident in the quality of its services.
“We can’t force students to choose these lenders, but we are trying to give students the information to make an informed decision,” Small said. “You can quickly decipher for yourself that this is the way to go.”
Vice President and General Counsel Dennis Blumer began sending out requests for proposals to 15 to 20 institutions across the country last spring in hopes of creating a better lending program for all GW students, Small said. GW received several responses for undergraduate loans and decided the A.M.S. and T.H.E. proposals were the best solutions at this time.
“In the response to the request, Northstar Guarantee put together a different twist on the financing for student loans,” Thornton said. “We are using capital markets instead of a traditional banking arrangement – we are eliminating the mediating institutions most lenders use.”
While figures were not available for other preferred lenders, nearly 200 GW students have used T.H.E., which became available in June, to service their Stafford loans, Small said.
