One lender admits there’s a problem with repayment benefits. So what’s the solution?
In a recent press release, one of the nation’s most prominent lenders scolded those few remaining companies that still charge origination fees on federal Stafford loans: “Rather than paying this fee on behalf of students, these lenders tout back-end benefits that very few students — less than 10 percent — will ever receive.”
From the looks of it, the student loan industry is beginning to address the dismal findings of Mark Kantrowitz, publisher of FinAid.org, whose research shows that “less than 10% of borrowers qualify for the full-term of their prompt payment discounts.”
This lender is right: most benefits don’t pay, and crediting origination fees is one great way to make financing more affordable. We agree; we were one of the first to offer
zero-fee loans.
While we’re glad to see other lenders acknowledging the problems with most repayment benefits, we don’t think the value of such discounts should be dismissed — just because lenders haven’t been able to deliver them.
We at T.H.E. know that, when done right, repayment benefits work. They can save students at least four times as much as zero-fees alone.
We strongly believe in the value of real and reliable benefits — on the front and back end. That’s why we designed our loan programs for real people in the real world, not for shareholders. Thanks to the uncomplicated nature of the T.H.E. Bonus, in January 2007, 96.87% of our borrowers earned our repayment benefit. Since 2001, we’ve given back more than $28 million in repayment benefits or “back-end benefits,” not to mention the $158 million in front-end fee credits.
This lender’s press release did not provide any figures on its own benefit qualification rate.
We’re happy to be different in the industry if it means that our borrowers reap significant rewards, not just at the beginning of school but throughout repayment.
It's important that students and schools understand what's real and what's not.