The student loan application process can hurt a student's credit score.
Students at private, nonprofit colleges and universities in 12 states can use a new online service to find a school loan, avoiding complex web searches that discourage students from finding the best deal.
The Marketplace, a web site launched in August, offers private loan options that show student applicants how much they will be charged before submitting their loan application.
Without the one-stop-shopping site for private school loans, students are left to manage a circuitous route through various sites that make it impossible to compare loans and interest rates.
“Students can be misled about a certain loan being the best option for them,” said Tina Bjarekull, president of the Maryland Independent College and University Association (MICUA), which has its own site that includes local lenders. “They go through the frustration of finding the right loan for them and applying, and then they give up and just take what they can get.”
Lending institutions included in The Marketplace’s list of loan options won’t include fees that often catch students off guard, officials involved in the formation of the service said.
And the site introduces students to government loan options before they’re guided through private lending choices.
The Marketplace includes information on each loan’s monthly payments, payback options, APR, total costs, and any fees that might be charged during the life of the loan, according to the service’s web site, which provides Twitter contact information for loan experts who can answer student questions.
The Marketplace has a blog that updates applicants on the latest news from the financial aid market and explains the most basic and complex parts of the lending process.
When the private student loan market grinded to an almost-complete halt in the economic downturn of 2008, private college decision makers saw the need for a reliable way for lenders and students to connect.
“If [the market] ever froze up again, it would be very dire consequences for independent colleges,” said C. Todd Jones, president of the Association of Independent Colleges & Universities of Ohio.
Students who have hurt their credit scores by applying for multiple student loans won’t damage their all-important credit rating when they peruse options on their state’s Marketplace web site, Jones said.
A student applicant with a credit score of less than 650 is “unlikely” to be approved for a student loan without a cosigner, according to FinAid.org, a site that tracks student lending trends. A score of 30-50 points higher would likely help a student secure better loan terms.
Jones said students who find loans through haphazard online searches would most likely face higher interest rates than students who find the same loan through their college or university.