On CNBC’s On the Money today, host Carmen Wong Ulrich talks about New York Attorney General Andrew Cuomo’s recent settlement with Goal Financial over Goal’s deceptive advertising practices. She gives a few tips on avoiding student loan scams:
1. Exhaust all public loan options. Public loans are preferred because they have fixed interest rates and flexible payment options. FinAid.org offers examples of different types of public loans offered.
2. If you do apply for a private loan, stick with big banks. You will rest easier knowing your loan is coming from an established institution with a good reputation. Bankrate allows you to compare your different options and pick loans with the lowest rates and best payment plans.
3. If it sounds too good to be true, it usually is. Like with anything, always read the fine print (and if a free iPod is involved, be extra studious). It’s also best to approach your financial aid office for recommendations before heading out on your own.
Not all private loans are inherently bad and misleading, Carmen stressed. But now more than ever, it pays to be vigilant.
Good tips all, but I still have a major problem with the fact that 18 year old kids are expected to be fine-print-reading financial whizzes, and if they do wind up taking out particularly onerous loans because of deceptive practices, they still can’t get out of them.
“Goal Financial had used mailings that looked as though they came from the federal government and had offered iPods, spa gift cards and other items to lure borrowers.
Under the terms of the agreement, Goal will adopt a marketing code of conduct developed by the office of the attorney general, Andrew M. Cuomo, and will pay $350,000 to a fund maintained by his office for educating students about the financial aid process.
Eight other lenders have already agreed to abide by the code of conduct, which sets out rules for companies to follow in their direct-to-consumer marketing efforts. Seven of those companies have contributed more than $1.4 million to the attorney general’s fund.”
The Times also reports that in 2006, Goal was one of the top 10 largest providers of student debt consolidation loans. One interesting thing about this whole mess – no report of what, if any remedies, the students who took out these loans are going to get.