Student loan firm aims to save you some money

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What rubbed some educational institutions the wrong way was the ad’s suggestion that students ask staffers in financial aid offices whether the college or university was accepting “inducements” from lenders on the resource list. In other words, My Rich Uncle’s ad introduced the possibility that the college or university might be getting a kickback from a favored lender. Khan says: “There are a number of lenders on lists who are not exactly happy.”

What do financial aid officers think about these upstarts? “My colleagues are offended, because the questions [in the ad] imply underhanded tactics,” said Kurt Wolf, director of financial aid at the Ringling School of Art and Design, in Sarasota, Fla. Wolf, who confirms that My Rich Uncle is on his school’s lender list for private loans, does not believe that “consumers necessarily have the time, expertise, knowledge and inclination” to look for the best deals on their own. Steven Sharp, associate director of financial aid at Utah State University, in Logan, Utah, believes that financial aid officers were upset about the ad because “the innuendo or implication was that they were on the take.” He also concedes that few students are savvy enough to do their own research and, therefore, rely on their financial aid office.

“There are schools out there that are not engaged in nefarious practices, and a few of them do a pretty good job of letting students know they should shop around for loans,” Sharp says.

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But, if Khan had his way, financial aid offices would not be recommending lenders at all. “Financial aid offices cannot guarantee that the recommended lenders will provide students with the best rate,” he says. That means students should be doing comparison shopping, something experts say may be increasingly common in the years to come.

Peter Bielagus, licensed financial advisor with a practice in Bedford, N.H., and the author of “Getting Loaded: A Complete Personal Finance Guide for Students and Young Professionals" says that, these days, anyone can be a banker. “I see the lending industry changing,” he says. "If someone is a lender, they can charge their own rate. It’s commercializing the notion of ‘I need a loan from Uncle Joe.’" Over the next few years, Bielagus believes that banks will be laying down the cards they’ve been holding. “When anybody can be a banker, that’s going to make the market more competitive,” he says.

“There’s too much blind trust among financial consumers,” says Russell Wild, a fee-only financial planner from Allendale, Pa. Many schools, he suggests, are taking advantage of “financial gullibility.” As an example, he suggests that students and parents who share the same religious affiliation as the college might be more inclined to believe information provided by that institution. There’s no excuse not to do some research, says Wild. “It’s so easy to shop online. Loans list the APRs, and you can check with several sources.”

A more open marketplace for student loans suits Khan just fine. “We’ve shown consumers now that all federal loans are not the same and not all private loans are the same,” he says. “And that it pays to inquire about every option.”

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