SimpleTuition is a free-service Internet company based in Boston, Massachusetts that compares student loans offered by a variety of private and federal lenders and offers advice about them. Founded in 2005, SimpleTuition enables students to comparison shop for loans from different lenders with a tool that is simple-to-use, and then select one, and lenders pay the site on a per-click basis and also pay for referrals. The website provides details on federal and private loan products from partner and non-partner lenders. Loan types include "Stafford", "GradPLUS", "PLUS", "Private Student Loans", and "Federal Consolidation". While it has been the subject of controversy, the SimpleTuition website was named one of Kiplinger's Best of the Web in 2007 in the category Student Loan Sites. The company is funded by Flybridge Capital Partners, a Boston-based venture capital firm.
The basic service is a loan comparison. A student goes to the website and offerings from different loan providers are given, and SimpleTuition offers what one source described as a ballpark estimate. Loan prices are given based on lenders' best rates. In 2007, the website listed 65 lenders, including 40 which were affiliated with SimpleTuition and called partner lenders. Students give biographical but not personal financial data, which means that the credit score is not part of the assessment. As a result, the actual interest rate of the loan will not be clear until the person actually applies for the loan. At the same time, one advantage to the arrangement which bypasses the checking of credit scores is that the detrimental side-effect of repeated credit checks, which can lower an applicant's credit score slightly, is avoided. One report suggested that it is not easy to determine the essentials of any private loan, since the rates advertised by various lenders can prove to be much higher when the paperwork is finally completed. In addition, lenders try to keep their interest formulas hidden for proprietary concerns.
The firm's website has a number of helpful tools and calculators to assist parents and students with other issues regarding loans and financial aid. One calculator helps a person assess the financial consequences of stretching out the repayment period for a given loan. The TuitionCoach application is an online resource to help advise parents about how to structure assets and income to maximize financial aid for their student in college. Another online calculator estimates repayment costs of a loan after the student graduates from college. According to SimpleTuition CEO Kevin Walker, in a report in USA Today, the number of financial firms which are willing to lend money to students for their college education has been shrinking; in 2007, according to Walker, the number of lenders at their site was 77; in 2008, it was only 16. In contrast to federal loans, private lenders offer different rates depending on the credit score of the applicant; in some cases, lenders will use their estimate of the school's quality, itself, as a way to estimate a student's creditworthiness, according to Walker.
Students seeking private loans have often gone to their college aid offices, and these departments often had lists of so-called preferred lenders to show them. But there were revelations that various lenders were buying gifts for college financial aid officers. SimpleTuition was caught in this criticism. The company was criticized in The Wall Street Journal in 2007 for providing gifts to college financial aid officers. According to one report, SimpleTuition awarded a $100 restaurant gift certificate, through a raffle, to a Duke University financial aid officer during an industry conference. The firm's president, Kevin Walker, denied meeting the Duke officer personally.
There are differing reports about whether SimpleTuition can help find the best student loan rates. While one report in the Chicago Tribune suggested that some private loan interest rates were as low as 2.88%, in comparison with federal Stafford loans at 4.5%, there is a general consensus among financial aid experts as well as college admissions counselors that the best loan choice to finance college is with a federally guaranteed loan. And there are reports that SimpleTuition can help a student search among various lenders to find the best overall deal. A report in the New York Times suggested in one instance that the website did not make clear the fact that a federal loan rate was a fixed rate, while the private loan rates were variable, and suggested that the omission was a "critical and potentially expensive distinction." A loan with a variable rate can end up costing much more over the life of the loan in terms of increased overall interest payments, if the interest rate goes up. While the website has been criticized for not being comprehensive and for having given preferential treatment to its lender clients, the firm has responded that it discloses these arrangements clearly on its website. CEO Kevin Walker said that students do not pay more when choosing a partnering lender:
It bothers me a little bit that folks would have a sense that because we make money, we somehow can’t be trusted. The important thing is just to be clear about what our business model is. The user should use us as part of their shopping experience.—Kevin Walker, SimpleTuition CEO, 2007
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