But some lenders market directly to students, and consumer advocates say they often fail to clearly detail loan costs and may even seek to present themselves as part of a school's financial aid office.
For a glimpse into how lenders operate, The Times filled out online loan applications with JPMorgan Chase & Co., Sallie Mae and MyRichUncle. An 18-year-old student who began college this fall agreed to provide personal information, including her Social Security number, so that lenders would provide detailed loan terms.
For The Record
Los Angeles Times Tuesday, January 20, 2009 Home Edition Main News Part A Page 2 National Desk 2 inches; 72 words Type of Material: Correction
College loans: A Dec. 27 article in Section A about the costs of college loans said lawyer Marja Lopees spends about 40% of what she makes to pay off her student loans, including $88,303 she accrued in private loans. Lopees said her debt burden has lessened since she was interviewed and she no longer spends 40% of her income on her debt, but she declined to provide current income or debt figures.
JPMorgan Chase, the giant New York bank, did not disclose its interest rates or fees in the online application.
Sallie Mae, which is based in Reston, Va., disclosed an interest rate and fee, but an attached disclaimer in capital letters said the numbers were preliminary "and may change."
The third, MyRichUncle, a New York-based student loan firm formed in 2005, disclosed a variable rate that starts at 9.6% and said there would be an unspecified origination fee.
The loan companies provided a bit more information over the phone. A MyRichUncle representative said its origination fee would be 2%. A Chase agent said the variable rate would start at 7.5% with no origination fee, and Sallie Mae said its variable rate would be 8%, also with no fee.
After initially resisting, agents for Sallie Mae and Chase both agreed to provide summaries of the loan costs in writing. But the one-page letters they mailed did not include the total cost of the loan over time.
The Times then called all three lenders to discuss their practices. MyRichUncle co-founder Raza Khan said that the failure to state the amount of the origination fee in the online application was a mistake and that the information was now included.
Sallie Mae spokeswoman Martha Holler maintained that the company's disclosures were adequate.
JPMorgan Chase spokeswoman Mary Kay Bean said the loan terms would be sent after the loan had been approved, pointing out that the company was not required to do so beforehand.
"We send borrowers a letter with the rate," Bean said. "We comply with the law. That's it."
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Lenders in disguise
When Shianily Torres took out $38,000 in student loans at Florida's International Academy of Design and Technology, she thought she was dealing with the college financial aid office.
She now thinks it may actually have been a representative of Sallie Mae -- in part because that was the only company that offered her a loan.
