An article by personal finance expert Gretchen Morgenson in The New York Times on Sunday (5/3/09) was titled, Students’ First Lesson: Beware Loans’ Fine Print. If you (or a relative) had, have or will have a student loan, you should read it.

It points out that “Disclosures on various lending practices differ vastly. For example, lenders do not disclose all fees charged in the servicing and collection of student loans, and loan contracts do not always include benefits that are promised in lender advertisements—like the possibility of a lower interest rate after graduation. Most troubling, some lenders ask students to sign promissory notes obliging them to pay off their loans before they are told what interest rates they will be charged.”

The article quoted the founder of Student Lending Analytics, who reviewed student loan applications and other documents and discovered that, “The range of interest rates on fixed-rate loans was wide—7 percent to 12 percent—and the largest lenders charged the highest rates.” The article further stated, “There are also differences in how lenders apply excess payments made by borrowers. Say a monthly loan payment is $200 but a borrower submits $400. Most lenders apply the extra amount to any late fees that have been charged, then to accrued interest, and finally to principal. But for its private loans, Sallie Mae applies excess money only to future payments, making it tougher for a borrower to pay down principal faster....With short-term interest rates in the cellar, the profits on (variable-rate) student loans are immense.”

Quoting the Project on Student Debt, the article noted: “The average graduate leaves college shouldering $21,900 in student loans. These loans cannot be charged by filing for personal bankruptcy.”