Borrower Benefits

Borrower Benefits. Borrower Benefits are generally "awards" you earn from a FFELP lender. They are only available on FFELP Loans and generally take the form of reductions in the interest rate or the outstanding loan balance. While Borrower Benefits vary from lender to lender, they are almost always awarded in return for prompt payment. Generally, Borrower Benefits take the form of a reduction in the interest rate or principal outstanding.

For example, some lenders will reduce the interest rate by 1% if the first 24 monthly payments are made by their due date. Other lenders will offer a similar rate reduction if the first 48 monthly payments on made by their due date. Still other lenders will offer an interest rate reduction (generally ¼ of 1%) if payments are made by auto-debit, waive origination fees on Stafford Loans and/or pay the 1% Federal Default fee (formally called the Guarantee Fee) on behalf of the borrower.

Lenders use Borrower Benefits to attract borrowers. Borrower Benefits are not available on Direct Loans and, in most case, Borrower Benefits are not provided on Consolidation Loans, although lenders may reduce the interest rate by ¼ of 1% if payments are made by auto-debit. Be sure to check with a number of lenders for specific information on their Borrower Benefits, including whether or under what conditions any Borrower Benefits may be reduced or eliminated. Also note that some Borrower Benefits may have tax consequences. For example, a reduction in principal may trigger a reportable event under IRS rules and the amount forgiven may need to be included as income. Consult your tax advisor for details.