College Loans Interest rate drops for good grades

Here’s a new twist on college aid: a student loan with a lower interest rate based on your academic standing.

MyRichUncle, a private student loan originator, has been experimenting with rate discounts of 0.25 to 0.75 percent for borrowers who submit information similar to what you would find on a college application – grades, area of study and academic institution.

The company says it wants to change how students are approved for nongovernment-backed loans from the traditional creditworthiness criteria that often require parents of students with no credit history to co-sign loans to what it believes is a more sensible, and fiscally accurate, method.

“Students who tend to do well in school tend to be more likely to repay their loans and so, from our perspective, should be rewarded with a lower interest rate,” said Raza Khan, company president.