Alternative Loan Information

What are alternative loans ?

Alternative loans, also known as private loans, are student loans offered by private lenders. They are usually used to fill a gap in coverage between federal / state loans and actual college expenses, however due to their convenience some families choose alternative loans to fund all of a student's college expenses.

Interest on an alternative loan will accumulate while you are in school but, as with federal aid, most lenders will not require you to repay a private/alternative loan until after graduation.

Why alternative loans?

Alternative loans are a useful option when:

- The student is not a US citizen, or is otherwise ineligible for federal loans
- The student has missed the deadline for applying for federal aid
- The family is unwilling or unable to fill out complex federal loan applications
- You would like to reduce an existing balance.
- There is a gap between what is covered by federal aid and college savings and the actual cost of your education.

Alternative loan eligibility:

Alternative loans are available to US citizens and eliglble international (non-citizen) students. Many (but not all) lenders require that you be enrolled in a degree program and maintain a minimum GPA. Applicants must pass a credit check, however you are usually allowed to have a co-signer.

Benefits to Alternative /private loans:

- Fast and easy: Alternative / private loans require no complicated government forms and there are no deadlines. Most lenders have easy online applications and quick credit approval.
- Affordable: Alternative loans offer competitive interest rates, flexible repayment terms and affordable monthly payments.
- Flexible: Besides covering tuition, alternative loans may provide for other education expenses such as transportation or personal computers.
- Specific needs: Many alternative loans are designed to meet special educational needs, such as undergraduates, graduate school, law school, medical school and residency, dental school, distance learning, continuing education and students attending school less than half-time.

Alternative loan drawbacks:

The overall cost of an alternative loan, while very reasonable, is usually higher than federal or state education loans. For this reason, it is often advised that you use private/alternative loans only after you have exhausted any federal/state/institutional loans or grants which are available.

Choosing a reputable lender:

Things to consider when choosing a lender include:

Reputation and experience: How long has this lender been in business and how long have they been offering student loans? Are they a reputable financial institution?
Your school: Is this lender approved by my school's Financial Aid office?
Incentives: Do they offer any special services or discounts? To encourage prompt payments, some lenders offer discounts for e-payments or for having a history of on-time payments.

Choosing an alternative loan:

Some important things ask when comparing loans:

What are the total loan fees? Is there a fee at disbursement? A fee at repayment?
What is the interest rate and how is it determined? Is it a fixed rate or variable rate loan?
Am I eligible for this loan?
Do I need a co-signer? A co-signer may enable you to take out a loan when you don't personally meet the lender's credit requirements.
What repayment options are available?
Is there a penalty for early repayment?
What deferrment options do I have?
Is there a grace period after graduation? If so, for how long?
How often and when is interest capitalized? (Less frequent capitalization will result in lower overall costs)