What is an Alternative Loan?
An alternative loan is a financial aid resource to help students and their families finance education expenses not covered by other forms of financial aid such as grants, scholarships, and federal loans. Alternative loans require a creditworthy borrower and/or cosigner to be approved.
Generally, the applicant must have at least two years of established good credit, and two years of continuous full-time employment to be considered creditworthy. Because most students do not meet these requirements, creditworthy cosigners are usually required.
Parents of dependent students may apply for the Direct Parent PLUS Loan. See the Loan Chart for more information about this loan.
You may borrow up to the amount of your Cost of Attendance, less any other financial aid you have been offered. To determine the amount of your Cost of Attendance and financial aid, log into MyFSU. Click on the Academics & Services tab. Click on Accept Award Offer. Select the appropriate Aid Year. This will display the financial aid awarded. Click on the link: Overall Financial Aid Status, and the Cost of Attendance link for your Cost of Attendance figure.
Applicants usually receive a credit decision once the on-line loan application is submitted. Ferris is not notified that you have been approved for an Alternative Loan until you have submitted all requested documentation to the lender, and all promissory notes have been signed by both the borrower and the cosigner. It typically takes 2-3 weeks to process an alternative loan.
Because Ferris State University bills for one semester at a time, alternative loans are divided into two disbursements – half for Fall and half for Spring. In the event of a one-semester loan such as those for the Summer semester, one disbursement is made. The funds will not release to the student account until the designated disbursement date has passed, which is typically 10-14 days after each semester begins.
A fixed interest rate means the interest is set for the life of the loan. A variable interest rate is subject to change at least quarterly, but sometimes as often as monthly. Variable rates are based on either the Prime Index or the LIBOR Index.
The Prime Rate, as reported by the Wall Street Journal’s bank survey, is among the most widely used benchmark in setting home equity lines of credit and credit card rates. It is based on the federal funds rate, which is set by the Federal Reserve.
The LIBOR (London Interbank Offered Rate) is among the most common benchmark interest rate indexes used to make adjustable rate mortgages and other loans.
Alternative loan repayment options vary by lender. Some loans offer deferred payments, which means you do not make any payments as long as you are enrolled at least half-time. Other loans require or offer the option of making minimal monthly payments or interest-only payments while you are in school. It is important that you look at repayment options before selecting a lender.
Capitalized interest is unpaid interest that is added to the principle amount borrowed. At repayment, any interest that accrued while the student was in school is added to the loan balance. For example, a $10,000 loan that accrued interest at 10% for four years, would make the loan become $14,000. Upon repayment, interest would begin accruing on the new principle balance.
The loan(s) will appear on the cosigner’s credit report as if they were the borrower who is responsible for the debt. An alternative loan may affect the cosigner’s ability to obtain credit such as a mortgage or car loan. Cosigners may be released from the alternative loan after a specific number of on-time payments have been made, and the student borrower is determined to be a creditworthy borrower on his own. Refer to your selected loan program for details.
If you are a dependent student and your parent is unable to cosign for you because they have poor credit, our first recommendation would be that your parent applies for the Direct Parent PLUS Loan. This loan has a unique feature: If a parent is denied this loan, you may be offered an additional Unsubsidized Direct Loan of $4000 or $5000. While this loan may not be enough to cover all of your education expenses, it would bring you closer to meeting your budget.
Independent students are not eligible for the Direct Parent PLUS Loan option. You may apply for other
alternative loans with or without a cosigner.
Remember that cosigners do not necessarily have to be your parents. Sometimes grandparents or other friends or relatives are in a better position to cosign than your parent. If you find a suitable cosigner, you may pay lower interest rates than if you are approved for the loan without a cosigner.
Click Here for a list of alternative loans.