- Are designed to fill the gap between the cost of attendance and the student's financial aid award
- Must be repaid
- Are not automatically awarded (borrowers must apply for them)
- Begin to accrue interest once the funds have paid (while the student is in school)
- Require credit-worthiness
- What are alternative loans?
- Are there different kinds of alternative loans?
Yes, there are two basic types of alternative education loans:
- Loans for parents or other borrowers (sponsors) who are willing to assume loan debt on behalf of a student
- Private Student Loans
- I have credit issues. Will that affect my ability to obtain a private education loan?
- Yes. All alternative loan options require credit-worthiness for both the borrower and/or co-signer (if applicable).
- A student applicant that does not have any or has little established credit will need a credit-worthy cosigner.
- If a student applicant has an adverse credit history or rating, then the student may be declined for an alternative loan, regardless of how good his or her co-signers' credit is.
- Can a student get a loan without any assistance from a parent or other person?
Most students do not have enough established credit to obtain an alternative loan on his/her own without a credit-worthy cosigner.
The general credit guidelines of credit-worthiness are as follows:
- At least two years of continuous full-time employment (continuing while the student is in school)
- At least two years of established positive credit such as mortgage or vehicle loans
Most traditional students do not meet this criteria and need credit-worthy cosigners.
- What is the difference between a fixed and variable interest rates?
Fixed interest rates remain the same for the entire loan period. Variable interest rates are subject to change periodically throughout the life of the loan.
It is important to note that the variable rates listed are not limited to the high end of the range listed on the comparison chart. Most variable interest student loans do not have a cap or ceiling rate. For those that do, the lowest capped rate currently in the industry is 18%.
It is recommended that borrowers choose fixed interest rates due to the extremely high ceiling rates.
- Is there a deadline/when should I apply for alternative loans?
Yes, the alternative loan deadline is the last class date of each semester.
It takes an average of two weeks processing time for most alternative loans, so it is recommended that you begin the process at least two weeks before the billing due date that you need the loan to cover.
For Fall semester, you may begin to apply for alternative loans on June 1.
- What is a "cosigner release?"
Once a student graduates and begins repayment on a private alternative, and then makes the specified number of on-time payments, the cosigner on the loan may request to be removed from the loan. The lender will typically evaluate the credit-worthiness of the student at that point in time, and may release the cosigner from his or her responsibility if the student meets the established criteria.
- Are there any fees associated with alternative loans?
Many lenders do not charge processing fees, but some do. We recommend that you search for lenders that do not charge processing fees.
There are processing fees associated with the Federal Direct Parent PLUS Loan.
Be careful when choosing a private loan lender and make sure that you read and understand the terms and conditions of your alternative loan selections.
- When will I start making payments on my alternative loan?
This depends on the loan/lender that you choose. Most lenders offer "deferment options" that allow you to postpone payment until after you graduate or drop below half-time attendance.
Some lenders offer reduced interest rates for borrowers who agree to go into some form of payment while the student is in school.
Make sure you understand the details of your loan contract.
By law, students may make payments or pay off student loans at any time without any pre-payment penalties. However, if you choose to make payments on a loan while you are in school and then fail to do so, you will be considered in default and may not be able to obtain future loans to complete your education.
- When does interest start accruing on alternative loans?
Upon "disbursement" of the loan (when the money applies to your billing account). Please note that if you apply for a loan for the academic year (fall and spring semesters), we will disburse half of your loan in the fall and half in the spring. You will accrue interest only on the loan amounts that have disbursed.
- Is there protection for cosigners in the event of student death or permanent disability
of the student?
Student death and permanent disability discharge features are not a standard in the student loan industry, although some lenders offer this feature.
The Federal Direct Parent PLUS Loan offers student death or permanent disability discharge