Alternative Student Loans

Alternative Student Loans: Private loans are available to students who need funding beyond the limits of the Federal loan programs.

Lenders and Financing Options for 2008-2009---Recommended Lenders for Alternative Student Loans:

Campus Door
EdAmerica
SallieMae
Wachovia
Wells Fargo

You may use the Borrowsmart tool to determine your best option. Visit www.afford.com/borrowsmart for more information.

Information on other Alternative Loan options are available from our office and we encourage you to make an advising appointment before borrowing additional funds.

Alternative Loan Considerations:

• Take time to carefully review your family’s financial situation and identify every financing resource available. Be sure to explore all options before applying for an alternative loan.
  
• Alternative loans should be the last option a student should consider. The Federal PLUS loan program is a better option. If you need to borrow an alternative loan be sure that you have first borrowed the maximum Federal Stafford loan for which you are eligible. First year dependent students may borrow up to $5,500; second year dependent students may borrow up to 6,500; and for each subsequent year for dependent students, $7,500. Independent student eligibility is up to $9,500 for first years, $10,500 for sophomores; juniors and seniors may borrow $12,500 per year.
  
• Determine the total amount of education debt you and your family are willing to accumulate during the student’s college enrollment. Take into consideration the four years worth of federal student loan debt the student will be taking on as well as what income the student may realistically expect after graduation.
  
• Thoroughly review and decide how important the various features of a loan are to you before choosing one; these features include fees, grace periods, lengths of repayment terms, how future interest rates are determined, co-signer release availability, borrower benefits and incentives.
  
• Another consideration is the frequency of the interest rate changes. Some loans change every three months (quarterly). Some loans change their interest rates every month. During a time of rising interest rates having your rate change on a monthly basis will cost you more money.
  Think about the length of your repayment period and how your monthly payments will be effected. If you plan to borrow more than $20,000 in alternative loans for your undergraduate career, you should consider a loan which offers a 15, 20, or 25 year repayment term. If you choose a loan with a repayment period of 12 or less years your monthly payment will be huge. Don’t forget that you may also have the Federal Stafford loan to pay back as well.
  
• You may want a time period between leaving school and when monthly payments begin. Look for an alternative loan which has a grace period when payments are not due. For example, the Federal Stafford loans have a six month grace period after leaving school or graduating when monthly principal and interest payments are not due.
  
• Some loans have a co-signer release option. This means that the co-signer can be released from the obligations of the loan after a period of time and the student borrower will remain as the sole signer on the loan. Be aware that to be able to release the co-signer, you must make a certain number of on-time payments before the lender will consider releasing the co-signer. Also, the student borrower needs to prove that he or she is able to make payments on the loan after the co-borrower is released. If this is an important feature for you, inquire about the number of on-time loan payments required to release the co-signer and how is the borrower determined to be able to make payments after the co-signer is released.
  
• Most loans have borrower benefits and payment incentives. Payment incentives include interest rate reductions after certain number of on-time payments, and interest rate reductions for automatic payments from a bank account. A word of caution about incentives linked to making a number of on-time payments: only a small number of borrowers actually benefit from this type of incentive because there may be a late payment made along the way. To safeguard against having late payments, ask what is the window of time when a payment is considered to be on-time. For example, if the payment is due on the 10th of the month, and the window is 10 days, you have until the 20th to make the payment and still be considered on-time. If the window is only 5 days, you need to make payments sooner. To ensure that payments are made on time, ask about paying the monthly bill using automatic payments from your bank account.
• Information regarding a specific loan program can be obtained from the lender.

Student Financial Services
Created: September 9, 2007
Modified: July 15, 2008