Loans --- Private or Alternative Loans

Alternative Educational Loans

In addition to the Federal Perkins, Direct, and PLUS loan programs, several lenders offer private student and/or parent loans. These loans are usually more expensive than the federal loans and costs vary widely between programs. Students/Parents may borrow up to the Student’s yearly Projected Cost of Education minus any other aid the student is receiving (including other student/parent’s loans). All of these lenders will review the borrower’s credit history and some of them will require a loan cosigner.

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Should You Borrow an Alternative Educational/Private Loan?

The Federal Loan programs will almost always offer lower borrowing costs than any private educational loan program. Due to the higher borrowing costs, most students and families should not consider borrowing private student loans until they have exhausted their maximum federal student and parent loan eligibility.

You should consider a private loan if any of the following situations applies:

  • The student or parent is unable to borrow federal student/parent loans because they do not meet the Federal Eligibility Requirements.
  • The student is responsible for financing his or her education, and he or she needs to borrow additional funds.
  • The student or parents need to borrow funds for a previous semester and it is too late to borrow federal loans. (Many private loans allow students/parents to borrow funds to repay overdue university charges from previous semesters).
  • The student or parent has exhausted their federal loan options and needs to borrow additional funds to meet the student’s cost of education.

Lender Requirements

Under provisions of the Truth in Lending Act, lenders who provide private education loans must:

  • Provide three separate loan disclosures to borrowers: one at the point of application, one when the loan is approved and one before the loan is disbursed.
  • Must have a waiting period of three to seven business days between the time the borrower receives the final loan disclosure and the time the loan is disbursed.
  • Receive a signed self-certification form from the student before disbursing the loan.
Your lender should provide you with information about these requirements, but if you have questions, feel free to contact our office.

Applying for Alternative Educational/Private Loans

Students/Parents may borrow up to the Student’s yearly Projected Cost of Attendance minus any other aid the student is receiving (including other student/parent loans). To apply for a private loan, borrowers should choose a lender.