Alternative Student Loans

Private education loans, also known as alternative education loans, are available to students to pay for their education.  Alternative loans are offered by private lenders and do not require any federal forms.  Before you consider an alternative loan, we strongly advise you to:

1.  Apply for need based financial aid (grants, federal loans, and workstudy).   Please review our application requirements.    
 Federal student loans are less expensive than private loans.

2.  Apply for a Parent Loan for Undergraduate Students (PLUS) if you have maxed out your Federal Stafford and Federal Perkins Loans.  The PLUS loan is a federal loan for parents.  Parents can borrow up to the full cost of attendance.  One advantage for parents is they can consolidate these loans later.

3.  Investigate a home equity loan or line of credit as an alternative to education loans. Some people say that the interest rates are competitive with education loans and the interest may be deductible.   This, again, needs to be investigated.  You can start your research at The SmartStudent Guide to Financial Aid.

4.  Calculate what you monthly payment might be at The SmartStudent Guide to Financial Aid.

5.  Research private loans as they tend to be more expensive for students.  If you wish   to consider an alternative loan, please consider the following:

• Eligibility criteria 
  • Citizenship criteria
  • Does the loan require a credit worthy co-signer
  • Academic standing
• Interest rates 
  • Usually tied to the prime rate
  • Typically the interest rate charged is determined by the credit score of the applicant and/or co-signer
  • When does interest begin to accrue?
• Up front fees - you might be charged a fee that will be deducted from the proceeds of your loan. 
• Repayment terms 
  • Are there pre-payment penalties
  • Are there flexible repayment options
  • Are there deferment options for graduate programs  

Last Modified: Friday, December 21, 2007 9:06