Alternative Loans
Private education loans, also known as alternative education loans, are available to students to pay for your 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 work study). Federal student loans are less expensive than private loans.
2. Your parents may want to 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. They can borrow up to the full cost of attendance. One advantage for parents is that they can consolidate these loans later.
3. Your parents may want to 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. Your parents can start their research at The Smart Student Guide to Financial Aid.
4. Research private loans as they tend to be more expensive. 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: Tuesday, March 24, 2009 17:08