General Resource : Resources for Financial Aid >> 5. Alternative Financial Options

• Alternative Financing
• Submitted by Tony Y on 2009-12-21

• Alternative Financing

  
  
  

  If you are considering applying for an alternative loan, make sure you have considered other options such as the Parent Plus Loan and the payment plan. We caution students about excessive borrowing through private loan programs. Unlike loans through federal programs, private loans, loans are not guaranteed by the government, interest rates are not capped, and deferment/forbearance options may not be available once the borrower enters repayment.

  Below is a list of lenders who we feel offer competitive rates and excellent customer service. To select the best option for your circumstances, you should compare interest rates, borrowing limits, and credit requirements.

  Private Alternative Loan Recommended Lender List (opens in new window)

  Before borrowing a private loan from a lender, you should ask them the following questions:

  1. How is the lowest interest rate and fee combination obtained? Will this rate change during the life of the loan?
  2. Is there a cap in the variable interest rate? How often is the interest rate adjusted, and how is this rate determined?
  3. What interest rates are available on fixed-rate loans?
  4. What are the fees associated with the loan?
     • Origination fees, also know as fron-tend fees, are taken off the gross amount you borrow. The net amount of the disbursement will be less than the gross amount approved.
     • Repayment fees, also known as back-end fees, are applied to the loan at repayment. These fees will increase the gross amount of money that needs to be paid back.
     
     

  Lenders may impose origination and/or repayment fees on your loan.

  Always ask the lender how fees are determined. Fees may be calculated based on credit review. Therefore, these fees may not be known until after the loan is approved.

  5. What is the repayment period for the loan?

     Remember: the longer the repayment period, the more interest that will accrue on the loan.

  6. When does the loan need to start being paid back? If a student is in school, how long is the deferment period? If a student is in graduate school and they defer payments, how much will they owe when they start making payments?
  7. Is the interest rate reduction discount for paying on time lost if one late payment is made or if a request for a change in the payment schedule is made?
  8. What percent of borrowers receive the discount you offer? Are your discounts guaranteed for the life of the loan?
  9. Are borrowers allowed to defer or reduce payments temporarily because of economic hardship? Under what circumstances and for what time period is this allowable?

  
  

  Direct-to-Consumer-Loans

  Students should also be aware of Direct-to-Consumer-Loans. Direct to consumer loans are loans that students apply for directly through the lender. The college does not provide financial information to the lender and, therefore, does not certify the loan. Below are some items that should be taken into consideration before applying for a direct to consumer loan.

  • Interest rate and fees tend to be higher with direct-to-consumer-loans. Be aware of the interest rate and any additional fees.
  • Some lenders require verification of enrollment, i.e. a copy of the student's schedule, before they will send a student the check. This may be difficult to provide since most schools will not let a student enroll for classes before he/she has paid his/her balance.
  • The check is mailed directly to the student. before the beginning of the term, the student may not be able to attend class.

  
  

  While we understand that many students must take some of the responsibility to borrow for a private college education, we encourage students to consider borrowing only what they absolutely need. Excessive borrowing can burden a student's credit report, which may make it difficult to take out loans or rent an apartment in the future.

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