4: Medical Exams, Knowledge & Practical
Alternative loans (aka Private Loans)
are offered by private lenders, which are not federally
funded or guaranteed, and each lender sets its own
rates, term and conditions. Alternative loans are lent
by banks, credit unions and private lending companies
rather than the federal government and are specifically
for educational purposes. There are no federal forms
to complete, and loan applications and information
must be obtained from the lender. Just like other student
loans, alternative loans must be repaid!
Some students and parents seek alternative
loans when grants, scholarships and traditional student loans
are not enough to cover the student’s full cost of attendance.
Parents often seek alternative loans when they need different
repayment options. For example, a parent might want to defer
repayment until the student graduates, an option that is not
available from the federal parent loan program (PLUS).
Alternative loan requirements
vary according to the lender, but some of the most common
Ability to pass a credit
check, or having a credit-worthy co-signer.
Loan amount plus all other aid cannot
exceed the cost of attendance.
Enrolled at least half-time (some lenders
require full-time enrollment).
Making reasonable academic progress.
If you are considering an alternative loan, you should compare
interest rates, loan origination fees, and repayment options
with those of other private lenders. When choosing a private
lender, it is important that you ask questions considering
You should consider asking
the following questions. These questions include, but
are not limited to:
How much may I borrow?
What are the processing and origination
fees or any other kind of fees associated with the loan?
How much will my payments be if I borrow
How is the loan disbursed?
Is a credit check required?
What is the interest rate? How is it
What financial index is the interest
rate based on?
Is the interest rate fixed or variable?
If variable, is there a cap?
What are the repayment options?
How many years will it take to pay
off the loan?
Are there are penalties for prepayment.
Who is the borrower -- the parent or
Are there origination or any other
kind of fees?
Is a cosigner permitted or required?
Will having a cosigner affect the interest
rate and/or origination fees?
Is the loan secured or unsecured?
Is the interest on the loan tax deductible?
When does repayment begin?
As a borrower, you should:
Read and understand the
terms and conditions of each loan before you sign, anything.
Eliminate any misunderstandings you may have about your
Know your Rights, Responsibilities,
and the Conquesences of defaulting on a loan
Always inform the lender, if you have
an address change and/or changed schools
Whenever you speak with a loan representative,
you should keep a log of the date, time, loan representative’s
name(s) of who you spoke too, and notes about the conversation.
READ & SAVE EVERYTHING YOU SIGN!
Save all promissory letters, check stubs, deferment
/ forbearance letter, disclosure statements, canceled
checks, any and everything regarding the loan.