ALTERNATIVE LOANS

Alternative loans, also commonly referred to as private loans, are commercial loans offered by banks and other private lenders to cover the costs of college not covered by financial aid. We strongly encourage every student to explore all funding options including scholarships, grants, work-study and federal loans (subsidized, unsubsidized and PLUS), prior to applying for a private loan.

These loans differ from federal loans in several ways:
 
First, these loans are not guaranteed which means that both the student and the co-signer (if needed) will be subject to a credit check.

Second, the interest rates on these loans can be higher than the federal rate. There are several places to go to find the current rates for Prime, T-bill, LIBOR and the other instruments that lenders use to set their interest rates, but we suggest you bookmark the following site: http://www.bankrate.com/brm/ratehm.asp. When you go to the above site there will be many indexes listed. The three main indexes that lenders use for private loans are: Wall Street Journal (WSJ) Prime, 91 day T-Bill, 1 month LIBOR plus a certain percent.

Third, there are no interest rate caps on these private loans like there are with the federal loans (including the PLUS). While these loans typically have deferred payments while you are in school and offer a grace period, interest will still accrue during these time periods.  Make sure to read the conditions and terms of the loan prior to signing the promissory note. This will ensure that you understand the loan terms when it comes time to repay the loan.

To find out what your estimated monthly payment would be, please click on the following:

Worksheet for an alternative loan

Apply for an alternative loan