An alternative loan is a private, non-federal loan made by a commercial lender. Because alternative loans are not guaranteed by the federal government, they must be insured privately. This extra cost is passed on to the borrower in the form of higher fees and interest rates. The terms on alternative loans may also differ significantly from those for federal education loan programs. Private interest rates and terms can vary by lender and loan product as well. Questions regarding terms and conditions of a specific loan should be directed to the lender representing the loan.
Alternative loans are not for everyone and should be considered as loans of last resort. They are expensive and should only be borrowed when all other resources, such as Federal Stafford and PLUS loans have been exhausted. In this instance alternative loans can provide a source of additional funding for students that still need more money to meet educational expenses including tuition, computers and tools. It is important to keep all borrowing within reasonable limits and never borrow more than you think you will be able to repay.
Requirements vary according to the lender and loan product. An applicant may be denied by one lender and approved by another. Some of the most common requirements are:
The amount a student can borrow is determined by the school's Cost of Attendance (COA) minus other financial aid.
Cost of Attendance - Grants, Federal Loans, Scholarships, Other Resources = Alternative Loan Amount
The Cost of Attendance is established by the Financial Aid Office and is an estimation of how much it costs to attend college for one academic year at that school. Costs include tuition, fees, room and board, supplies, personal expenses, transportation, books, and equipment or tools. The total from all sources of financial aid, including private and federal loans, cannot exceed the COA.
The loan certification from the Financial Aid Office to the lender will include a disbursement schedule. There is a disbursement schedule for each term of enrollment during the academic year. For example, if you are enrolled for the fall and spring terms, you will get two installments, one for each term. Disbursements are typically scheduled for release 10 days before the start of each term.
Disbursed loan funds are sent to the Student Accounts Office, also called the Bursar's Office. If you requested early disbursement for tool or equipment purchases, Student Accounts will issue you a refund check in the amount of your loan. If the loan is to be used towards the payment of your tuition, the disbursed loan will be applied directly to your semester bill.