What is an alternative loan?
If you have reached your annual or lifetime maximum borrowing level for Federal Student Loans, you may be offered an Alternative Loan. These are loans through private agencies willing to lend to students for educational purposes. They are not based on financial need. Deferment of loan principal may be allowed while the student attends school, however, the student may be responsible to pay interest while in school. For each of the loan programs, a student must qualify as a U.S. citizen, a permanent resident, or an eligible non-citizen, be accepted to pursue a degree at an eligible institution, and be subject to a credit check to determine creditworthiness of the borrower. A creditworthy co-signer may be required. You must fill out a loan application on line and it will be transmitted to OFA for authorization.
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.
