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Alternative Loans

What is an Alternative Loan?

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.

Who Needs an Alternative 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 Direct Stafford and Federal Direct 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.

What are the Eligibility Requirements?

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:

  • Applicant must be 18 years of age.
  • U.S. citizenship or eligibility as a non-citizen.
  • Enrolled at least half-time in a certificate or undergraduate degree program.
  • Applicant must be creditworthy or apply with a creditworthy cosigner.
  • Satisfactory academic progress.

How Much Can I Borrow?

The amount a student can borrow is determined by the school's Cost of Attendance (COA) minus other financial aid.

Cost of Attendance Formula

Cost of Attendance - Grants, Federal Loans, Scholarships, Other Resources = Alternative Loan Amount

What is COA?

The Cost of Attendance is established by the Student Records and Financial Services 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.

How Do I Apply?

  1. Download and print the Alternative Loan Financing Worksheet.
  2. Determine the amount of loan you need using the COA formula, what you need the loan for, and when you need it. Note: The amount you apply for will automatically be certified by the school for two disbursements (fall and spring) unless you specify otherwise.
    • Example 1: You need $3,000 to cover the balance of your fall tuition bill. (Assume you would also need $3,000 for spring semester). On the Alternative Loan Financing Worksheet you would write in $3,000 required for fall and anticipate another $3,000 for spring for a total of $6,000 for the year. $6,000 is what you would apply for.
    • Example 2: You need to buy required tools or equipment for your curriculum before the start of the semester. Using a price quote write in the amount you need next to the corresponding expense on the Alternative Loan Financing Worksheet. (Keep reading to get more information about price quotes).
  3. Return the completed Alternative Loan Financing Worksheet to the Student Records and Financial Services Office. If you are using this loan to purchase required tools or equipment, a price quote from a store or retailer MUST be attached to this worksheet. The Student Records and Financial Services Office will not certify any alternative loan requests lacking appropriate price quotes. The office reviews all quotes and will not allow students to purchase duplicate items.
  4. Select your lender and complete the alternative loan process required by the lender. In August, 2008 the Higher Education Opportunity Act (HEOA) came into law. Title X of HEOA-the Private Student Loan Transparency and Improvement Act - contains requirements that will improve the information provided to borrowers, reinforce the availability of federal loan options, and encourages borrowers to consult with the Student Records and Financial Services Office prior to making a private loan commitment. Private loan lenders must support these federally mandated regulations which will require a longer processing time of loan applications. Borrowers need to be aware that applying for a Private Alternative Loan will be a lengthy process and should allow sufficient time for processing.
  5. Cosigners also need to go online to complete their sections of the application process.
  6. Once the loan is approved by the lender the Student Records and Financial Services Office will receive a request for certification. Loan certification will be forwarded to the lender within 30 days of notification if all necessary documentation is received by the school

How and When Will My Funds be Disbursed?

The loan certification from the Student Records and Financial Services 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 Records and Financial Services Office. If you requested early disbursement for tool or equipment purchases, that office 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.