Alternative Loan Programs
Students may find that the combination of federal loans, employment and grants they receive may not cover their entire costs. They may need to pursue other options to finance their education. Students should keep in mind that alternative loans work differently than their federal counterparts.
Here is some important information on alternative loans:
- Alternative student loans are credit-based and require a credit check which determines your eligibility and your interest rate.
- Lenders have varying requirements for credit scores and often add fees (both front-end and back-end) and sometimes reject loans for those students who have bad credit or no credit. However, students who have a co-signer with good credit can sometimes gain approval and/or get a better interest rate than they could on their own.
- It is recommended that you only apply one time with a lender each year. Allowing lenders to check your credit is called an “inquiry,” and can have a negative effect on your credit if you’ve had several inquiries in the last six months. Inquiries can be anything from seeking a car loan to opening up an account at a department store, for example. Be sure to research the benefits of each loan program and choose the one that best fits your needs before applying.
- While alternative student loans carry a higher interest rate than federal loans, their rates are typically lower than a personal loan or a mortgage and definitely lower than credit cards.
Calculating Your Allowable Maximum Funds
The amount you can borrow in alternative loan funds is determined by taking your budget and subtracting any financial aid you’ve already been awarded, as listed on your Award Letter.
Your budget includes allotments for:
- Books and equipment
- Living expenses
Your financial aid includes (if awarded):
- Direct Loans
- Perkins Loans
- Parent PLUS loans (for students identified as “dependent” on the FAFSA)
- Graduate PLUS loans
- College Work Study
For example, if your budget is $35,000 and your financial aid is $30,000, you’re eligible for $5,000 in alternative loan funds.
The lender you select may approve you to borrow more money than you are eligible to receive. The Financial Aid Office is required to complete a certification form for you to return to the lender. This is to certify that you are receiving the allowable maximum from federal aid programs. If you are unsure as to how much you can request, feel free to contact the Office of Financial Aid and a counselor would be happy to let you know the exact amount.
Lenders that NUHS students have used in the past are listed at Fast Choice. Should you wish to apply and you have additional questions, please stop by the Financial Aid Office to speak with a financial aid counselor.
Below are some questions to ask if you are considering an alternative loan option:
- Do you offer any benefits and how do I qualify for them?
Some benefits are automatic (meaning you won’t have to do anything to qualify for them) while others require you to sign up for something (like ACH payments or electronic-only statements) to realize the benefit.
- What is considered a late payment?
This is an extremely important question to ask because many benefits are only available after x-number of “on-time” payments. What exactly does on-time mean? Is there a window of time when a payment must be received, or does the lender need to have your check in hand on the due date? Note: it is extremely easy to be “late” on one payment, especially if you have just entered repayment and have not yet set up your payments to deduct automatically from your checking account.
- Do you have lifetime servicing of your student loans?
Legally, lenders can sell their loan portfolio to secondary markets if they so choose (as long as they notify their borrowers in writing of the sale). What happens to your repayment incentives if your loans are sold? How comfortable are you working with a lender that has no intention of seeing your loan through to payoff?
- Do I really need to take out other loans besides Direct Loans?
Keep in mind that each loan program you borrow through will require a minimum monthly payment. It might be worth sticking with one lender for your borrowing needs each year; however, if loan terms change from year-to-year and are significantly different, you can borrow from more than one lender. Keep good records of these transactions, as you are ultimately responsible for keeping track of all loan obligations.
This is not a complete list of questions you should ask, but it should get you started on the road to selecting a lender for your alternative loans. If you have any questions about this process, please contact the Financial Aid Office.