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In addition to the federal educational loan programs available to students and parents, private loans (most commonly known as alternative loans) are available to borrowers. These loans began as a means to assist graduate and professional students, however, they are now available to help families cover the Expected Family Contribution (EFC) calculated from the Free Application for Federal Student Aid (FAFSA).
All families should apply for federal, state, and institutional financial aid before considering alternative loan sources. The financial aid office may be able to suggest lenders which offer alternative loan programs that suit the student's financial needs. The student should shop around for the best program with the most favorable loan terms from lending institutions (i.e., banks, credit unions, private organizations, etc.). Here is a sample of questions students and their families should be asking:
- Who is an eligible borrower?
- Is a cosigner required? Are there additional benefits with a cosigner?
- What are the annual limits and the aggregate limits?
- Is school certification required?
- What is the interest rate?
- Does interest have to be paid during in-school periods?
- Are any principal payments required during in-school periods?
- What is the minimum annual income required for a family to borrow?
- Is there a service fee?
- Is the loan based on credit-worthiness? If so, what is the debt-to-income ratio required?
- What is the origination/guarantee fee, if any? Are there other fees?
- What are the repayment options, maximum lengths of time, and deferment options?
- What is the turnaround time on the loan?
- Who is the servicer?
- Are the loans sold?
- What are some of the other features?
- How will the loan be disbursed: to the student or school?
- Are there any deferment options?
To further assist students and families in making informed decisions about alternative/private student loans, Student Lending Analytics, an independent research and advisory firm, makes the following available:
Additionally, the FinAid!® Web site provides information about student loan comparison sites, including minimum standards to be used in determining the usefulness of the sites, and links to available sites.
The accessibility of these lists on this site should not be construed as ISAC's endorsement of any lender that appears on the lists.
The National Council of Higher Education Loan Programs, Inc. (NCHELP) provides two guides, "Private Student Loans, A Guide to Responsible Borrowing" and "Private Student Loans, Understanding the Cost of Borrowing," both containing beneficial information about private loan borrowing.
College Illinois!® Capstone Loan Program (Pilot)
Effective October 1, 2009, the College Illinois!® Capstone Loan Program is no longer accepting applications.
College seniors who are enrolled at institutions participating in the College Illinois!® Capstone Loan pilot program may be eligible for this alternative loan to help them complete the final semester(s) prior to graduation. Interested families can find specific details at the College Illinois!® Capstone Loan Program (Pilot) page, which is located within the Student Zone's College area.
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