Alternative Loans are private loans offered through lending institutions and are NOT part of federal government programs. These loans are available if you need additional financial assistance after applying for all federal and state financial aid programs, including federal loans through www.fafsa.ed.gov.
Private Educational loans should be taken as a last resort after all Federal Loans have been exhausted.
As with all student loans, the amount borrowed must be for educational expenses and cannot exceed the cost of attendance for the loan period. Money is borrowed in the student's name. A cosigner is usually required and loan approval is based on creditworthiness. Interest rates, loan fees, and borrower benefits for alternative loans vary. Alternative loans are also available for students that may not qualify for federal aid; International students with a cosigner, students who have past due term balances, and students enrolled for less than half-time.
While private education loans can help you pay for college, they are most often not the best choice. You should only apply for a private loan if you have already made use of all federal resources available.
You should file the FAFSA and see if you qualify for any federal grants or federal loans. Federal grants do not have to be paid back. Federal loans generally have lower interest rates than private loans, and unlike private loans, federal loan interest rates do not adjust based on PRIME* or LIBOR** rates.
If you qualify and have been offered any federal loans in your financial aid award package, you should accept them before considering a private education loan. Alternative loans are not guaranteed and are based on your creditworthiness. Most have variable interest rates and fees and do not provide the benefits of federal student loans.
If, after receiving federal and any other state or external grant/scholarship aid, you still cannot meet college expenses, then you may want to consider applying for a private education loan.
*PRIME is the Prime Lending Rate as published in the Wall Street Journal. This is the rate banks charge their most creditworthy customers. **LIBOR is the 3-month average of the London Interbank Offered Rate. LIBOR is the average interest rate paid on deposits of US dollars in the London market.
- DO NOT borrow money you don’t really need. Private educational loans generally have higher interest rates than federal loans so you will often end up paying more money back on a private loan. Make sure you need the funds!
- Be selective in choosing your lender. Look for a lender that will give you the best interest rate, lowest fees, and best repayment plan. Failure to fully research these items can cause you to incur excessive debt.
- You may want to find a cosigner. Even with a good credit score, a cosigner may help you get a better interest rate and/or a better repayment plan. A cosigner is a parent, guardian or other trusted individual that is willing to put their name on your loan and be responsible for payments should you fail to make them. There are usually cosigner release programs that allow your cosigner to be removed from the loan after a designated period of time.
Stony Brook University takes financial aid advising very seriously which is why we’ve developed a Private Alternative Loan Lender List. The purpose of private/alternative loans is to provide secondary resources for students who have exhausted federal loan program options. A lender list is a tool used to assist students and families with the decision making process of choosing a lender. There are many student loan lenders from which you can choose. While the lenders on our sample lender list have been evaluated closely on the basis of customer service, technology, lender stability, reputation, default management, and borrower benefits, students have the right to select the lender or loan product of their choice. In fact, borrowers are strongly encouraged to conduct their own consumer research.
Stony Brook University established its Private Educational Loan Lender List by proactively requesting Requests for Information (RFI's) from lenders. The lenders on our list have demonstrated a commitment to providing high quality customer service and quick accurate loan processing. The performance of our lenders is evaluated each academic year. This evaluation is conducted by a committee of financial aid professionals and is based on a variety of criteria such as customer service and technology, lender stability and reputation, default management and borrower benefits. The list may change from year to year as current lenders are evaluated and new lenders are considered. Each of our sample lenders must meet the following requirements:
Customer Service and Technology:
Loan borrowers should receive quick, efficient and accurate processing of their loans through a simplified application process and state of the art operations. Programs should interface with the university’s financial aid processing system assuring a streamlined, electronic loan certification and funds delivery system. Timely and responsive processing with outstanding problem resolution service is essential. A toll free number for borrower information is required. Ideally, there should be separate dedicated toll free numbers for borrowers in school and in repayment status.Lender Stability and Reputation:
Our sample lenders, their affiliates, and associated loan servicing agencies must be well established in the student educational loan industry for a minimum of five years. They also must maintain a proven record of excellent customer service to borrowers. This includes offering a variety of repayment options and the maintenance of a well-trained staff to answer questions via a toll-free number.Default Management:
Our sample lenders provide web-based default management tools and early intervention for borrowers who are delinquent on their loan payments. They also provide information and advice to borrowers about costs of deferment/forbearance, repayment calculators, consolidation information, planning/budgeting, and credit information to students and parents.Borrower Benefits:
Our sample lenders have competitive rates and provide above-average repayment benefits to loan borrowers. Borrower benefits provided by each of our sample lenders can be accessed from the websites listed on our sample Lender List. Reasons for selecting a particular lender can vary from person to person. Some choose a lender based on name recognition or where they have already had positive banking experiences. Others prefer the immediate benefit of lower origination fees, resulting in more money up front. Still others prefer the long-term advantage of repayment options, like an interest rate reduction as a reward for making payments on time.
Effective February 14, 2010, lenders offering private education loans are now required to provide consumer disclosure information.Federal regulations also now mandate that private loan lenders require borrowers to complete a Private Educational Loan Application Self-Certification Form when requesting any private education loan. This form must be submitted to the lender – NOT to Stony Brook University! While your cost of attendance and estimated financial assistance are needed to fill out section 2 of the form, you should be able to obtain this information by accessing your Stony Brook SOLAR account. If you need assistance completing this form, please contact your corresponding Financial Aid Office.
Related Link: http://federalstudentaid.ed.gov/federalaidfirst/ (Explains the differences between federal and private education loans)
Students and parents can borrow from any lender. To assist you in deciding which lender to choose, we have listed some important questions to ask a lender:
- What is the interest rate and what is it based on?
- When does repayment begin?
- Can principal and interest be deferred?
- When is the interest capitalized?
- How much is the loan origination fee?
- What is the maximum amount I can borrow per year?
- What is the minimum amount I can borrow per year?
- Can payments be combined with Federal Direct payments?
- Can payments be made through electronic transfer?
- Can the loan be consolidated with other loans?
- Can I borrow money to cover past due balances from a previous school term?
- Are there interest rate deductions or other incentives for borrowers who make their payments on time?
Important information you need to know when selecting an Alternative Loan Product:
Private student loans typically have variable interest rates, with the interest rate pegged to an index, such as LIBOR or PRIME, plus a margin. The LIBOR index is the London Interbank Offered Rate and represents what it costs a lender to borrow money. The Prime Lending Rate is the interest rate lenders offer to their most creditworthy customers. A rate of LIBOR + 2.8% is roughly the same as PRIME + 0.0%.