What is an alternative loan?
Alternative (or "private") student loans are educational loans that are not secured or guaranteed by the Federal government. There are many options for this type of funding. Lenders generally provide funding based on credit approval and other factors. The student is the primary borrower. For most loans, the student must be a U.S. citizen or eligible non-citizen. Repayment may begin while the student is enrolled, or possibly be deferred until she ceases enrollment. There is generally no penalty for pre-payment.
Interest rates of alternative loans are generally higher than the Federal loan programs. We strongly recommend borrowing through the Federal Direct Student loan program first, and at least considering the Federal Direct PLUS loan option before using alternative loans. If your parent applies for a PLUS loan and is denied, you may be eligible for additional Direct Unsubsidized Stafford loan funds.
Do I need a co-borrower?
You will usually need a credit-approved co-borrower to secure an alternative loan. The decision to require a co-borrower is up to your lender. However, even if your lender does not require one, in most instances, adding a co-borrower will secure a better interest rate and/or fees for your loan.
Who can co-sign?
Any adult with acceptable credit can co-sign for your loan. Although parents are often a good choice, a grandparent, other relative, or friend may apply. In most instances, the co-borrower must be a U.S. citizen or eligible non-citizen with acceptable credit. Some loans have income requirements as well.
Many lenders offer a "co-borrower release" option, where the co-borrowers' responsibility for repayment can be removed after the student borrower meets certain criteria. In most instances, the student borrower must meet credit approval on her own at the time of the release request.
How do I apply?
Most lenders encourage students to apply online. When you do, the lender will conduct a credit screening to determine if you are approved for the loan. Complete the application in full. If you are adding a co-borrower, make sure he or she completes the application as well. When your credit has been approved, Saint Mary's College will be notified by your lender that the application is ready to be certified by the school.
Which alternative loan is right for me?
Only you can truly answer that. There are many alternative loans available, so please research your options thoroughly before applying. Typically, interest rates are based on the current prime rate, LIBOR, or T-bill. These different "base rates" may vary. To check current interest rates, please click here.
Applying for a 2015-2016 Alternative Loan:
- Select a lender and complete the application process with that lender. You may use any participating lender that offers alternative loans; however, we have a Preferred Lender List with our top six lenders we suggest you use to help make your decision. Please visit our FASTChoice web page with information on all six lenders at http://choice.fastproducts.ort/FastChoice/home/183600/1
- Complete your alternative loan application and Master Promissory Note (MPN) directly with your lender. Most lenders allow you to e-sign an MPN online, although you may request that a paper MPN to be mailed to you. We strongly recommend completing the application and MPN online when possible to expedite loan processing.
- Your lender should provide you with a "Self Certification" form. You will be asked to provide your cost of attendance and your estimated financial aid for the 2015-16 academic year. Both of these figures may be located by checking PRISM. This form must be completed and returned to your lender before your loan funds can be disbursed.
This page was last updated on March 20, 2015.