Alternative Student Loans
Alternative student loans, also referred to as private student loans, are there to cover the cost of college minus federal loans and/or any other financial aid they are receiving. They are can be used for all different types of students like undergraduates and graduates along with residency students and those studying for the bar and many more, and can be used for schooling and other school related tuitions like transportation, a computer, supplies, cost of living, To get you familiar with alternative student loans, here is a bullet point overview and following the overview is a list private student loan providers.
Alternative Student Loans Overview
- Loans are generally based of your credit score or the score of your cosigner.
- You must be enrolled in a half time class schedule as well as provide proof that you are either a resident of the US or qualifying non resident.
- They have what is called “cosigner release” which is where you provide a cosigner with a worth credit score, and later on into your contract the loan is tranferred under the students name enabling them to build their own credit score.
- Interest rates are generally higher than that of a federal student loan, so it is suggested that students apply for all the federal aid that they can before considering an alternative student loan.
- Alternative student loans consolidation must be done seperately from federal student loans.
- There are three major repayment options; full deferral, which is no payments on the loan or interest payments, immediate repayment, which is where you begin paying 30 to 60 days after you receive your loan, interest only, where you either pay our interest while you are in school or let it build up and pay it when you are finished with your education.
- Unlike federal student loans, alternative student loans are not eligible for student loan foriveness (currently).
- Private student loans tend to demand stricter repayment terms compared to federal loans.
- Interest rates on alternative student loans are offered in LIBOR rates(London Inter-Bank Offered Rate).
Alternative Student Loans Providers
- Salie Mae Education Trust – Available for undergraduate, graduate and professional students, offering a fairly flexible repayment term of 15 to 30 years, LIBOR interest rates of 2.5 – 10.05 percent, 6 month grace period until you have to start paying your monthly dues and rewards for on time payments. Salie Mae alternative student loans also come with the benefit of up to 5,000 dollars coverage due to the the potential lost to medical payments.
- Wachovia Alternative Student Loans – Now part of West Fargo and offer interest rates that are variable and start as low as 3.40, rate discounts that go as high as 1 percent, you can borrow up to 25,000 per year and you do not have to pay while your are in school.
Getting The Best Alternative Student Loans
It is a good idea to shop around for alternative student loan providers and not jump on the first ad you see. To get the best provider, remeber to ask some of the following questions:
- Are there any fees, like for forbearance, and what are they?
- Is the interest rate fixed or variable? (Try for fixed at all costs)
- Is the margin subject to change, and if so what is the determinating factor of the margin number.
- Are there penalties for paying a loan off earlier than scheduled?
- What is the interest rate cap if there is one?
- Is there a rate offered that you can get a fixed interest rate?
- Are the discounts offered permanent or do they change after a limited time?
- If by chance it is variable, what index amount is it tied to, or what is the highest amount they can go up to.
Like it was said earlier, it is best to apply for federal student loans and grants before you entertain the option of alternative student loans. If you haven’t done so alread, you should fill out a FAFSA ,which stands for Free Application of Federal Student Aid, which will determine all the grants and student loans that you are eligible for, based on their EFC or Expect Family Contribute sheet that is given to you after you fill out the FAFSA.