Alternative Loans

General Information

WARNING! Terms and conditions for alternative (private) loans may be less favorable than those of federal student loans. Be sure you have used all eligibility for federal aid before applying for an alternative loan. The Free Application for Federal Student Aid (FAFSA)can be found here: www.fafsa.ed.gov . Borrow only what you need! Remember that excessive debt can have a negative effect on your future plans and lifestyle for years to come.

• Calculation what you will owe: interactive worksheet
• Information about the SPU payment plan as an alternative to borrowing

Alternative (private) loans are credit-based consumer loans offered by a lending institution; therefore, a better credit rating secures a better interest rate. Regulations require the lender and borrower to complete several steps before the loan may be disbursed. These requirements may increase the time required for processing a loan. You should plan to apply well in advance of when the funds will be needed. If you are planning on borrowing alternative loan funds, remember that if you request additional funds later in the year the lender may need to pull your credit report again.

A self-certification form is required to receive an alternative loan; a borrower must complete and submit this form to his or her lender. The form is available from your lender or Student Financial Services. Student Financial Services will assist you to complete section 2 of the form. You may bring the form to SFS or follow the following steps:

• Complete section 3 of the form
• Email the form to sfs-info@spu.edu for completion of section 2.
• The form will be returned to you via email for you to print, sign and submit to your lender.

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Research Your Options

Students may borrow alternative loans up to the cost of attendance, less financial aid, subject to lender loan limits.

Comparing information about eligibility, repayment and other terms and conditions for loans offered by different lenders will help you make an informed decision.  Much of this information will be available on the lender’s website.  You may also want to call the lender(s) for additional information.

• Are there enrollment requirements, e.g. is the loan available for less than half-time or non matriculated students? 
• Is satisfactory academic progress required?
• What requirements must be met to use the loan for past due balances?
• Are there any fees?  What are they and when are they charged?
• Does the lender offer benefits for on-time payments or automatic direct draft payments?
• How long will you have to repay the loan?
• Are there any prepayment penalties?
• Are there any forbearance options?
• What is the highest and lowest interest rate for the loan?
• Is there a maximum amount of interest that may be charged?
• Is the interest fixed or variable?
• How frequently do variable interest rates change?
• How often is interest capitalized (added to the principal)?
• Sometimes you can get a better interest rate by having a cosigner, even if you don't need one.
• Is a cosigner required?
    o If a cosigner is used will the credit of the borrower or the cosigner be used to establish the terms of the loan?
    o What are the requirements for releasing a cosigner?
• Who will service the loan?
• SPU utilizes ELM for efficient alternative loan processing and ELM/NDN for delivery of disbursements. If you select a lender that does not utilize ELM/NDN additional time may be required for processing and receipt of disbursements.

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Things to Consider

It is important to borrow only the money you need to cover unmet educational expenses.

Calculate what you will owe: Interactive worksheet

Information about the SPU payment plan as an alternative to borrowing

Interest rates for alternative loans typically use either the prime rate or LIBOR(London Interbank Offered Rate) as the base rate. The margin is the additional percentage point added to the base rate by the lender. LIBOR variability has been smaller than the prime rate, which has tended to experience larger, sporadic changes. Remember that the interest rate on an alternative loan is variable; the rate may increase or decrease over the life of the loan.

Interest will begin to accrue immediately, but most loans offer in-school deferment. Lenders will have different policies regarding when capitalization of interest occurs. When interest is capitalized, it is added to the principal of the loan. Therefore, the amount paid over the life of the loan will be greater if capitalization occurs more frequently.

Your credit rating will affect the interest rate you will be charged. Factors reviewed by lenders include your debt-to-income ratio, the length of your established credit and your payment history. Borrowers will typically receive a better interest rate the better their credit rating is. The Fair Credit Reporting Act(FCRA) ensures that you can obtain a free credit report. You may purchase a credit score from one of the three credit bureaus or when you order a free credit report from AnnualCreditReport.com. The interest rate you qualify for will have a significant effect on the cost of your loan.

Remember that a longer repayment term may mean a smaller monthly payment, but you will most likely pay more over the life of the loan due to interest that will accrue. For instance, consider the effect of lengthening the loan term in the chart below.

A loan calculator can be helpful to estimate what your monthly payments would look like. It will be helpful to identify your existing financial obligations including any federal student loans and their estimated monthly repayment amount. You may also want to determine how much can be borrowed based on future expected earnings; using a Debt/Salary Calculator can be helpful.

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Resources

Glossary: Financial aid and loan terms provided by Northwest Education Loan Association (NELA).
StudentAid.ed.gov: The U.S. Department of Education provided this Web site to assist students with funding postsecondary education.

FinAid.org: “The SmartStudent™ Guide to Financial Aid”

Mapping Your Future: A national, collaborative, public service project of the financial aid industry, bringing together the expertise of the industry to provide free college, career, financial aid and financial literacy services for students, families and schools.
National Student Loan Data System: The U.S. Department of Education's central database for student aid. NSLDS receives data from schools, guaranty agencies, the Direct Loan Program, the Pell Grant program, and other Department of Education programs. NSLDS Student Access provides a centralized, integrated view of Title IV loans and Pell Grants so that recipients of Title IV Aid can access and inquire about their Title IV loans and/or Pell Grant data.
Repayment Calculator
Prime Rate
LIBOR

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