How to get alternative student loans

Three steps that can help you get the right loan for you.

How to get alternative student loans

Why Is it important?

If you’re considering student loans to help you pay for school, you’re not alone – many students need loans to cover their full cost of attendance. In 2010, 67% of bachelor’s degree recipients used loans to pay for their education. But the more money you borrow now, the higher your monthly loan payments will be after you graduate.

If you have to take out student loans, comparing your options can help you find the student loan best suited for your needs.

Key Questions

If you have to take out student loans, you essentially have two choices: federal student loans and private loans.

For most borrowers, federal student loans are the best option. When you start to pay back your federal loans, the interest rate will be fixed, which will help you predict your payments after graduation. And in some cases, the federal government will pay the interest on your loans while you are in school – these loans are called subsidized loans.

Other student loans are generally private student loans. The most common private student loans are offered by banks. Their interest rates are often variable, which means your interest rates and payments could go up over time. Private loans can also be more expensive – rates have been as high as 16% over the past couple of years. And when it is time to repay, private loans don’t offer as many options to reduce or postpone payments.

For most people, federal student loans are a better deal than private student loans, so you’ll want to take advantage of federal options first.

If your grants and federal loans are not enough to cover the cost of your education, you should consider the following options:

    Search for scholarships. Look for state and local grants

using one of the many free scholarship search options available. Servicemembers, veterans, and their families may be eligible for GI Bill benefits

First, make sure you need a private student loan. These loans generally are not as affordable as federal student loans and offer little repayment flexibility.

Here are some factors to consider:

  • Talk to your school’s financial aid office to get a form certifying that you need additional aid to cover the cost of attendance – most lenders require it.
  • Shop for lower interest rates and loans that offer flexibility if you have trouble making payments.
  • Some private lenders may advertise very low interest rates – remember that only borrowers with the best credit will qualify for these rates. Your rate could be much higher.
  • In 2011, over 90% of private student loans required a co-signer, so make sure you have someone like a parent or another relative lined up. Your co-signer will be legally obligated to repay the loan if you can’t or don’t. You may want to consider loans that offer “co-signer release” after a number of on-time payments.

I have to borrow money for school. What are my options?

If you have to take out student loans, you essentially have two choices: federal student loans and private loans.

For most borrowers, federal student loans are the best option. When you start to pay back your federal loans, the interest rate will be fixed, which will help you predict your payments after graduation. And in some cases, the federal government will pay the interest on your loans while you are in school – these loans are called subsidized loans.

Other student loans are generally private student loans. The most common private student loans are offered by banks. Their interest rates are often variable, which means your interest rates and payments could go up over time. Private loans can also be more expensive – rates have been as high as 16% over the past couple of years. And when it is time to repay, private loans don’t offer as many options to reduce or postpone payments.

For most people, federal student loans are a better deal than private student loans, so you’ll want to take advantage of federal options first.

What if my grants and federal loans don’t cover the cost of attendance?

If your grants and federal loans are not enough to cover the cost of your education, you should consider the following options:

    Search for scholarships. Look for state and local grants

using one of the many free scholarship search options available. Servicemembers, veterans, and their families may be eligible for GI Bill benefits

What should I consider when shopping for a private loan?

First, make sure you need a private student loan. These loans generally are not as affordable as federal student loans and offer little repayment flexibility.

A private (alternative) education loan is a non-federal education loan borrowed from a private lender such as a bank, credit union or other financial entity and should be a student’s last resort for educational assistance. Only students who need additional funds beyond what they do qualify for in Federal Student Aid (FSA) and non-federal aid should consider applying for a private education loan.

Process:

Students enrolled in a degree program should first complete the annual Free Application for Federal Student Aid (FAFSA) so their eligibility for any FSA can be determined.

Students should contact their bank, credit union or other private lending institution to ascertain if they provide private (alternative) education loans.

If your selected lender approves your private education loan application, then the lender submits a certification to us requesting our confirmation of your enrollment status, and that your requested private loan amount plus any other aid you have been awarded does not exceed your Cost of Attendance. If following the certification you remain eligible for the private loan, your lender then forwards the semester’s loan funds to the UGA Student Accounts Office for disbursement.

Your chosen lender will most likely provide you the Private Education Loan Applicant Self-Certification that the Department of Education requires you to complete. You can also click here (PDF) to obtain the form.

Click here for additional information regarding private education loan lenders used by UGA students.