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Students, after exhausting all other aid avenues including federal loan eligibility, sometimes explore the use of non-federal educational loans. Collectively called alternative loans, these loan products may be available to assist a student who is not eligible for federal aid or when federal aid does not meet the financial need of the student.
While these are educational loans,
alternative loans have terms and conditions
very different from federal educational loans.
Families considering alternative loan borrowing
should explore multiple options
including Federal PLUS Loan borrowing when possible.
Alternative educational loans require the student borrower to be credit-worthy or have a credit-worthy co-signer. They can assist with meeting your educational costs; however, these loans are not to be entered into lightly. In particular, students need to look ahead so as not to create an accumulated federal and non-federal loan debt that is unmanageable in repayment.
It is far better to explore ways to live more frugally rather than support a lifestyle on borrowed funds.
Choosing an Alternative Loan or Lender
Students can choose an alternative loan product from any lender they wish. Note, however, that various products offered have very specific eligibility requirements. You must obviously meet the lender's eligibility requirements for their loan product in order to use their alternative loan.
The University of Cincinnati does not endorse lenders or loan products nor does it limit student choice. But to assist students who may be looking for an alternative lender, we do annually provide a listing of lenders utilized by our students over the past two academic years.
Additionally, to assist students in comparing loan products, we have supplied links below to the FASTChoice product from Great Lakes Higher Education Loan Service. Via FASTChoice, you will receive basic counseling on alternative loans. You can then review general information and see side-by-side comparisons for alternative loan products used by UC students in the past if the lender has supplied the information to Great Lakes.
UC invites alternative loan lenders utilized by UC students during the previous two academic years to make information available on one of their loan products per student population via FASTChoice. Some lenders may elect not to post information. Other lenders may have additional products beyond the one listed within FASTChoice. The "Apply Now" buttons within FASTChoice will take you to a particular lender's alternative loan Website.
Again, the list of lenders and loans within FASTChoice is not exclusive. UC does not promote one alternative loan over another or limit your choice of lending products. You can also bypass FASTChoice and simply search the Web for the lender of your choosing to explore alternative loan options and the application process.
Ultimately, you are the consumer and should exercise appropriate financial judgment (just as you would for a car loan or mortgage) when choosing an alternative educational loan. As has been said before, borrowers should explore all federal options (given their terms and loan interest rates) prior to seeking non-federal alternative loan borrowing.
One option that students exercise is to first consider the alternative loan product offered by their Federal Stafford Loan lender (if the student borrowed Stafford Loans prior to June 30, 2010). By continuing to use the same lender as your Stafford Loan, you may be able to take advantage of combined billing during repayment. While full consolidation of the federal and non-federal loans is not possible, combined billing can coordinate your monthly repayments and make overall loan repayment easier. Likewise, students should be discouraged from using multiple alternative loan products over their borrowing timeframe if simplicity in repayment is desired.
Finally, some lenders may utilize agreements in place with UC in order to electronically send the disbursements when your loan is approved. If not, your funds may be delayed due to paper check processing.
Amount Limits & Loan Periods
Alternative loans are not part of the federal aid process though lenders restrict their use based on federal aid regulations. In particular, regulations limit the amount of financial assistance a student can receive to the Student Financial Aid Office-determined cost of attendance budget.
This budget is the tuition amount and an average allowance for housing, food, books and supplies, and other non-tuition, educational expenses. The total financial aid package – to include all types of federal and non-federal aid – must remain within the cost budget.
But as is the case with any borrowing, students should think long and hard about borrowing maximum amounts. What may seem easy to accept and sign for now can be extremely difficult to manage when in repayment. All students should reduce reliance on loans whenever possible.
Also, it is important to clearly identify the timeframe for your alternative loan on the promissory note. Loans will generally be processed according to academic year timeframes. If you are borrowing for periods other than fall-spring, you should alert Student Financial Aid prior to submitting your promissory note. This alert will ensure your loan is processed within eligibility for the timeframe desired.
Your actual budgeted costs and the timeframe of your loan are just a couple of the items required when submitting the Private Loan Self-Certification to your lender. The link provides a web tool to both gather needed information and print the required form.
Unlike federal loans using a master promissory note allowing continuous borrowing, alternative loans require a note to be completed with each new or increased borrowing and, as of 2/14/2010, require the use of a Private Loan Self-Certification.
Promissory notes can be completed online with the lender, or the borrower can request that a paper note be sent to them. Completed notes and private loan certification forms are submitted to the lender.
Once the note and required paperwork is received by the lender, a credit check occurs, and the prospective borrower is notified of the outcome. If the loan is credit-approved, UC's Student Financial Aid Office will also be informed and will certify the loan based on eligibility.
You can monitor the certification status of an approved loan since, after certified, the alternative loan will appear as part of your online award offer. Funds will then be disbursed based on the required schedule determined by your lender and UC.