The private/alternative loan financing market is the fastest growing source of financial aid today.
The most common source of alternative funding is the federal Parent Loans for Undergraduate Students, usually referred to as PLUS loans. These are federally insured loans that offer creditworthy borrowers significant funding at reasonable interest rates. The key word here is “creditworthy.” To qualify, you will need to pass a credit check. If you might be in the market for a college loan—and for other important reasons—it is a good idea to check your credit report annually. Be sure to contact your school’s financial aid office, because some schools are in the Direct Loan program and will process the application from the financial aid office. Other schools will recommend a bank or other financial institution to begin the PLUS loan process. In general, you can borrow the full cost of attendance, less any other aid received. Over the years, this will run into the thousands of dollars. Other federal student loans to consider include the Perkins Loan and the Stafford Loan.
But PLUS loans are not always the best deal. Many states have alternative loan programs that offer far better terms than the PLUS loan. For example, New Jersey and Pennsylvania offer programs backed by state bond issues that generally are more attractive than the federal PLUS loans. Check with your state Higher Education office or with a school in your area for more information. In most cases, these loans are portable, meaning they can be used at any school across the country. Doing some checking can save hundreds of dollars in interest charges.
Many schools have arranged special financing plans with private lenders. When you are working with the financial aid office to put the total aid package together, be sure to check for any special programs that may be offering private student loans. There are many lenders available to help families finance higher education. Every day, new and better products are brought into the market.
The world of private/alternative educational loans can be confusing. There are varying interest rates, loan fees, up-front costs, and capitalization dates. Unlike home mortgages, there is no single place to go and search for the best deal on a college loan. One of your best resources will be your school’s financial aid office. They do this work everyday, and can point you in the right direction. Ask them to help you weigh the pros and cons of federal student loans against private student loans. Ask them to help you sort out the PLUS Loan, Stafford Loan, Perkins Loan, and your other options. Helping you find the money you need in order to stay in college is in their own interest, so start with them and then do your comparison shopping.
