Loans

The term "alternative student loans" is often interchangeable with "private student loans". These loans are often referred to as "alternative" because the most typical method of borrowing money for college is through Federal loans that are either underwritten or guaranteed by the Federal government.

Alternative Student Loan Information

Alternative student loans, or private lender student loans,differ significantly from their Federal counterparts. Federal loans are backed or guaranteed by the government, and qualification for a Federal loan is determined by the student's financial need. To qualify for a Federal loan program you must fall within a certain income bracket, have a demonstrably low EFC and prove that you have no history of defaulting on any previous student loans.

Alternative student loans, unlike Federal loans,are backed by private lending companies such as Bank of America, Wachovia or Citibank. Private student loans are determined by your credit score, and this can be a problem for many applicants. Students fresh out of high school, looking for their first college loan, are likely to have little or no credit history. This can be circumvented by using a cosigner, usually a parent or guardian, with an acceptable credit score. A cosigner agrees to be responsible for all payments against the loan should you default at any time. A cosigner with a particularly good credit rating can help you secure a loan with better interest rates and more attractive repayment terms.