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Office of Financial Aid

Alternative (Private) Loans

Before you apply for an Alternative Loan, have you and your parents consider the Federal Direct Parent Loan for Undergraduate Students (PLUS).

Important Things to Know about Alternative Loans

  • Funded by private lenders
  • You should first file the Free Application for Federal Student Aid (FAFSA) to be considered for state and federal sources of financial aid
  • Intended for students who need additional funds beyond what federal and state programs can provide to meet educational expenses
  • Generally have higher fees and interest rates than most federal loans
  • Interest usually accrues on the total amount from the date of disbursement
  • Borrower and co-borrower must pass a credit check
  • Interest rates can change monthly or every three months
  • Shop wisely and ask questions
  • Applying with a qualified co-borrower may give you the cheapest rate

How to Apply/Choose a Lender

Sallie Mae Signature loans and Citibank CitiAssist loans offer Illinois State University students competitive rates and terms for private loans.  Sallie Mae Signature loans can be secured through a variety of lenders.  Sallie Mae Ed Trust, Regions Bank, and Fifth Third Bank have all contracted with the Sallie Mae Signature Loan Product to offer you low rates.

Illinois State University will continue to certify alternative loan applications from all lenders.  The lenders listed above are provided as guidance only.  The Financial Aid Office submitted a Request for Information (RFI) for Alternative Loan Programs in an effort to assist students and families who request guidance in selecting a lender.  Data from the responses was compiled and reviewed.  The lenders listed above offered competitive rates and borrower benefits, high approval rating, efficient processing, and great customer service.  Rates and terms are based on borrower credit history. 

IMPORTANT REMINDER:  Not all borrowers will receive the same rates.  Each borrower should shop wisely for alternative loans to ensure the best rates. 

Top 10 Questions to Ask Before Borrowing

  1. Who is eligible to borrow the loan? Is a co-signer required?
  2. What is the minimum and maximum loan amount per year?
  3. What is your lowest interest rate and fee combination and how can I qualify for it?  Will a co-signer help reduce that rate? Is the rate fixed or variable? Does the interest rate have a cap?
  4. What fees are applied to the loan and when are they applied?
  5. What is the Annual Percentage Rate (APR)?
  6. What is the application process (mail, fax, Internet)?
  7. When is the loan disbursed and where are the proceeds sent – borrower or school?
  8. Is the interest and/or principal deferred while the student is in school? 
  9. What are the repayment options and are there any repayment benefits? What proportion of your borrowers actually receive these benefits?
  10. Can the loan be consolidated with other loans?

Helpful Hints

  • Most lenders offer online application process and disclose the loan terms before the borrower has to submit the application. It is wise to shop around and find the best loan for you.
  • When speaking to lenders on the phone, always get the name of the person you are talking to. Once you decide on a loan, keep record of the address, phone number, and fax number of the lender so you can easily contact the lender if you have additional questions.
  • Generally a co-signer with good credit can help you secure a lower interest loan with no or low fees. Several lenders also offer a co-signer release option once the borrower has made a set number of on-time payments. That benefit releases the co-signer from the loan.

PLUS Loans vs. Alternative Loans

Feature

Federal PLUS Loan Program

Alternative (Private) Loan Program

Interest Rate

Rate currently fixed at 7.9% .

Variable, usually no cap. Usually reset quarterly or monthly.

Cancellation

Federally insured and discharged in the event of total and permanent disability or death of student or parent

Not federally insured and does not offer discharge in the event of disability or death.

Qualifications

Approval is not based upon income, financial need or a debt-to-income ratio

Borrowers must meet minimum income and debt-to-income ratio requirements or have a qualified co-signer

Application

Very easy. Parents can apply by fax or mail. Must also complete the Master Promissory Note, which is generally good for 10 years

Students can apply by fax, telephone, or online. Supporting documentation is generally required (proof of income, co-borrower addendum, etc.) Promissory Notes must be completed each year

Consolidation

Can be consolidated in a Federal Consolidation Loan

Cannot be added to a Federal Consolidation Loan

Repayment

Generally begins 60 days after the funds have been disbursed, and has repayment term of up to 10 years.

Varies by lender and may begin immediately or be deferred until six months after student ceases half-time enrollment.

Deferments

Deferment and forbearance options are available.

Deferment is generally available while a student is enrolled at least half time.