Tips on Selecting and Applying for an Alternative Loan*
As you pursue your educational goals, we understand that meeting the cost of your education can be a major concern. It is important to first consider your lowest cost options which include scholarships, state grants, and federal student aid. The terms and conditions of federal loans may be more favorable than the provisions of private education loans. We encourage you to complete the Free Application for Federal Student Aid (FAFSA) to determine your eligibility for federal and state aid.
Applying for an Alternative Loan
If federal aid, along with scholarships, tuition waivers and personal savings is not enough to cover your educational expenses, you may wish to consider borrowing an alternative loan. Below are some of the most commonly asked questions regarding alternative loans. This information should help guide you as you decide whether an alternative loan is right for you.
What exactly is an alternative loan?
Alternative loans are non-federal, interest-bearing loans through private lenders. Approval is not guaranteed and the student will need a co-signer with good credit to apply. There are a variety of alternative loans available and it’s up to the student and co-signer to choose the one that is best for them.
Are there benefits to borrowing an alternative loan over a commercial loan from my bank?
Yes. There are benefits to applying for an alternative loan. Programs may include some of the following benefits; please contact individual lenders for details.
- No mandatory principal or interest payments until six months after graduation
- No loan fees
- Co-signer’s obligation may be released after 24 consecutive on-time payments
- Interest rate reductions with automatic bill payment
- Extended repayment plans
- May borrow up to your cost of attendance minus your other aid Loan may be forgiven in the event of the borrower’s death or permanent disability
How do I know which alternative loan is best for me and which lender to choose?
Due to federal regulations, we are not able to recommend a specific alternative loan for you; therefore, you will need to do a bit of research and shopping around using the Alternative Loan Lender List. We can, however, offer you some tips on what to consider when choosing an alternative loan.
- Interest Rate
- What is the rate of interest? How often does it change?
- Are fixed and variable rates offered? Which do you prefer?
- Interest rates on alternative loans vary by lender and may depend on the creditworthiness of the student and their co-signer. Contact each lender or review their website for information on rates
- Other Considerations
- Do I need to be a resident of a particular state to qualify for the loan?
- Is there a borrowing limit based on my grade level?
- Does the loan program have a lifetime borrowing maximum?
- Do your parents prefer to be the primary borrower of the loan rather than co-signer? If so, the Federal Direct PLUS loan (for Parents) is available.
A good place to start when choosing an alternative loan is to eliminate the loan programs that have specific requirements that you do not meet.
When should I apply?
The application process should be initiated after you’ve been awarded federal aid and know how much additional funding you will need to cover your expenses. Apply at least 4 weeks prior to the time you need the loan disbursed. Some lenders require follow-up paperwork and a holding period of your loan funds before they are sent. Be sure you complete all paperwork in a timely fashion so your loan arrives on time.
How much should I apply for?
You can request up to your cost of attendance (COA)* minus the other financial resources listed on your award notice. To keep your loan debt as low as possible, we recommend you borrow only what you need.
*COA includes tuition, fees, room, board, books, supplies, transportation and some personal expenses.
How do I apply for an alternative loan?
You apply directly online by going to the website of the lender of your choice. During the application process, you will be asked to enter the amount you are requesting along with the loan period. If you are unsure of the amount or which loan period to use, please call Bison Connection at 701-231-6200 for assistance.
Click here to view the Alternative Loan Lender List
NDSU Student Financial Services and its staff do not endorse or accept any incentives, financial or otherwise, from the lenders listed on our lender list. Lender information is provided as a courtesy and in no way should it be interpreted as a requirement to use one of the listed lenders. NDSU will process loans from any lender that participates in any educational loan programs.
