Private (Alternative) Student Loans

Students who need additional funds beyond what they qualify for in federal student aid (including Federal Direct Loans) or students who are not eligible for Federal Direct Loans may wish to apply for a private (alternative) education loan. Note: A Free Application for Federal Student Aid (FAFSA) is not required to apply for a private (alternative) education loan.

What is a Private (Alternative) Education Loan?

A private (alternative) education loan is a non-federal education loan, through a private lender typically issued in the student’s name and requiring a cosigner. The availability of these loans is declining and most lenders who still provide these loans are increasing their interest rates.

Each lender has different eligibility requirements, interest rates, repayment terms and conditions. For example, some lenders require students to be enrolled at least half-time in a degree-granting program, while others will lend to students who are non-degree seeking or are enrolled less than half-time.

Private (Alternative) Education Loan Considerations

1. Students enrolled in a degree program at the University of Georgia (UGA) should always apply for Federal Direct Student Loans and parents of dependent undergraduate students should also apply for Federal Direct Parent PLUS Loans before considering a private (alternative) education loan. It is in the student and parent’s best interest to borrow the maximum amount of Federal Direct Loans for which they qualify before borrowing a private education loan. Here are some things to consider:
• Students do not have to start paying back their Federal Direct Stafford Loans until they graduate or stop attending school at least half-time. If you obtain a private loan, you will probably have to start making payments right away.
• The interest rate on a Federal Direct Stafford Loan is almost always lower than that on a private loan - and much lower than on a credit card!
• The government will pay the interest while in school at least half-time for students who qualify for a Federal Direct Subsidized Loan.
• Students do not need a credit record or a co-signer to get a Federal Direct Stafford Loan.
• Federal Direct Parent PLUS Loans require a credit check but the qualifying criteria is not as strict as for private loans and, if approved, the parent can choose not to begin repaying the loan until the student graduates or is no longer enrolled at least half-time.
2. Students enrolled in a degree program at another institution and pursuing college credit courses through Independent and Distance Learning (IDL), should contact their school’s financial aid office regarding their possible eligibility for financial aid (including federal student loans).
3. Students enrolled solely in non-credit (continuing education) courses through IDL are not eligible for federal Title IV student aid or the HOPE Scholarship.

In Conclusion

Students and/or parents who find they must apply for a private education loan may contact their bank, credit union or other private lending institution to ascertain if they provide private (alternative) education loans. Students may also do an internet search for “private student loans”. We strongly recommend you compare interest rates, loan fees and repayment plans before applying for any loan.