Alternative Student Loans
Covering the cost of your college education can be a daunting challenge. The fact is that unless your parents have saved up for your education, you are really going to have to apply for student loan aid. If you can’t make ends meet through financial aid and you have exhausted all other options, then you will want to look at getting alternative student loans.
What are Alternative Student Loans?
The actual term “alternative student loans” means the same as “private student loans.” The term “alternative” is used because these type of loans are based on your credit history, while federal loans are guaranteed by the government. Federal loans are student loans without cosigner while alternative loans are not.
You can use alternative loans to help pay for your college education. Keep in mind that private loans are not the “best” option out there when it comes to paying for your college education. Only seek out alternative student loans if you have utterly exhausted all other student loan options and financial aid options.
You should file a FAFSA application to see if you can qualify for grant aid. Grants are good because you don’t have to pay them back. If a grant doesn’t cover the total costs you have, then look at the Federal Stafford loan or the Federal Perkins Loans. These are guaranteed student loans and are backed by the federal government. You can quality for these student loans with bad credit history. Federal student loans are student loans without cosigner. Federal student loans will generally have lower interest rates than those found in private loans.
If you find that after you get grant aid and federal loans you still can’t cover your college expenses, you can then look at alternative student loan funding for college.
Now, alternative college loans do have quite a few differences over federal student loans. Federal loans will always require you to fill out a FAFSA before you qualify for the loan and you will need to qualify as a “needy” student. You will also need to have never defaulted on any student loan if you want federal loans. If you are really needy, you may even qualify for a subsidized federal loan which is a deferred student loan where the government will make interest payments on your loan while you go to school.
Most reputable alternatives student loans are backed by large lenders such as Bank of America, Citibank, etc. If you want a private student loan, you will need to be credit worthy however. For many students, this can be a hurdle to overcome, especially if you are applying for a private loan right out of high school and will likely have no credit history. This can be overcome by getting a cosigner. A cosigner is some individual who is willing to take responsibility for your loan in the event that you default or miss payments. However, keep in mind that a cosigner must have better credit than you have. If they do have good credit, you can qualify for a low interest private student loan. Some private student loans have special cosigner-release programs where after a period of time the cosigner is removed from responsibility.
Tips When Searching for Alternative Student Loans
Here are a couple tips for how to get private alternative student loans:
Tip 1: Make sure you never ever borrow money that you don’t need. Most private student loans will have higher interest rates than federal loans, so you will pay more money when you make loan payments. You don’t want to end up paying more money on a loan you don’t need!
Tip 2: Make sure to do plenty of alternative student loan comparison shopping. The rule is to be as picky as you can. Never rush into getting a private student loan. You want to look at all options – loan fees, deferment options, repayment plan, etc. If you don’t do your homework, the result could be a lot of extra debt and future financial troubles.
Tip 3: Look for special student loan deals. Many alternative loan companies will try and compete for business by offering special student loan deals. Look for these deals! You can search online to spot alternative student loan offers. Make sure to check out as many as possible.
Getting an alternative student loan is a big deal. It’s a step that you need to carefully consider. So do plenty of research and explore all the options out there to get the private student loan that best fits your personal needs.