Alternative Private Loans To Consider

Alternative private loans are available to help students and parents finance college education. Private student loans are also known as alternative education loans. They provide a way to meet any unfunded need for a student and their parents when paying for college. These loans are offered by banks and other lenders and are not sponsored by the federal government, like the Stafford and PLUS loan programs.

Alternative Education Private Loans

An alternative education or private loan are used to give more flexibility to borrowers who need additional funding for college or would like to design more flexible repayment terms. Parents who are looking to retire student loan debt immediately use private loans as a way to do so instead of allowing interest to accrue on deferred payments, as in the case of PLUS loans.

Alternative private loans carry higher interest rates that do comparable federal student loans. Federal loans for students are subject to caps while private loans do not have interest rate caps or restrictions.

Credit Rating

The actual interest rate that is paid on an alternative private loan is based on the borrower’s credit rating. Credit ratings, as reported by the 3 major credit bureaus, determine the creditworthiness of the borrower and the likelihood that a loan will be made. Borrowers with credit scores in the mid to low 600 range will find it difficult to be approved for an alternative education loan.

Establish Credit for Student

Alternative education loans can provide a way to establish credit for students. A student applying for a loan with a parent as a co-signer allows the student with a way to benefit from the parent’s higher credit rating and ultimately establish a positive credit file, provided loan payments are made when scheduled.

Purpose for the Loan


The money that is received from an alternative private loan can be used for many purposes related to financing a student’s higher education. The loan can be applied toward a parent’s expected financial contribution when applying for financial aid via the Free Application for Federal Student Aid (FAFSA) form. It can be used for room and boarding expenses, books and incidental costs. Students and parents should be cautioned that the amount of the loan could exceed the costs of the school. This will result in a reduction of aid from other resources as determined on the FAFSA.

The alternative private loan provides a way to meet the needs of students and parents. Careful consideration should be given to the use of these funding mechanisms in order to lower the potential debt load that a student incurs and relieves them from any potential financial stress.


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