What you need to know
Terms and conditions for alternative (private) loans may be less favorable than those of federal student loans. We recommend that you use all eligibility for federal aid and fully explore the loan terms and options for repayment before applying for an alternative loan. Be sure to fill out your FAFSA, (the Free Application for Federal Student Aid). Borrow only what you need to avoid excessive debt that may affect your future plans.
The estimated payment worksheet can help you calculate what you will owe.
Consider reviewing SPU’s payment plans to determine if they may be an alternative to borrowing.
Research your options
Students may borrow alternative loans up to the cost of attendance, less financial aid, subject to lender loan limits.
Comparing information about eligibility, repayment, and other terms and conditions for loans offered by different lenders will help you make an informed decision. Find this information on the lender’s website or by speaking with the lender(s).
Research your options with FASTChoice.
Not sure what to ask your lender? Here's help.
- Are there enrollment requirements? (i.e., Is the loan available for less than half-time or non-matriculated students?)
- Is satisfactory academic progress required?
- What requirements must be met to use the loan for past-due balances?
- Are there any fees? If so, what are they and when are they charged?
- Does the lender offer benefits for on-time payments or auto-debit payments?
- How long will you have to repay the loan?
- Are there any prepayment penalties?
- Are there any options to postpone or reduce payments?
- What is the highest and lowest interest rate for the loan?
- Is there a maximum amount of interest that may be charged?
- Is the interest rate fixed or variable?
- If variable, how frequently do variable interest rates change?
- How often is interest capitalized (i.e., added to the principal)?
- Who will service the loan?
Sometimes you can get a better interest rate by having a cosigner, even if you don't need one. Also ask:
- Is a co-signer required?
- If a co-signer is used, will the credit of the borrower or the co-signer be used to establish the terms of the loan?
- What are the requirements for releasing a co-signer?
SPU utilizes ELM for efficient alternative loan processing and ELM/NDN for delivery of disbursements. If you select a lender that does not utilize ELM/NDN, additional time may be required for processing and receipt of disbursements.
The cost of an alternative loan
Interest rates for alternative loans typically use either the prime rate or LIBOR (London Interbank offered rate) as the base rate. The margin is the additional percentage point added to the base rate by the lender. LIBOR variability has been smaller than the prime rate, which has tended to experience larger, sporadic changes. Remember: If an interest rate is variable, the rate may increase or decrease over the life of the loan.
Interest will begin to accrue immediately, but most loans offer in-school deferment. Lenders will have different policies regarding when capitalization of interest occurs. When interest is capitalized, the accrued interest is added to the principal. Therefore, the amount paid over the life of the loan will be greater if capitalization occurs more frequently.
Your credit rating will affect the interest rate you will be charged. Factors reviewed by lenders may include:
- Your debt-to-income ratio
- The length of your established credit
- Your payment history
Typically, the better a borrower’s credit history, the better the interest rate will be. The Fair Credit Reporting Act (FCRA) ensures that you can obtain a free credit report. You may order a free credit report from each bureau annually at AnnualCreditReport.com.
The interest rate for which you qualify will significantly affect the cost of your loan. These examples are estimates and for educational purposes only:
With a loan amount of $10,000:
- Interest rate: 8%
- Loan term: 15 years
- Monthly payment: $95.57
- Total interest paid: $7,202.60
- Cumulative payments: $17,202.60
- Interest rate: 11%
- Loan term: 15 years
- Monthly payment: $113.66
- Total interest paid: $10,458.80
- Cumulative payments: $20,458.80
- Interest rate: 18%
- Loan term: 15 years
- Monthly payment: $161.04
- Total interest paid: $18,987.20
- Cumulative payments: $29,987.20
A longer repayment term may mean a smaller monthly payment, but you will most likely pay more over the life of the loan due to accrued interest. These examples are estimates and for educational purposes only:
With a loan amount of $10,000 and interest rate of 10%:
- Loan term: 10 years
- Monthly payment: $132.15
- Total interest paid: $5,858.15
- Cumulative payments: $15,858.15
- Loan term: 15 years
- Monthly payment: $107.46
- Total interest paid: $9,342.80
- Cumulative payments: $19,342.80
- Loan term: 20 years
- Monthly payment: $96.50
- Total interest paid: $13,161.66
- Cumulative payments: $23,161.66
Loan and debt/salary calculators
A loan calculator may be helpful to estimate your monthly payment. To determine how much can be borrowed, use a debt/salary calculator.
Find more loan resources to consider as you make your financial aid decisions.
Alternative (private) loans
Alternative (private) loans are credit-based consumer loans offered by a lending institution, so a better credit rating secures a better interest rate. If you request additional funds later in the year, a second application may be required and the lender may need to pull your credit report again.
A Self-Certification form is required to receive an alternative loan, and a borrower must complete and submit this form to the lender.
The form will be returned to you via email to print, sign, and submit to your lender.
Note that regulations require the lender and borrower to complete several steps before the loan may be disbursed, and once approved, it may take an additional 30 days before SPU receives the funds.