Private student loans, also known as “alternative loans,” are made available to students through banks, savings and loans, credit unions and other financial institutions. Although regulated by the federal government, these loans are not subsidized or guaranteed by the government. They are instead a private arrangement between you and the lender. Consequently, the terms and conditions of the loan will vary from lender to lender.
Since loan terms differ among the lenders, and your personal circumstances are unique to you, there is no “right” loan for everyone, and Brandman University does not recommend any particular lenders. Instead, we suggest you evaluate several loan options to obtain the loan that is best suited to meet your needs. Among the factors, we advise you review:
- Loan Eligibility Rules: All lenders require credit checks, but their standards for a satisfactory credit rating vary. Some lenders may require co-signers; those that do not require co-signers may provide lower interest rates to students who have co-signers. Some lenders require that students be enrolled in specific majors or graduate programs. There may be requirements that borrowers enroll full time, possess specified minimum GPAs, have incomes above a defined amount, and so forth.
- Loan Amount: Federal rules somewhat limit the amount you can borrow, but lenders also can restrict the amount they wish to lend you.
- Interest Rates: Interest will typically be charged from the time the loan is taken out. Some interest rates are variable whereas others may be fixed for the life of the loan. Interest may be compounded differently, so be sure to compare the annual percentage rate (APR). If interest rates are variable, are there limitations on interest rate adjustments, both in terms of frequency and amount? Some lenders will reduce interest rates if you elect to have your loan paid automatically by electronically debiting your bank account. There also may be a reduced interest rate after a specified number of on-time payments.
- Loan Fees: Most lenders will charge loan fees, and these fees will vary based on the policy of the lender. Sometimes higher loan fees will result in lower interest rates. Among fees to consider are loan origination fees, processing fees, late payment fees, and penalties and adjustments to principal based on defaults or late payments.
- Repayment Terms: There may be some loans that require repayment beginning on the month following the date the loan proceeds are received. Most lenders, however, will defer payments (but not interest) while you are attending school. There may be deferment of payment for other reasons such as financial hardship. The length of time required for full payment of the loan could differ among lenders.
- Loan Forgiveness: Some loans have provisions for cancellation upon the death or permanent and total disability of the borrower.
- Loan Servicing: Most lenders service loans from a central location that may be situated outside your state of residence. Prompt, accurate information from your lender is important, especially if you need to know if your loan application has been approved, when the funds will be sent to Brandman, or if you need to know the due date and amount of your next payment. It is also important that you borrow from a lender that will work with you should you experience difficulty making loan payments.
- Sale of Your Loan: Lenders sometimes sell student loans to secondary markets, and you may be required to repay your loan to a company different from the one that originally lent you the funds. Selling your loan in no way alters the terms of the loan, so your payment schedule, interest rate, rights to deferments and forbearance remain unchanged. If your loan is sold to a secondary market, at the time of sale you will be notified about the name, address, and telephone number of the company that has purchased your loan.
You may borrow funds from any eligible lender, and the Financial Aid Office will process the request accordingly. At most lenders, the easiest way to obtain information about loan terms and apply for a loan is to visit the lender’s web site. Local branches may have some information, but it is usually limited. The lenders’ web sites customarily provide toll free telephone numbers so that you can contact loan officers specializing in private educational loans.
Since each private loan program is provided by a different lender, the application procedure will be unique to the lender making the loan. All lenders, however, are required by the federal government to obtain a completed “Private Education Loan Applicant Self-Certification".
After you apply for a loan (customarily done online), and the lender approves your loan, the lender will request that Brandman verify your enrollment, tuition charges, and some other demographic information. This request typically is made electronically, and Brandman will respond promptly. The entire process from submission of your application to your lender to disbursement of loan funds onto your student account could take as long as four weeks, so please allow sufficient time. A small number of lenders do not wish to exchange data and transfer funds electronically. If you choose to borrow from one of these lenders, the process may take six weeks.
The lenders are important sources of information about their loans, but Brandman also is here to assist you. Please contact your One Stop Specialist should you desire more information about the loan application process.
A private student loan should be funding of last resort. We encourage you to exhaust all federal student aid sources before pursuing this option.