What is an Alternative Loan?

An alternative loan is a credit-based loan intended for educational expenses. Alternative loans are offered by private lenders and are not a part of the Federal Direct Loan Program.

What does “School-certified” mean? The Financial Aid Office will certify (verify that you are eligible for) an alternative education loan if your lender’s loan eligibility requirements are met.

Alternative loans are considered a Financial Aid resource and are applied to your Cost of Attendance. This may reduce the type and amount of other aid you may receive. Alternative loans are serious financial obligations that must be repaid. These loans often have terms and conditions that are different than those of the federal loan programs.

How do I Apply for an Alternative Loan?

Most lenders offer the choice of applying on-line or by telephone. Once you have completed the application, the lender will contact the Financial Aid Office directly for the school certification. The Financial Aid Office ONLY accepts certification requests that come directly from the lender. Loan processing can take several weeks so please plan accordingly.

Selecting a Lender for an Alternative Loan

Salem College does not provide a preferred lender list for alternative student loans. If you are interested in applying for an alternative loan, you will need to research and compare loan options on your own.

An internet search for “Certified Alternative Loans” should provide you with multiple lender choices.

Do Your Research

Alternative student loans differ from lender to lender. It’s important to ask questions when seeking a private student loan, so you can compare loans, and choose the one that best fits your needs.

Here are a few questions you might want to ask a potential lender about any private student loan you are considering:

• Will I need a cosigner?
• What is the interest rate?
• Will I need to make payments while I am in school?
• Are there any fees?
• Is there a minimum or maximum amount I can borrow?
• Does the lender require Satisfactory Academic Progress?
• When does the lender capitalize accrued interest? (that is, add any unpaid interest to the principal loan balance, which increases the amount of money you have to pay back)
• Does the lender combine billing statements for federal and private student loans so I only have one monthly payment?
• Does the lender offer electronic payments?
• Can I use this loan to cover an unpaid balance from a previous school term?
• Does the lender offer interest rate reductions or other incentives to borrowers?

Other Frequently Asked Questions

What are the disadvantages of an alternative loan?

• Higher interest rates and fees than federal loan programs.

• You must have a satisfactory credit history and/or use a co-signer to be eligible for these loans.
• School-certified alternative loans are considered a source of financial aid and must be included in your financial aid award package. This may limit how much you can borrow.
• You cannot consolidate alternative loans with federal loans.

How much loan am I eligible to receive?
Your loan eligibility is based on your Cost of Attendance (COA) minus any other awarded financial
aid. Salem College cannot certify your loan amount above your maximum eligibility.

Has my loan been approved?
Please be aware that “pre-approval” is not the same thing as a final approval because once the lender receives the school certification record the loan could still be denied by the lender. Please be sure to complete the application in full to avoid delays in the processing of your application.

Can I use my alternative loan to defer payment of my bill at Salem?
If the Financial Aid Office receives an approved school certification request from your lender, your alternative loan amount may defer (count as a credit) your bill.

What is the loan period as requested by the lender's loan application? The loan period for:

• The academic year is August 2015– May 2016.
• The fall semester is August 2015 – December 2015.
• The spring semester is February 2016 – May 2016.
• The summer semester is May 2016 – August 2016.

Alternative Loan Tips

• Never borrow money you do not absolutely need. Before you explore private student loans, be sure you exhaust your other funding options, and then you will understand how much money you need to borrow through an alternative loan.
• Be selective in the lender you choose – compare benefits.
• Budget for repayment.

            ○ Be realistic about what your salary will be when you graduate from college.
            ○ Add up the total amount you will owe on all your student loans.
            ○ Estimate what your monthly payments will be.
            ○ Compare your estimated monthly payment with your estimated monthly income.