Private Alternative Loans
Alternative loans are unsecured educational loans through private lenders (not the federal government). These loans typically have much higher interest rates, loan tuition fees, and/or payments than the Federal Direct Student Loans, and should only be used when you have exhausted all other options. Thus, for those students who apply for an alternative loan through a private lender, please be aware that the OFA&S will require that you have already completed a FAFSA (so that we can determine Stafford or any other aid eligibility first), as well as an Alternative Loan Questionnaire (so you understand the terms of the loan), before we will certify this loan.
How to Apply
CSUB will only certify an alternative loan if -
- you are a CSUB student enrolled at least half time
- you complete a Free Application for Federal Student Aid (FAFSA), which enables us to determine any federal and state financial aid that may be available to you.
- your eligibility for all other forms of aid has already been determine by the OFA&S.
- you complete an Alternative Loan Questionnaire, so that you can make an informed decision.
- lastly, you complete the Private Alternative Loan Self-Certification Form provided by your lender. If your lender does not provide you with the self-certification form, you may print the Private Education Loan Self-Certification Form here, then complete and submit it to your lender.
Note: The deadline for certification of alternative loans is the student's last day of attendance. An exception may be made for students who owe a balance on their CSUB student account, in which case we will only certify the loan for the amount owed to the University.
An alternative loan, whether or not it is required to be certified by CSUB, is a resource that you must report to the Office of Financial Aid and Scholarships. We will coordinate your alternative loan with the other aid you are receiving.
If you receive an alternative loan after receiving other financial aid for the term, you may be required to repay some of all of the aid you receive. The total of all financial aid and other resources cannot exceed your cost of attendance.
Choosing a private alternative loan lender
We do not recommend or endorse any particular lender and you may choose any lender you wish. To get you started, we offer these guidelines to help you determine which, if any, alternative loan is right for you.
- Begin by contacting the bank or credit union you use for your personal banking needs. Compare the terms of their loans with others that you research.
- Choose an actual bank or credit union, one that offers checking/savings accounts, credit cards and different types of loans. Banks are governed by banking industry regulations helping to make their practices more consistent and stable. In the current lending climate, where the sub-prime mortgage crisis is beginning to spill over into student lending, smaller banks and non-bank student loan companies are becoming unstable and are in some cases even closing down permanently.
- Choose a lender that has been in business for a long time. You will be doing business with the lender for the next 5 to 20 years (until the loan is paid in full) and may want to choose a lender that has been around at least that long.
- Choose a lender that services its own loans. Ask the lender if the product is their own loan or if they are just reselling a loan that is actually serviced or guaranteed by another lender or agency. Ask if they will service the loan until it is paid in full, or if they sell their promissory notes to another lender or loan servicing agency after collecting the loan processing tuition fees. You should know with whom you will be doing business, now and when you repay your loan.
- Compare private loan terms with the terms of the Federal Parent PLUS Loan. A PLUS is usually less expensive and has better repayment terms. A new federal regulation now allows parent borrowers to defer repayment on PLUS loans made after July 1, 2008, while their student is enrolled at least half time.
- Carefully compare the loan terms from the lenders you research. As a borrower of a private consumer loan, it is your responsibility to research and examine the terms and conditions offered by each lender to determine the right loan for you. Points to consider-
- Compare loan processing tuition fees as well as annual percentage rates. The processing tuition fees vary from lender to lender and some can be as high as 20% of the loan. A loan with a low interest rate but high tuition fees can sometimes cost more than a loan with no tuition fees but a higher interest rate.
- Lenders require a credit check and most require a cosigner.
- Interest rates vary from lender to lender and often depend on your or your cosigner's credit score.
- The time required to repay the total amount varies. Does the lender offer repayment options? A longer repayment term increases the total amount of interest paid even though the annual percentage rate may be lower than one with a shorter repayment term.
- The lender may or may not offer deferment or a grace period before repayment begins. Remember, with private loans, interest continues to accumulate and may capitalize during deferment. (Capitalized interest is unpaid interest added to the principal amount of your loan and increases the amount you must eventually repay.)
- If you defer repayment, try to make monthly or quarterly interest payments to reduce the amount of capitalized interest.
Private Alternative Loan disbursement
When we receive your loan check from the lender, you will be asked to endorse the check so it can be credited to your CSUB student account. Once your tuition fees are paid, any refund will be issued to you by the Student Financial Services Office.
CSUB will only disburse funds for an alternative loan if -
- you are an CSUB student enrolled at least half-time,
- you complete a Free Application for Federal Student Aid (FAFSA) which enables us to create a record for you and determine any federal and state financial aid that may be available for you,
- you are listed as the borrower on the loan and the check is made payable only to you (or co-payable to you and CSUB) because CSUB does not participate in private loan programs that allow parents or third parties to borrow a loan on behalf of the student, and
The alternative loan will be deposited to your CSUB university account, and any credit balance will be refunded to you by the Student Financial Services Office.
Non-school certified alternative loans
There are student loans that do not require completion and signature by a school's financial aid officer. You might want to consider this type of loan if you-
- are not a United States citizen or permanent resident,
- are not making satisfactory academic progress, or
- are enrolled less than half time.
The requirements and terms vary from lender to lender, so carefully compare the terms of the lenders that you consider.
Non-school certified alternative loans should be disbursed by the lender directly to you and not through CSUB.
Reporting your alternative loan to CSUB
An alternative loan, whether or not it is certified by CSUB, is a resource that you must report to the Office of Financial Aid and Scholarships.
We will coordinate your alternative loan with the other aid you are receiving. If you receive an alternative loan after receiving other financial aid for the term, you may be required to repay some of all of the aid you receive.
The total of all financial aid and other resources cannot exceed your cost of attendance.