Private (Alternative) Loans
Private educational loans are available from private lenders for students whose cost of attendance has not been met with other financial aid. The FAFSA (Free Application for Federal Student Aid) is normally not required to apply for a private loan. Private loan programs differ from federal loans, such as Stafford, Parent PLUS or Grad PLUS loans, in several important ways:
- Annual and total loan limits are higher.
- Interest rates and fees vary by lender.
- Rates are normally variable and change on a quarterly basis.
- Loan approval and the rate of interest are based on credit approval and approval is not guaranteed.
- Most students will be required to secure a co-signer.
- Loans are not federally guaranteed; therefore, they do not have the same deferment, cancellation and consolidation benefits.
The terms and conditions for private loans vary greatly. Students are advised to compare loan programs before choosing a lender. Interest rates, fees, and other provisions of these programs are subject to change by the lender. Contact the lenders directly for detailed information on individual loan products.
If you have already taken advantage of federal grants and loans and still find the need for funds, keep in mind the following tips and guidelines when considering a private education loan.
- Always borrow conservatively -- borrow only what you need.
- Check first with your local bank or credit union to see if they offer alternative eduational loans.
- Use the internet to research lenders.
- If you have had a private loan in the past, we recommend you stay with the same lender.
- MSU cannot certify loans that are submitted too early. Please use this guide to determine the earliest acceptable application date; if you apply prior to the dates listed below, your loan may be cancelled:
- June 1st for a Fall/Spring loan
- November 1st for a Spring loan
- March 1st for a Summer loan
Questions to ask when considering a private loan
The choice of a lender is your personal decision and we do not recommend any one in particular. We strongly urge you to do your research and ask the following questions when selecting a lender:
- Have I explored and exhausted all other means of educational funding?
- What is the interest rate?
- Is the interest rate variable?
- How often does the interest rate change?
- When does interest begin accruing?
- Is interest deferred while in school?
- How often does the interest get capitalized?
- What are the annual program maximums?
- Is there an application fee?
- Are there processing fees?
- Are there any enrollment requirements? (Undergraduate, full or part-time, in a degree-seeking program, etc.)
- Can I borrow to pay a past semester’s debt?
- How long does it take to process the loan?
- Is a co-signer required?
- Is credit-worthiness a requirement?
- When does repayment begin?
- What are the minimum monthly payments?
- How long is the repayment period?
- What will my estimated monthly payment amount be?
- What repayment options are available to me?
- If I am having difficulty making payments, what options do I have?
- If payment must be made while enrolled, can I handle these payments?
- Are there pre-payment penalties?
- Are there deferment or forbearance options available?
- Can this loan be consolidated with other educational loans?
- What is the source of the funds?
- Is the lender reliable?
- Where is the lender located?
- Whom can I contact with questions or problems?
- How long has the lender been in business?
- Does the lender service its loans or are they sold to another lender or servicer once the loan has been disbursed to me?
- If applying at a credit union, do I have to be a member?