Undergraduate Alternative Loans
If you have exhausted more attractive financing options such as the ECSI Payment Plan, the Direct Stafford Loan and the Direct Parent PLUS Loan, then you might want to consider an Alternative Private Loan. Students with a credit-worthy co-applicant may apply for a private educational loan to finance educational costs. If the borrower defaults (stops making payments or is late in making payments) on the private loan, the co-signer is fully responsible for the loan. Private Loans should be a last option loan. Please note that with current credit market conditions, credit approval for these loans has become more restrictive, variable interest rates have increased. Lenders may have fixed interest rate loans. Additionally, the continued funding from these loans for all undergraduate years has become less reliable than the Federal Direct Parent PLUS Loan. Application and credit review requirements vary. Our advice is to apply early if you choose one of these loans as part of your financing plan. Please review the Alternative Loan Recommended Lender List link.
Alternative Loan Recommended Lender List Selection Process 2012-2013
Federal loan regulations, set by the Department of Education, require a school that chooses to provide a Recommend Lender List to borrowers to disclose their method of selecting the lenders included on their list of suggested lenders. This guide is to provide information to borrowers about the method the University of Scranton's Financial Aid Office used to create the 2012-2013 Alternative Loan Recommend Lender List.
According to Section 682.212 of the Federal Register, published by the Department of Education, "A school may, at its option, make available a list of recommended or suggested lenders, in print or any other medium or form, for use by the school's students or their parents, provided such list:
- Is not used to deny or otherwise impede a borrower’s choice of lender
- Does not contain fewer than three lenders that are not affiliated with each other and that will make loans to borrowers or students attending school
- Does not include lenders that have offered, or have offered in response to a solicitation by the school, financial or other benefits to the school in exchange for inclusion on the list or any promise that a certain number of loan applications will be sent to the lender by the school or its students” (U.S. Department of Education, 2007).
Why does the University of Scranton have a Recommended Lender List?
Experience tells us that our students and parents appreciate assistance in making financing decisions. The recommended lender list provides a comparison of selected lenders in relatively consistent terms, reducing confusion and assisting borrowers and families in making the best-informed decisions in regards to the private student loan.
Steps Taken With Decision Process:
An internal review was completed with the lenders most often chosen by University of Scranton students. The goal was to provide a limited amount of recommended lenders that will provide the best loan offerings, electronic loan certification, customer service, reliability of the program and total number of loans accepted in the previous academic year.
Criteria Used To Select Lenders:
Best Loan Offerings-Lenders were evaluated on borrower benefits to students such as:
- Borrower-student and credit-worthy co-signers qualify
- Fees-paid by the lender or the responsibility of the borrower
- Interest Rates-fixed or variable, how often the rates change
- Benefits-interest rate reductions, principal reductions, and student discounts
- Co-Signer Release-offer to have the co-signer released a few years into repayment
- Grace Period-if lender offered a grace period
- Repayment Terms-availability of repayment options
- Deferment and Forbearance Options
- Death and Disability Loan Forgiveness
- Repayment Terms-availability of repayment options
- Eligibility-qualifications for the program
- Past Due Balances
Electronic Loan Certification-Lenders were evaluated on the ease of the application process, web-based services, and school notification.
Customer Service-Lenders were evaluated on the quality of products and services, years offering the current private loan, and the servicer of the private loans.
Reliability of the Program-Lenders were evaluated on the source and stability of the loan capital used in providing loans. It is important to select lenders who are reliable and will continue to service borrowers for future years.
Total Number of Loans-Lenders were evaluated on the number of loans accepted and paid during the previous academic year. Numbers of applications received, completed and approved.
Once all information had been gathered and considered, the committee within the Financial Aid and Treasurer’s Offices made a decision for the 2012-2013 academic year on the above criteria.
Am I obligated to use one of the "recommended" lenders?
No. You are always free to choose among the hundreds of lenders who provide student loans. You should stay with the same lender (or service provider) for future loans as this will prevent the receipt of multiple bills every month once you begin repayment, however, this is not required. If you have an existing banking relationship (checking, savings, etc), you should compare your bank's student loan offerings to those of the suggested lenders and make the choice that is best for you. Remember that most banks use third-party servicers (they sell their loans and benefits may not be maintained) to collect payments, so you will probably not be able to make monthly payments at your local bank branch.
Private Alternative Loan Requirements Effective February 14, 2010
The Higher Education Opportunity Act of 2008 (HEOA) mandated a number of changes to provide a significant amount of additional information to families who choose to utilize private educational loans. Title X of the HEOA changes the disclosure requirements for the Truth in Lending Act (TILA) for private education loans made expressly for post-secondary education expenses. These new requirements could delay the receipt of Alternative Loan approvals and disbursements. Please plan accordingly.
The regulations require lenders to produce the following disclosures to borrowers:
Application and Solicitation Disclosure-the lender must provide a general range of rates and fees so the borrowers can make informed decisions when choosing a private loan lender.
- The ASD provides general information about interest rates, fees, default or late payment costs and repayment terms. In addition, it includes an example of the total cost of a loan based on the maximum interest rate offered by a lender, a defined loan amount and calculations for each payment option.
- The ASD must also include eligibility requirements for the loan and information on alternatives to private education loans. The ASD is intended to be a tool for the applicant to use in comparing loan offers.
- Lenders are required to mail the ASD within 3 days after a phone application is taken and they pull a credit report on the applicant.
Loan Approval Disclosure-when an applicant is conditionally approved for a loan, the lender must send this disclosure with borrower specific rates and fees.
- The Approval Disclosure must be provided before the consummation of the loan on or with any notice to the applicant that the creditor has approved the consumer's application for a loan.
- The Approval Disclosure provides information specific to the loan being approved by the lender, including detailed information on the interest rate, itemization of fees associated with the loan application (including fees associated with late payments and defaults).
- Lenders must also provide a statement on the alternatives to private education loans through the federal student financial assistance programs. Lenders must give an applicant 30 calendar days after the date on which the applicant receives the Approval Disclosure to decide to accept the offered private loan.
- Borrowers have 30 calendar days to accept the loan terms offered. The borrower can accept the terms of the loan by mail, phone, or electronically.
Final Disclosure-this is sent to the borrower after the loan terms are accepted and the school has certified the students eligibility for the loan. The Final Disclosure gives the borrower a three business day right to cancel period.
- If the applicant accepts a loan within the 30 day calendar acceptance period provided in the Approval Disclosure, the lender must provide a Final Disclosure that includes updated information on the applicable interest rate, repayment terms, fees and default or late payment costs. The lender may not disburse any private education loan funds until the cancellation period has ended.
Private Education LoanApplicant Self-Certification Form-a lender must obtain a signed and completed Private Education Loan Applicant Self-Certification Form that has been created by the Department of Education. The self certification form will include information about the availability of federal student loans, the student's cost of attendance, estimated amount of financial assistance, and the difference between the student's cost of attendance and estimated financial aid. The borrower must complete a borrower Self-Certification Form and return to the lender.
Be proactive, contact your lender throughout the Alternative Loan process with any questions you might have.