Alternative Educational Loans, also known as Private Educational Loans, consist of any student loan that is not a federal student loan. Alternative loans are available from banks and private loan companies and offer additional financial assistance to students if they have exhausted all other sources of funding for their education. These loans are meant to supplement federal and state aid when the Cost of Attendance (COA) is not fully covered by these programs. Students who need additional funds beyond what they qualify for in federal student aid (including Federal Direct Loans) or students who are not eligible for Federal Direct Loans may wish to apply for an alternative education loan.
Alternative loans should only be considered after applying for federal financial aid using the Free Application for Federal Student Aid (FAFSA). A FAFSA can still be submitted even after the semester has started. Visit the Federal Student Aid website provided by the Department of Education for more information.
If you are considering borrowing through a private lender, we encourage you to:
- Be sure you have exhausted all other possible sources of financial aid first; including federal
- Look for ways to reduce your expenses before deciding how much to borrow.
- Borrow only what you absolutely need.
- Ask questions and compare the rates and terms offered by different lenders.
If you decide to pursue a private loan, you must apply directly through the lender. You are free to choose any lender you wish. Each lender will have varying eligibility criteria and available loan terms.
How to Apply
- Initiate the application process by choosing a lender and contacting them directly to begin the
pre-approval process. Don’t be shy about asking questions.
- Your lender will perform a credit review. If approved, you will be provided a self-certification
form and promissory note that you will need to complete and return to your lender.
- Your lender will notify UAA that you have applied for a loan. Once we receive this
notification, we will certify your loan once we determine you are eligible.
- Once your lender has received all necessary information from you and from our office, you will
be sent additional disclosures from your lender. Once all requirements are met, your lender will
send your loan funds to the Financial Aid Office.
Questions to Ask Before Applying for an Alternative Loan
- What are the eligibility requirements?
- Are there a minimum number of credits I have to be enrolled in?
- Does the lender require that I be admitted to a degree or certificate program?
- Is there a minimum amount I have to borrow?
- Are interest payments required while I’m in school?
- What is the interest rate and is it variable or fixed? Is there a maximum interest rate
they can charge?
- How long will I be repaying the loan?
- Is there a penalty for paying off the loan early?
- When do I have to start making payments?
- What are the repayment terms?
- If I have difficulty making payments (economic hardship), do they allow deferments or reductions
in payments temporarily? Under what circumstances, and for how long?
Items That Students and Parents Should Consider Before Borrowing
- Alternative loans usually have higher variable interest rates, more restrictive repayment terms,
and seldom offer loan forgiveness when compared to Federal loans.
- Alternative student loans require a credit check. Lenders will look at criteria such as credit
history, minimum income requirements, and debt-to-income ratio. These criteria will vary by lender.
- A creditworthy cosigner may be required. Even if you can qualify for a loan based on your
own credit, a cosigner may reduce your interest rate.
- Interest rates and loan terms are subject to change and vary by lender. Review the lender’s
website for the most up to date information before applying for a loan.
- Lenders typically send a certification request to the school after you have applied for a
loan. This is done to ensure that a student meets all of the lenders eligibility criteria and
that a student does not borrow more than their cost of attendance minus all other aid. UAA
cannot certify a loan for which you are not eligible.
- Review your estimated cost of attendance and existing financial aid on UAOnline to help you
determine what you may need to borrow.
- Loans are certified based on academic years. UAA cannot certify loans with disbursements
in both a summer and fall term, because this crosses financial aid award years.
Loan Repayment Comparison
Here are some repayment examples to better demonstrate the costs of different loan types.
These examples assume that any interest accrued will be paid while in school and no interest capitalization occurs. If interest is not paid while in school, it is capitalized (added to the loan principle at set intervals) and the resulting payment and interest paid amounts will be higher. The interest rate used for the alternative loan is the average found by the study, ‘Paying The Price: The High Cost Of Private Student Loans And The Dangers For Student Borrowers' by the National Consumer Law Center, March 2008.
Several loan comparison calculators are available online:
- bigfuture Student Loan Comparison Calculator
- FinAid Loan Comparison Calculator
- Mapping Your Future
Use Caution When Applying for Loans
Carefully review the terms and conditions of any loan to help avoid high interest rates and fees you may regret when it's too late. Remember, a loan must be repaid. Selecting a loan without the best terms could end up costing you significantly more than it should. UAA cautions students that loan debt can accumulate quickly and may result in a lifetime burden of high payments and credit denials for expenses like automobile purchases, credit cards, and home mortgages. To avoid these problems, read and understand the terms and conditions of all loans.
Students should avoid lenders that do not require UAA certification of their loan application and, in general, should be suspicious of unsolicited loan offers. Review the Federal Trade Commission and Department of Education Publication, Student Loans: Avoiding Deceptive Offers for more information.
Time Frame for Processing
If you apply for an alternative loan, your lender will send a certification request to our office and we will review your eligibility based on your lenders requirements. Lenders that use an electronic process for certification and disbursement are much faster than lenders who use a paper process. Certifications are generally reviewed within 1 week from the day we receive it from your lender. You will receive an e-mail from us if we have any questions or concerns regarding your alternative loan. Once we have certified your loan, you will receive a final Disclosure from the lender. At this time you have a 3 day rescission period from receipt of the Final Disclosure. This rescission period allows you to cancel the loan without penalty if you change your mind.
Give yourself plenty of time! The new Truth in Lending Act requires additional processing steps that include a three day waiting period after the necessary disclosures have been completed and before the loan can be disbursed. Depending on the lender, this can add an additional 3 to 7 days from time of application to disbursement.
Provided you are eligible for the loan, funds will be disbursed from your lender to your student account. The timing of disbursement will vary from lender to lender. At a minimum, your loan will disburse no sooner than 10 days prior to the first day of classes or at least three business days from the time your lender sends you the Final Disclosure notice, whichever is later. Be aware that the overall processing time may vary depending on your lender and that a processing time of several weeks is a definite possibility.
Choosing Alternative Loans in Lieu of Federal Loans
In general, alternative loans are meant to supplement federal and state aid when the Cost of Attendance (COA) is not fully covered by these programs. However, in some cases students may choose to use an alternative loan instead of federal loans. Because federal loans provide many advantages not available with alternative loans, we ask that students demonstrate that they are making a deliberate and knowledgeable decision.
Examples of Various Differences Between Federal Loans and Alternative Loans
Federal Student Loans
Private Student Loans
The interest rate is fixed and is often lower than
private loans — and much lower than some credit card interest rates. View the current interest rates on
federal student loans.
Private student loans can have variable interest
rates, some greater than 18%. A variable rate may substantially increase the total amount
Undergraduate students with financial need
will likely qualify for a subsidized loan where the government pays the interest
while you are in school on at least a half-time basis.
Private student loans are not subsidized. No one pays
the interest on your loan but you.
You don’t need to get a credit check for most federal
student loans (except for PLUS loans). Federal student loans can help you establish a good
Private student loans may require an established
credit record. The cost of a private student loan will depend on your credit score and other
You won’t need a cosigner to get a federal
student loan in most cases.
You may need a cosigner.
Interest may be tax deductible.
Interest may not be tax deductible.
Loans can be consolidated into a Direct Consolidation
Loan. Learn about your consolidation options.
Private student loans cannot be consolidated into a
Direct Consolidation Loan.
If you are having trouble repaying your loan, you may
be able to temporarily postpone or lower your payments.
Private student loans may not offer forbearance or
There are several repayment plans, including an
option to tie your monthly payment to your income.
You should check with your lender to find out about
your repayment options.
There is no prepayment penalty fee.
You need to make sure there are no prepayment penalty
You may be eligible to have some portion of your
loans forgiven if you work in public service. Learn about our loan forgiveness
It is unlikely that your lender will offer a loan
Free help is available at 1-800-4-FED-AID and on our
Consumer Financial Protection Bureau's private
student loan ombudsman may be able to assist you if you have concerns about your private
To Request an Alternative Loan in Lieu of a Federal Loan
- Apply for the alternative loan with your chosen lender.
- Submit a Revision Request Form available on our UAA Financial
Aid Forms webpage. Mark how much you are requesting under ‘Federal Work Study /
Other’. You may add additional notes under the ‘Comments’ section at the bottom of the
- Attach an additional sheet comparing the Interest Rates, Monthly Payments, and Total Interest
Cost of federal loans vs your requested alternative loan. This helps UAA to ensure that
student’s understand the financial ramifications of borrowing an alternative loan in lieu of federal
loans. There are several student loan comparison calculators available online.
- FinAid Loan Comparison
- Mapping Your Future
- Bigfuture Student Loan Comparison Calculator
Code of Conduct
UAA is unable to provide guidance as to which alternative loan best meets your specific needs and does not endorse or recommend any alternative education (private) loan company. The University of Alaska Anchorage receives no benefits from any lender. See the University Alaska Anchorage Financial Aid Code of Conduct for further information.