Donald Saunders

Most of the government student loan programs do not require a credit check to be carried out and provide students with significant financial aid. These programs are however need based and usually carry additional criteria that may make it hard to qualify. Even when a student does qualify, the loans only cover a portion of the whole cost of education in many cases. When students are caught in this position then they could look to alternative student loans to make up the shortfall.

Private alternative educational loans too have their own problems. A credit check will nearly always be required and this is not a problem as long as you have a good credit history. The problem is that ‘good’ is a relative term and if your credit history is not quite good enough then you may find that you are paying higher than the usual rates of interest.

Beyond the stated interest rate there are other monetary implications of alternative loans. Fees are generally added on to nominal loan amounts and a reasonably small loan of $3,000 can easily have fees of 4% applied prior to distribution. This means that $120 of the total loan will not be seen by the borrower but nevertheless has to be paid back. As a guide, every 3% of fees is equal to 1% added to the normal interest rate.

However private alternative loans do have a couple of advantages.

The first and perhaps most obvious one is that funds are available. Private lenders make a profit from the interest and fees which they charge and so have an interest in making money available to borrowers and will work very hard to see that each and every borrower qualifies for a loan. On the other hand Federal lenders adhere to an inflexible set of criteria and there is generally no real appeal if your application is turned down.

Not having to deal with that cold and all too frequently irrational bureaucracy is another benefit of alternative loans. Private lenders maintain customer service departments which are there specifically to deal with questions so that customers can get the answers which they need. Federal loan schemes generally have help available too but the answers one gets are hit or miss in terms of quality.

Other practical features that make private alternative loans especially desirable include:

The fact that neither parents nor students have to complete FAFSA (Free Application for Student Aid) forms and supply a mountain of additional documentation. Private loan applications have a tendency far simpler and indeed the entire process is easier. But, interest rates and fees might be higher or lower depending on the specific loan program.

The most sought after alternative loans have no fees and interest rates that are approximately equal to the prime rate. This is the rate which banks charge one another or charge their largest and most favored customers. If you are able to get an interest rate at prime then this is a very good deal and getting a rate at 1% below prime is a great deal.

In order to get this sort of loan it is generally necessary for you to have a very good credit history or to apply for the loan with a co-signer who has an excellent credit history.

Finally, the only way to find out whether an alternative loan will satisfy your requirements is to get out into the marketplace and take a look at exactly what is available.

With the cost of education continuing to increase from year to year it is becoming increasingly difficult to find the money necessary for a college education and more and more students spend more time thinking about raising the money needed than they do working at their studies. As if this were not bad enough in itself all too many students discover that once they have left college they are saddled with so much debt that it simply drags them down and will probably take many years to pay off. Now, if this seems to be a grim picture then for a lot of students the problem of financing a college education is compounded by a need to raise the funds needed without the availability of a cosigner to their loans.

College funding today is not merely a matter of turning to one single source of finance for most students but is a matter of building a portfolio of funds from a range of different sources.

The first port of call for every student must be to look for scholarships and grants. Far too many students ignore this source of essentially free money altogether and yet you would be surprised at just how many scholarships and grants are on offer today. In most instances of course the sums of money available are relatively small but even so can be extremely useful as one part of your overall funding plan.

The next source of funding should be federal loan funding through schemes such as Stafford and Perkins loans which are offered as both subsidized and unsubsidized loans. Perkins loans particularly useful because of their low interest rate but are also the most difficult loans to get and need a student to demonstrate financial hardship.

Unhappily at this point in spite of the fact that you will have begun to create your portfolio it is unlikely that it will give you sufficient money and you will need to start casting your net wider and here you will have two routes to follow.

If you are fortunate enough to have the assistance and support of either a parent or guardian then they may apply for a federal student PLUS loan to make up the shortfall between the funding you have been able to source yourself and the total cost of attending college. Student PLUS loans are subject to your parent or guardian having a fairly good credit rating but the requirements are not as strict as those applied by private lenders.

If you have not got a parent or guardian to whom you can turn or simply decide to go it alone then you will need to seek a private loan and exactly how simple that will be will depend to a large degree on your own credit history. In the majority of cases lenders will be quite happy to grant you a loan as long as your credit rating is good and will require you to have a cosigner if you have no credit history against which they can make their decision or have a poor credit history. However, with a growing number of people with a poor or bad credit history nowadays there is also a growing number of lenders who are prepared to grant loans without the requirement for a cosigner so it is simply a case of shopping around.

A bad credit loan with no need for a cosigner will naturally cost you more than a standard good credit loan but if you take your time and shop around carefully you will obtain a loan at a reasonable rather than extortionate rate of interest.