Alternative (Private) Education Loans
Alternative loans are funded by banks, credit unions and other private lending institutions. Students who need additional funds to pay educational costs, and who have exhausted their federal Direct Loan eligibility and other funding resources, may consider borrowing an alternative (private) education loan. This option should be carefully considered.
Be Smart About Borrowing - Things you should know before applying for an alternative loan
- Are non-federal loans and do not have the same terms and conditions of federal loans.
- Cannot be combined with federal loans when you enter repayment (this means you cannot include them in a federal loan consolidation, and will have separate loan payments each month when you enter repayment).
- May not offer flexible repayment plans.
- May have a higher interest rate than your federal loans.
- Do not offer public service loan forgiveness.
- May have a long repayment period, depending on how much you borrow each year you are in school.
- May require a separate payment each month on each loan you borrowed.
Similar to home and car loans, lenders have flexibility in setting the interest rate, credit criteria that must be met, and repayment terms.
Lenders may require a co-signer. A co-signer signs the promissory note promising to repay the loan if you don’t. After you enter repayment, some lenders offer a co-signer release. To determine your eligibility for a co-signer release the lender will require a specified number of on-time payments and will pull your credit score and history.
Interest rates are directly related to the credit rating of you and/or your co-signer, so choose a co-signer who has a good credit score.
Choosing a lender
Many factors vary among lenders so it’s in your best interest to research different alternative loan products and choose one that best fits your needs and circumstances both in the short and long-term.
Things to compare among lenders:
- Interest rates
- Whether accruing interest is added to the principal amount of the loan while you are enrolled in school
- Are there any fees associated with the loan? Ask about both up front and backend fees.
- Are payments required while you are in school? Some lenders require payments while you are in school and some do not. In the long-term, it’s in your best interest to make payments while you are in school but this may not fit in your budget.
- Does the lender offer a cosigner release? If so, what are the conditions you must meet in order to qualify?
If you apply for an alternative loan, the lender is required to obtain a signed self-certification form from you. This is a federal requirement through the Truth In Lending Act (TILA) and the Higher Education Act of 1965, as amended (HEA). The lender may provide the applicant the self-certification form; however, you can also obtain the form by clicking on this link, Private Education Loan Applicant Self-Certification form. If you need assistance filling this form out, you may contact MU Financial Aid at 573-882-7506.
List of Alternative Loan Lenders
In an effort to help students start the search for an alternative loan lender and make informed decisions, the MU Financial Aid Office, in a formal review process, biennially reviews loan products from various lenders. A review committee is formed and comprises of financial aid staff and MU students. The committee seeks out loan products that are in the best interest of our students. Many factors are used to evaluate each loan product and lender.
The University adheres to a Code of Conduct for Student Loans that prohibits inducements by private lenders. You are not required to select a lender from the link below. You are free to choose any lender and loan product you feel best suits your needs.
To view a list of lenders we selected for comparison click on this link.
The application process….
- Determine the amount you need to borrow – borrow only what you need and evaluate if you can reduce or cut out some of your monthly expenses to avoid over borrowing.
- Choose a lender
- Apply with that lender- most lenders have an on-line application. If you are applying with a co-signer, they will need to complete an on-line application as well. Your application is not complete and will not be processed until everything has been submitted to the lender.
- Lender may require proof of income or other documents to complete your application.
- The lender will provide to you an Approval Disclosure, Applicant Self Certification form and Acceptance of Loan Terms form. The Applicant Self Certification and Acceptance of Loan Terms must be signed (electronically or via paper) and returned to the lender.
- MU Financial Aid will be notified by your lender that you have completed the application. The lender requires us to verify you are eligible to receive the loan. This is called the certification process.
- MU Financial Aid certifies the loan, adds the loan to your financial aid package in myZou and sends the certification information to your lender.
- The lender sends you a Final Disclosure. After a regulatory waiting period (3-9 days), the lender sends the funds to MU Financial Aid.
- MU Financial Aid disburses the funds to your University account.