Private Alternative Education Loans
Private alternative (commercial) educational loan options assist students and families in meeting college costs. Private educational loans are available to eligible students and are provided by nationally recognized lending or banking institutions. These are credit-based loans, and it is recommended that students first complete the Free Application for Federal Student Aid (FAFSA) to be considered for the Federal loan programs prior to applying for an alternative loan. Graduate students and parents of dependent undergraduate students are also encouraged to compare private alternative loan costs with those of the Federal Direct PLUS Loan, a PLUS Loan is usually less expensive and has better repayment options.
Before selecting a lender, a student should compare lender terms, conditions and options, and choose those that best fit their financial needs. Factors such as interest rate, APR, length of repayment, back-end benefits, loan minimum and maximum as well as various fees should be carefully considered when researching and choosing a private loan. Back-end benefits are benefits that a borrower may receive after going into repayment, such as an interest rate reduction for a set number of consecutive on-time payments or for automatic electronic payments. You should scrutinize back-end benefits and the criteria required to trigger the benefit on a lender-by-lender basis. Determine which benefits are important to you and if it is reasonable to obtain the benefit. Before borrowing an alternative loan, the student should carefully consider their present level of debt and repayment obligations on all loans. Determine how much to borrow by working out a budget for educational costs and subtracting all the resources for those costs. Terms and conditions applicable to these loans vary greatly.
Private educational loans, like auto or home loans, are based on the borrower’s creditworthiness. Most private alternative lenders rely heavily on the creditworthiness of the student and cosigner to determine whether or not a loan application will be approved and to establish the interest rate. Most students will need a creditworthy cosigner, such as a parent or other relative, in order to obtain a private loan.
It is recommended that borrowers compare and research various private alternative lenders available in the marketplace, but to be cautious of direct-to-consumer loans. Direct-to-consumer loans often have much higher interest rates and/or fees than private alternative educational loans. Usually direct-to-consumer loans do not require school certification.
General Step-by-Step Private Alternative Loan Application Process
You may begin the application process any time after June 1st, 2011, for the 2011-2012 year.
- Submit a loan application directly to the lender of your choice. Please be sure to indicate that you will be attending Bethel College. Applying with a credit-worthy co-borrower can enhance your credit rating and lower your interest rate and fees.
- The maximum loan amount is the amount of the total Cost of Attendance (COA) not covered by other financial aid. You should apply for the amount you will need for both the Fall 2011 and Spring 2012 Semesters. Your lender will disburse the loan proceeds to Bethel College in equal disbursements each semester.
- Your lender will complete a credit check and advise you of the decision.
- After initiating your application with the lender, a pre-printed promissory note will be mailed to you by the lender or you will be encouraged to fill out the application online. Sign and return the promissory note to the lender. Your lender may allow you to sign your promissory note electronically via their website. A signed promissory note is required prior to disbursement of loan funds.
- Once approved, your lender will forward your application to the Office of Financial Aid office at Bethel. We will certify the loan to verify your enrollment and eligibility and return the data to your lender.
- Loan funds will be applied to your student account when Bethel College receives them from your lender. Funds will be sent to Bethel either via a paper check or electronic funds transfer. You will be notified by the Business Office if a paper check requires your endorsement. Student enrollment is verified prior to disbursement.
- As loan processing depends on operations inside and outside of Bethel, please allow 4-8 weeks processing time. Please contact your lender directly about the status of your loan.
Important Notice: Once a private alternative (commercial) loan is disbursed, the loan is considered complete (booked) and the Office of Financial Aid will not make a change in the loan amount based on a borrower’s request. If the borrower is left with excess funds those funds can be paid directly to their lender as repayment of loan principle. If the borrower determines that additional funds are needed, a second loan would need to be initiated with the chosen lender.
Choosing a lender is an important step in the student loan process. We do not recommend any one lender over the other and recommend you check their websites to acquire their respective rates, etc. Following is a list of lenders who have supplied alternative loans to Bethel students the last year or two (listed alphabetically):
- Citibank - CitiAssist Loan, 1-800-788-3368 or 1-800-Student
- Sallie Mae - Smart Loan, 1-888-272-5543 (must be full time)
- US Bank - US Bank Student Loans, 1-800-242-1200
- Wells Fargo - Private Student Loan, 1-877-437-3029
Students may, but are not required, to work with any of the lenders on this list. Students may choose to work with any eligible commercial lender for their private alternative borrowing needs. The Office of Financial Aid will work with any lender a borrower selects to certify their private loan(s) and to facilitate loan disbursement.
The federal loan programs have mandated interest rates and repayment schedules, so lenders compete mostly on borrower benefits and services. However, the interest rate and origination fee on private educational loans is based on the credit worthiness of the individual borrower or co-signer if applicable. It is advisable to apply for a private educational loan with a co-signer since the interest rate and origination fee are usually based on the highest credit score. Back-end benefits are benefits that a borrower may receive after going into repayment, such as an interest rate reduction for a set number of consecutive on-time payments or for automatic electronic payments. You should scrutinize back-end benefits and the criteria required to trigger the benefit on a lender-by-lender basis. Determine which benefits are important to you and if it is reasonable to obtain the benefit.
Choosing a Non-Electronic Process Lender
Some lenders will do electronic processing, and some will not. Should you choose a lender that is not set up for electronic processing using ELM (Electronic Loan Management), processing will be slower. The lender will send us a paper certification request, and your funds will disburse in the form of a paper check mailed to the College. We will process your loan as expeditiously as possible, but be aware that this paper transaction will take longer. Please contact your lender directly for additional information.
You are responsible for:
- Contacting the lender to inquire about their specific promissory note processing procedures;
- Determining if your lender is ELM capable and if so, requesting your loan certification to be sent via ELM;
- Requesting your lender (if they are not ELM capable) to send your loan certification by fax to 316-284-5845 or mail it to: