Alternative Loan Policy
Alternative loans are available to students who are not eligible for financial aid or who need additional funds to meet educational expenses. The student’s eligibility is determined by the cost of attendance minus other financial aid. In addition, the lender will review the student's credit history as well as other factors to determine eligibility. Students may be denied by one lender and approved by another because of the different ways the credit information is interpreted. Note: Wallace State Community College will not certify an Alternative Loan for a Dual Enrollment, Fast Track or any high school student. Those students are not eligible for Alternative Loans at Wallace State Community College
Alternative loans are not for everyone. They can be expensive and should only be utilized when all other federal resources, such as Federal Direct Stafford and Federal Direct PLUS Loans, have been exhausted.
Before Applying for an Alternative Loan
The Financial Aid Office encourages all students eligible for federal loans to maximize their eligibility before borrowing any alternative loans.
Before applying for an alternative loan, the student should contact the Financial Aid Office to ensure they have received their maximum eligibility in federal aid and help determine the correct amount to borrow in an alternative loan. Alternative loans should only be used as a last resort when there is no other type of funding available to pay for school expenses.
It is recommended that students review many alternative loan lenders and research their policies and loan terms to decide which lender is best for the student. The Financial Aid Office will process an alternative loan with the lender of your choice.
Things to Consider when Selecting a Lender
Applications and Eligibility
Requirements vary according to lender. Some of the most common requirements are listed below.
- The borrower must be enrolled, accepted for enrollment or previously enrolled at an eligible degree-granting institution within the last 365 days.
- The borrower must be a U.S. citizen, permanent resident or eligible non-citizen with proper evidence of citizenship.
- The borrower must be a student attending school full-time, half-time, or less than half-time or taking prerequisite classes.
- The borrower still needs funds after maximizing grants, scholarships and federal student loans –
- The borrower does not qualify for federal student loans
- The lender may determine which programs they will allow a student to borrow on an alternative loan.
Interest Rates and Fees
- Many education loans involve fees. These fees are usually presented as a percentage of the requested loan amount. Fees are usually added to the amount requested to borrow – but sometimes they are deducted from loan proceeds. Students should consult their selected lender and read the promissory note carefully to determine the type of fee (if any) associated with the loan.
- Some loans are more credit-sensitive than others. Alternative loans have specific qualifications and may have higher rates and fees for borrowers with less than perfect credit.
- When shopping for an alternative loan, be aware that the advertised interest rate may be introductory or limited to highly qualified borrowers. The rate that you are offered may be considerably higher depending on your credit worthiness.
Repayment and Deferment
- Deferment is an important principle in student loans. Since in many cases students do not have any income, lenders are often willing to allow deferment of payments while the borrower is enrolled in school at least half-time. During this time, interest may accrue, but the student does not need to make any monthly payments. Some loans will allow the student to pay the accruing interest during this time; these are called interest-only payments.
- Deferment usually lasts from the time the money is taken until graduation, plus some additional number of months, called a “grace period.” (This is typically 6 to 12 months.) This will vary from lender to lender, and product to product, so check each loan for details.
- Borrower benefits can significantly alter the cost of the loan. Make sure to research the fine print on a lender’s borrower benefits and comply with the student requirements in the agreement.
- Some borrower benefits can be lost if a student fails to continuously pay on time and/or discontinue use of auto debit for the monthly payment or
- Some borrower benefits can be lost if the loan is sold to another lender
- Some borrower benefits can be lost if the student does not complete the terms of the lender contract.
Where can I find alternative loan lenders?
- Use the internet. Search websites that list alternative lenders. Read consumer reports to help direct you to a reputable lender.
- Alternative loans should only be used as a last resort when there is no other type of funding available to pay for school expenses.
- Students should compare multiple lenders and loan programs. Remember, the decisions made will affect the borrower for the life of the loan.
- Generally, a co-signer with good credit can help secure a lower interest loan with no or low fees.
- Keep a copy of the loan application and other related documentation for the student's records.
- When speaking to lenders on the phone, always get the name of the person. Keep records of the address, phone number, and fax number of the lender so they can be easily contacted with additional questions.
- Check the status of the loan request by calling the lender’s borrower services department. Be sure to have supplied all required documents.
- Make sure that the “Mailing Address on your MyWallaceState account is up to date. Checks for alternative loans are mailed in the same process as student refunds. An invalid address may cause long delays in receiving funds.
- Alternative loan applications will ask that the student enter a requested loan period, or the dates for which you need a loan. Use the begin and end dates of the term for the loan requested.