Alternative and private loans are applied for by students and/or parents and are designed to supplement or replace federal student aid. You should always exhaust your federal aid possibilities, including the Federal Direct Loans, before applying for alternative loans. It is very likely that the lenders will even have you affirm that you have done this before you can continue their application process. To apply for federal loans, you must first complete the Free Application for Federal Student Aid (FAFSA) at http://www.fafsa.ed.gov.
Michigan Tech does not provide a preferred lender list. Having you select a lender without our guidance requires you to better research your possibilities - resulting in more informed decision making. Below is a comprehensive list of lenders used by our students within the past three academic years. You are by no means limited to these lenders - it's just a helpful starting point. Visit the web sites and thoroughly read all literature from the lenders to determine the loan programs that would best suit your needs. While reviewing, keep in mind these shopping tips. Alternative loan programs:
- are not federally backed.
- will most likely require a cosigner.
- have varying borrowing limits – yearly and cumulatively.
- may have minimum enrollment requirements.
- may have satisfactory progress requirements.
- have different deferral options.
- sometimes have origination fees or application fees.
- may have higher interest rates and more stringent repayment terms than Federal Direct Stafford Loans.
- may not have a cap on a variable interest rate or a limit on how frequently your rate is adjusted.
- may have incentives during repayment that do not carrying forward if your loan is subsequently sold to another lender.
The Application Process
Most lenders have paperless, or nearly paperless, application processes. Despite this, give yourself plenty of time. Lenders are bound by legislation in the Truth in Lending Act, as well as the Higher Education Opportunity Act, to minimum required waiting periods for various steps in the application process. Though there may be some variance between lenders as to the order, there are several general steps that must occur. Once you submit your application, the lender will send you an Application Disclosure. When you (and your cosigner) are credit approved, you will receive an Approval Disclosure and Self-Certification Form. Both disclosures will require you to actively accept the terms, and the Self-Certification Form will need data from your Michigan Tech BanWeb account. Now that you are approved, the lender will contact us for our portion of the loan certification. Upon submission of the school certification form, you will receive the Final Disclosure from the lender. As a final note, you have a three day rescission period from receipt of the Final Disclosure. During this period, you still can opt to cancel the loan. Although the overall processing time by lenders will vary, several weeks is a definite possibility. Give yourself time.
Calculating loan amounts/eligibility
There are two parts to determining how much money can be borrowed through an alternative loan – lender credit approval and school certification. The lender will approve the requested loan amount based on the borrower’s and cosigner’s credit report. Then, they rely on the school to certify eligibility for the requested amount. Eligibility is calculated the same regardless of the lender chosen: Estimated Cost of Attendance (COA) minus all other financial aid and outside resources equals the maximum alternative loan amount. Students with a FAFSA on file can view their estimated Cost of Attendance on BanWeb under the Award Overview tab in the Financial Aid section. Students without a FAFSA can see estimated costs here. Whether or not there is a FAFSA, a student’s Outside Resources and total Financial Aid Awards can also be viewed on the Award Overview tab in BanWeb. Michigan Tech will be using these numbers when we provide our certification to the lender.
Therefore, it is possible that a lender will approve a loan for $12000, but Michigan Tech certifies a lesser amount. The lesser amount is what the lender is going to disburse.
Be mindful of the requested loan period that is put on the application. This effects when money is received and how much. We will calculate loan eligibility based on the loan period listed on the application. If it is known that funds will be needed for fall and spring, we suggest completing the lender’s application with a loan period of August through May. Eligibility will be calculated as stated above and the loan funds will be disbursed in two portions: half in late August for the fall semester and half in late December for the spring semester. Interest will not accrue on the second half until the funds are actually disbursed, so there will be no penalization for completing just one application. Should separate applications be the family’s preference, then use a loan period of August through December (fall semester) or January through May (spring semester). We will calculate the school certified amount by using half the annual estimated Cost of Attendance and only the aid and resources pertinent to that semester. We will request that the lender send all funds in August for a fall only loan or in late December for a spring only loan.