Alternative loans or private loans are a type of non-federal student loan provided by a bank or lending institution to assist with the cost of education. These loans must be repaid. You should always consider federal loan options before considering borrowing private student loans because the federal student loans typically have better terms, for example: fixed interest rate, more flexible repayment terms, etc.
However, if you find you are in need of additional loan funds after borrowing all of the federal loans available to you, you may want to consider this type of loan. For more information in regards to the differences between federal and private loans visit: https://studentaid.ed.gov/types/loans/federal-vs-private.
In addition to alternative loans for students, several lenders offer alternative loans for parents, family members, friends or other sponsors. This option allows families to potentially secure a loan in the name of the applicant instead of the student.
Your Right As a Borrower
The Higher Education Act of 1965, as amended (HEA) prohibits institutions from refusing to certify a loan because of the borrower's choice of lender (or guaranty agency). Students and their parents should understand that they are not required to use any of the lenders on Fredonia's "Recommended Lender" list, and are free to select the lender of their choice. Fredonia will promptly certify any loan from any lender selected by a borrower. Lenders who are included in Fredonia's "Recommended Lender" list disclose agreements to sell their loans to other entities. The selection of lenders for inclusion on Fredonia's "Recommended Lender" list is based solely on the best interests of the students and parents who may rely on such a list. In compliance with the New York State Attorney General's Code of Conduct, the process through which recommended lenders are selected is fully disclosed through Fredonia's Request for Information (RFI) process.
New Alternative Loan Regulations
As of February 14th, 2010 all Alternative Loan Lenders are required by the Federal Government to process alternative loans according to the new regulations tied to the Truth in Lending Act (TILA) of the Higher Education Opportunity Act (HEOA). Each borrower will be issued three different disclosures and a newly created self certification form during the time their loan is being processed. On the self certification form that will be given to students by their lender it will require students to fill in the Cost of Attendance and the Estimated Financial Assistance for the period of enrollment that the loan will cover. This information can be obtained by the student through their YOUR CONNECTION account. The student’s Financial Aid Award letter is another place where the student can find their Estimated Financial Assistance. In order to speed up processing time we encourage students to quickly reply back to requests for information received from their lender. As a result of these new regulations borrowers should keep in mind that there could be an increase in the time it takes for both the lender and the school to process their alternative loan.
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