Other Student Loans (private, supplemental, alternative)

Because private loans are not guaranteed by the federal government, they are frequently more expensive than the federal Stafford and PLUS loans. Be a careful consumer. For many private loans, the interest rate or fees depend on the borrower’s or the borrower’s cosigner’s credit rating.

Most alternative education loans have not one, but several interest rate tiers, and a borrower qualifies for one or another based on his and/or his cosigner’s credit score. Find out what interest rate (for example, PRIME plus 1%, LIBOR plus 0.5%) you qualify for before you finalize an alternative loan—it may be very different from the minimum or maximum rate reflected in a loan comparison. Remember also: alternative loans typically have a variable, not a fixed interest rate.

In collecting information on alternative loans with several interest rates based on the borrower’s credit score, we found some lenders advertising an interest rate for which fewer than 10%—or fewer than 1%—of applicants qualified. You may use any lender, but do research, choose carefully, and don’t assume you will receive the advertised interest rate. Don’t borrow any more than you truly need. These loans are an expensive option.

Investigate whether your home state has a nonprofit lender/guarantee agency. These lenders can borrow funds at an advantageous rate, and might offer a low interest rate or other benefits to residents or students at school in the state.

Some, but not all, state loan programs are linked below:

• Alaska Supplemental Education Loan
• The Maine Loan
• Massachusetts MEFA Student Alternative Loan
• New Jersey Class Loan
• North Carolina EXTRA Education Loan
• Rhode Island Family Loan
• Vermont Advantage Loan

Basic Loan Information

• Interest rate. Interest rates for alternative loans is often variable, commonly based on an index like LIBOR or PRIME, plus some percentage.
• Loan fees. Fees vary depending on the lender, the borrower’s repayment schedule, and the borrower’s or cosigner’s credit history.
• Disbursement. Funds are usually sent directly to Bennington College, at the beginning of each term.
• Interest accrual. The borrower is responsible for interest from the date of disbursement, although some loans permit borrowers to defer payments until they leave school or graduate. Loans will be less expensive if some interest payments are made while in school.
• Repayment. Depending on the lender’s terms, repayment may begin immediately after disbursement or may be deferred until the borrower is out of school.
• Length of repayment. Repayment schedules vary but, in some cases, the borrower may choose a repayment term of up to 25 years. Longer repayment schedules may permit smaller monthly payments, but the total amount paid on the loan will be greater because it accrues interest for more years.
• Annual loan limits. The maximum amount possible to borrow is typically a year’s cost of education minus any financial aid received from other sources.