Alternative Loans - Frequently Asked Questions

What is an alternative loan?

An alternative loan is a credit-based loan for students who need additional educational funding beyond the federal loan(s) awarded in their financial aid award package.

Unlike certain federal loans, alternative loans accrue interest while the student is enrolled in college, although repayment of principal and interest may be deferred until after graduation.

How do I know if I should apply for an alternative loan?

You are encouraged to consider all other sources of funding before applying for an alternative loan.

After you have completed the FAFSA (Free Application for Federal Student Aid) you will receive your financial aid award notice, listing scholarships, grants, and federal loans you have been awarded from federal, state, and college sources. We strongly encourage you to accept your federal loans before considering an alternative loan.

Also, consider the contributions your parents can make toward your college costs, as well as your own contributions from earnings and savings. If there is any remaining financial need, you may wish to apply for an alternative loan.

How much am I allowed to borrow?

You should borrow only the amount you need for each academic year since alternative loans start to accrue interest at disbursement.

You are eligible to borrow the difference between your yearly cost of attendance and yearly total financial aid received (including federal loans).

Which alternative loan should I choose?

There are many alternative loan programs available. While Calvin does not endorse any particular alternative loan program, the options most often chosen by Calvin students appear on our Alternative Loan Table. These loans were selected because of the interest rates and/or features they offer.

All the loans on the table are loans for student borrowers; in addition to these loans, the Federal Direct PLUS Loan is an option for parents.

What are the interest rates? Will there be any fees?

Interest rates and fees will vary with each type of alternative loan program.

The Federal PLUS Loan offers a fixed interest rate, but charges a fee (deducted from the amount of the loan). The advantage is that you will always know the interest rate you have for the life of your loan.

Other loans have variable interest rates based on the Prime or LIBOR rates. The lenders of these loans add a percentage to the current Prime or LIBOR rates depending on the outcome of the credit report. The advantage with these loans is that there is usually no fee, so you receive the entire loan amount for which you apply.

The actual interest rate for your loan can only be determined by the lender.

Do I need a co-signer?

Having a co-signer can greatly increase your chances of being approved for a loan. Applying with a co-signer can be helpful in reducing your interest rate and fees and save you money over the life of your loan. If you lack sufficient credit history or currently have limited earnings, having a co-signer is usually necessary in order to be approved for an alternative loan.

Who may co-sign for me?

A co-signer can be anyone you know, but usually it is a parent, grandparent, or legal guardian with an established credit history.

How does co-signing the loan affect my co-signer?

The loan will appear on your co-signer’s credit report. The co-signer is legally responsible for repaying the loan if the student defaults on the loan. Most alternative loans allow you to drop the co-signer if you make a number of payments on time.

Why is a credit check necessary?

A credit check is used for most consumer loans to determine your ability, and your co-signer’s ability, if applicable, to repay your debt.

Are there any alternative loans that I can get without a co-signer?

If you are unable to obtain a co-signer for an alternative loan, please make an appointment with a Financial Aid Counselor to discuss possible options.

What kind of information is needed when I apply for a loan?

Information requested varies by loan program. Generally, you (and your co-signer, if applicable) will need to give your name, Social Security Number, address, telephone number, school you are attending, requested loan amount, loan period, income/employment information, and the name, address, and telephone number of a personal reference.

How will I know if I am approved?

If you apply online, most alternative loan programs will notify you of the loan decision within minutes of your application.

Before you sign a promissory note, make sure you know what interest rate you are being offered and whether or not there are any fees involved in your loan. This information is available only from your lender.

What is Calvin’s role in the alternative loan process?

After your alternative loan is approved it is submitted electronically to Calvin’s Office of Admissions and Financial Aid. Our office checks each student’s eligibility and then certifies alternative loans online. We also offer loan counseling to students and their parents by telephone, email, or office visit.

When and how does my alternative loan disburse my money?

Alternative loans usually have two disbursements which are scheduled by Calvin in early September for the fall semester and in early December for the spring semester. If these dates have passsed, disbursement is usually received within 2 - 5 business days after school certification.

Most loan funds arrive at Calvin by EFT (Electronic Funds Transfer) and you will receive an email when this occurs. If a check is received from your lender, you will receive an email asking you to endorse the check.

When do I start repaying my alternative loan?

If possible, you should consider making regular monthly payments or interest-only payments on your alternative loan. This will result in substantial savings over the life of your loan.

Unless you have requested deferment during the application process, repayment usually begins 60 days after the first disbursement of loan funds.

May I defer my alternative loan payments?

Full deferment or forbearance of principal and interest (making no payments) is available on a majority of alternative loans until 6 months after graduation or leaving school.

Deferment or forbearance can usually be requested during the online application process. It should be noted that interest accrues during deferment or forbearance.

How much will my payments be?

You may calculate your approximate loan payments by entering your loan information at www.finaid.org/calculators/loanpayments.phtml In order to receive exact information you will need to contact your lender.

What is a Direct to Consumer Education Loan?

Direct to Consumer (DTC), or non-certified, education loans are offered by banks or lending institutions to support a family's desire to work independently of the financial aid process. These are private supplemental loans that are NOT guaranteed by the federal government. DTC loans are credit based loans and generally carry higher rates and fees than other alternative loans that are certified by the college. Terms and conditions can vary according to specific lender guidelines. Most DTC loans do not require school certification prior to disbursement being made to the borrower. Typically, only enrollment verification is required by the lending institution to disburse the loan funds.

Helpful Links

Compare Alternative Loans
Current Prime and LIBOR rates