2008 Guide to
Alternative Loans
Important: Only look for alternative loans after you have exhausted all potential
scholarships, federal grants, work study funds, and federal loan programs (Perkins,
Stafford, PLUS and Grad PLUS). Alternative loans (also called private loans) have been the
fastest growing source for funding a college education. This guide is intended to provide
students and their parents with the tools they need to make the best decision in evaluating
alternative loan options.
Here are the key steps in the process:
1. Collect all the information that you need prior to starting the application process.
Most lender applications require information on the borrower (the student), a co-borrower
(also referred to as a co-signer) and several references. To speed the application process
along, SLA has provided a list of common data fields that lenders request in the
application process.
2. Identify a co-borrower (also called a co-signer) who will strengthen your
application. A co-borrower guarantees the loan taken out by the student borrower. A
co-borrower can be a parent, a grandparent, a relative or any individual willing to take on
that responsibility. You will want to ensure that they have good credit, as their credit
status will play a significant role in the pricing of your loan. Given the current “credit
crunch”, having a creditworthy co-borrower can be critical to getting your loan approved.
3. Ask your college’s financial aid office if they have a Preferred Lender List for
Alternative Loans. This can provide you with a good starting point for your research. If
your school does not have a lender list, then be sure to choose a lender that offers a
school-certified loan, as their rates and fee structures tend to be better than direct-to-
consumer loans.
4. Plan on applying for up to 3-4 loans. Research indicates that applying for too many
loans can have a negative impact on your credit score. The tradeoff is that by not
applying for more than one