Alternative Loans: Selecting a Lender

Think FAFSA or CADAA first. We strongly encourage you to file a Free Application for Federal Student Aid (FAFSA) or California Dream Act Application (CADAA(opens in new window)) to determine you eligibility for federal and or/state aid. While there is a great range of private educational loans available, we advise students to check out Federal Direct Loans or CADAA loans(opens in new window) before considering alternatives. If you need to pursue a private loan, make sure you get all the facts.

ELM Select

There are many private loan providers and varying terms, interest rates, and fees. We have partnered with ELMSelect(opens in new window)(opens in new window) to provide you with more information about private educational loans. We hope this tool will provide you with a way to make a well-informed decision when looking at Private Educational Loan resources to cover your educational expenses.

ELMSelect is a way for students and parents to compare various lenders and loan products. The lenders that are displayed on this tool are the top lenders that our students and parents have borrowed from over the past three years, in addition to lenders who offer quality products for our students and parents. Please note: You are not limited to the lenders that appear on this tool. If there is another lender that you would prefer to use, please do so.

Things to Consider: Get the Facts

Lender

1. Who is the lending institution?
2. Are they an established lender with a good track record?
3. Will they keep the loan, or, if they sell it, to whom?
4. Who will provide loan servicing after disbursement?

Although you or your family may have a relationship with a lender that provides educational loans, it is wise to shop around and compare loan products. In the current economic climate, the loan market has tightened considerably. Most loan decisions are not made at the local level, nor take into account whether a borrower-lender relationship exists.

Interest rate and loan fees

1. What type of interest rate is being offered?
2. Can the interest rate change and, if so, how frequently?
3. When and how often is accrued interest capitalized (added to the loan principal)?
4. Is there a ceiling or “cap” on the rate? If yes, what is it?
5. Are there prepayment penalties or fees?

Shop around for the best overall loan. Many lenders advertise only their best rates, a rate not all borrowers will qualify for. Research the loan terms and conditions and ask about the interest rate and loan fees and how they are determined. Loan fees can vary as well, so compare how the combination of interest rate combined with loan fees affects the “cost” of the loan.

Co-signer

Rule of thumb: The stronger an individual’s credit rating, generally the lower the interest rate and loan fees are, and having a co-signer can help even if it is not required. Ask the lender if they offer a co-signer release and, if they do, how to qualify?

Customer service

• Are representatives easy to contact and are they knowledgeable?
• Will the lender be servicing the loan, and, if not, who will be?
• Is online account access available after the loan is issued?

Billing and repayment

• When will repayment begin?
• How much will the payment be?
• Are there different payment plans?
• How long is the repayment period?
• Are there allowable situations which qualify for “deferral” (postponement)?
• Are there borrower benefits or repayment incentives? If yes, how do you qualify? How could you lose these benefits?