Alternative Loans

When federal funds aren?t enough

By College Loan Corporation

Many lenders offer Alternative Loans, which are educational loans that are used by families when federal funds aren't enough.

Interest rates may be higher than federal loan rates.
Annual and aggregate borrowing limits may apply.
Credit qualification may be required.
Borrower and school eligibility requirements may apply.

Unlike federal loans, Alternative Loans can vary dramatically in their terms and conditions. Make sure you compare a loan's interest rate, borrowing limit and credit history requirements with other loans that are available on the market.

Federal PLUS Loans/Alternative Loans

FACTS	PLUS	ALTERNATIVE
Borrow up to cost of education, less other aid received	Yes	Yes
Interest rates is adjusted annually	Low variable interest rate	Variable monthly or quarterly interest rates
Currently 6.10%; will never exceed 9%	Most do not have an interest rate cap	�
Capitalization of unpaid interest	Once at repayment	Can be monthly, annually or once at repayment
Loan discharge upon death or permanent disability of borrower	Yes	Some availability; varies by lender program
Loan deferment or forbearance while attending school at least half time	Yes	Most offer deferments
Generous repayment options with deferments and forbearances	Yes	Limited options available
Credit check required	Yes	Yes
Debt-to-income qualification	No	Yes
Income verification	No	Yes
Parent responsible for repayment of loan	Yes	Most require parent cosignature, impacting the parent's credit report (similar to PLUS)

Home Equity Loans
Parents who are homeowners can borrow against the value of their property to finance their child's education. Depending on your credit, equity and other factors, you may find that this option makes sense for you. Be sure to compare the overall cost of a home equity loan (interest costs, fees and other closing costs) with other available loans.

401(k) and Other Retirement Plans
If your family has been saving for retirement through a 401(k) or other plan, you could borrow money from this fund to pay for college. However, you may find that the associated costs and risks can be significant.

If you choose to explore this financing option, please carefully consider the fees and penalties, as well as the risk of jeopardizing your retirement if you are unable to repay the loan as planned. To evaluate the pros and cons of borrowing funds from your retirement plan, consult with your tax advisor and your 401(k) plan administrator before utilizing this option.

Consumer Borrowing: Credit Cards and Personal Loans
Some parents choose to use their credit cards or take out personal loans to pay for college expenses. This expensive option is typically not the best choice for students or their families. Interest rates on credit cards and loans tend to be high. Plus, if you fall behind on payments, you can damage your credit rating. Before you run up your credit card bills or take out a personal loan, exhaust all other possibilities, including federal educational loans.

College Loan Corporation (CLC�), headquartered in San Diego, is the nation's seventh largest student loan provider, owning and managing more than $8 billion in student loan assets. CLC has helped more than 500,000 students and families pay for college. More than 800 colleges and universities have designated CLC as a preferred lender. CLC makes higher education possible through innovative loan products and industry-leading, first-class customer service. CLC also offers the nation's best student loan advice line, answered by expert Loan Consultants 24 Hours a Day, 7 Days a Week.

To request your free custom information packet on PLUS Loans, click here.

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