Other Loans

Private/Alternative

Private Loans vs. Federal Loans

Private education loans may have significant disadvantages when compared with federal education loans. We encourage you to first borrow any federal loans for which you are eligible. Homeowners may also want to consider a home equity loan first.

Please keep in mind the following facts about federal education loans as you consider your options:

• Federal student loans are required by law to provide a range of flexible repayment options, including, but not limited to, income-based repayment and income-contingent repayment plans, and loan forgiveness benefits, which other student loans are not required to provide.
• Federal direct loans are available to students regardless of income.

To gain a better understanding of how federal and private loans may fit into your overall strategy for paying for college, you may want to go to the online Learning Center provided for Stanford students and families by the Association of Independent California Colleges and Universities (AICCU).

A Comparison of Federal and Private Education Loans

	Federal Loans	Private Loans
Co-Signer Required?	Perkins/Stafford: No PLUS: Usually no	Usually yes
Credit Check Required?	Perkins/Stafford: No PLUS: Yes (limited)	Yes
Deferment Options	Several options guaranteed by law	Depends on program
Grace Period	Perkins: 9 months Stafford/PLUS: 6 months	Depends on program
Interest Rate	Fixed	Usually variable
Loan Fees	Perkins: No fees Stafford: up to 1.5% PLUS: up to 4%	Depends on program
Loan Forgiveness Options	Several options guaranteed by law for Perkins and Stafford	Generally none
Penalties for Early Repayment	None	Depends on program

Choosing a Private Loan

When choosing a private education loan, you should compare the loan terms offered by several programs in order to choose the best fit for your situation. You can learn about and compare private loan terms from multiple lenders side-by-side using the California Private Loan Marketplace, also provided by the AICCU. Click on the "SHOP" icon to begin your comparison. Another resource for finding active private education loan programs is FinAid.org.

Here are several points you should research when considering a private loan:

• What is the interest rate; is it fixed or variable; is the rate capped?
• What fees must be paid for this loan and when are they due?
• How will I receive my loan funds?
• When does repayment begin and is there a grace period?
• What will my monthly payment be?
• What will be the total cost if I use the full repayment period?
• Are there penalties for early repayment? 
• Are there deferment or forbearance options?
• Is the loan program well-established?

Most private loan programs require our office to certify your eligibility before approving your loan. If you receive financial aid, you must notify our office of any private loans you borrow as it may affect your aid eligibility.

Self-Certification Form

Regardless of which private loan program you choose, you will need to complete a self-certification form before receiving your first disbursement of loan funds. Your lender will probably provide this form to you during the application process. You can also go here to download the Private Education Loan
Applicant Self-Certification (PDF) form.

In Section 2 of the self-certification form, you will be asked to provide the following three dollar amounts:

A. Student's cost of attendance for the period of enrollment covered by the loan
B. Estimated financial assistance
C. Difference between amounts A and B

You can find the amounts for items A and B on your most recent financial aid award letter (available in Axess). For item A, use the figure listed for Total Expenses mid-way down the left-hand column. For item B, find the line labeled Total Financial Support; use the figure shown in bold at the right-hand margin of this line.

If you have trouble locating these figures, you may contact the Financial Aid Office for assistance.

Final Disclosure and Right-to-Cancel Period

Under the federal Truth in Lending Act (TILA), your lender must provide you with a finalized disclosure statement after you have signed your promissory note. The final disclosure statement confirms the terms and conditions of your loan.

At the time that this final disclosure is delivered, your "right-to-cancel" period begins. During this period of six business days, you may cancel the loan by contacting the lender. The lender cannot release the first disbursement of your loan funds until the end of the right-to-cancel period.

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