Alternative Education (Private) Loan Guide

UMD encourages all students to complete the FAFSA and apply for financial aid through federal and state programs before applying for an alternative loan. Loans offered by the federal aid programs do not require students to have a good credit history or a cosigner and may have more favorable interest rates.

Because each borrower's needs are unique, and because lenders reserve the right to change qualification requirements for their programs at any time, UMD cannot recommend a loan program for you. If you are considering an alternative loan, you should carefully evaluate each loan program before applying, to determine which is best for your educational needs.

You are free to borrow from the alternative loan program of your choice; however, if you have borrowed from one program in the past, it is suggested that you continue to use the same loan program each year, if possible, as long as you continue to meet the lender's program requirements, are satisfied with the lender, their terms, and their service. This will make repayment easier, as you cannot consolidate alternative loans with federal loans, and you may not be able to consolidate different types of alternative loans.

• What to know before applying
• Interest rates
• Applying with or without a cosigner
• Application deadlines
• Repayment, grace periods, deferment and forbearance
• When to apply
• How to apply
• What happens after my lender approves my application?

What to know before applying

Interest rates

Rates are competitive between most lenders.

Interest rates are variable over the life of the loan, determined quarterly by each lender, and are not capped.

Lenders base their rate on either the Prime Lending or the LIBOR rate, plus percentage points. Most lenders have tiered interest rates—the interest rate for your loan will depend on your or your cosigner’s credit rating.

The interest on private loans is not subsidized by the U.S. Department of Education, or any other agency.

Interest on these loans begins to accrue when the loan is disbursed.

Some lenders may require you to make interest payments while in school, while other lenders may allow you to defer interest payments while you are still in school. Interest charges will still accrue if you choose to defer your interest payments.

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Applying with or without a cosigner

Some lenders require you to apply with a cosigner, regardless of your income or credit rating. Check your loan program for these requirements.

International students can apply for most types of alternative loans but must apply with a cosigner that is a U.S. citizen or a permanent resident of the United States.

Most students will receive a lower interest rate if they apply with a credit-worthy cosigner.

Students without sufficient personal income or a credit history typically need to apply with a cosigner.

Some lenders will release the cosigner once the student is in repayment and has made between 24 and 48 consecutive on-time payments. Check each loan program for specific requirements regarding cosigner release.

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Application deadlines

Students that do not owe a University account balance cannot borrow after their last date of enrollment.

Students may not borrow more than the cost of attendance minus other aid they have received (known as unmet costs), even if the amount they owe the University is greater than their unmet costs.

Loan applications received for school certification after a student's last date of enrollment will not be certified for more than the amount owed the University.

Important note about deadlines: You must apply, have your application approved by the lender, certified by the school, and disbursed within the lender’s deadlines. Alternative/private education loan program lenders may change their deadlines. If you have questions about a loan program's application or disbursement deadlines, contact the lender directly. The information provided below is as of September, 2009.

The SELF and CitiAssist loan programs do not allow students to borrow for an enrollment/loan period that has ended, or after a student has withdrawn.

The Sallie Mae Smart Option Student Loan allows students to borrow up to 180 days after the enrollment/loan period has ended.

The US Bank No Fee Loan program allows students to borrow up to 180 days after the enrollment/loan period has ended.

The Wells Fargo Collegiate Loan program allows students to borrow up to 30 days months after the enrollment/loan period has ended.

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Repayment, grace periods, deferment and forbearance

Alternative loans are not guaranteed the way federal loans are. In the event of your disability or death, the lender may still require repayment of your loan.

Repayment terms, grace periods, deferment and forbearance options vary by loan program and are determined by the lender.

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When to apply

If you file a FAFSA to apply for traditional financial aid each year:

Apply for alternative loans after you receive and respond to your financial aid award notice from UMD. UMD will not be able to determine your alternative loan eligibility until you have responded to your aid offer.

If you will not complete a FAFSA:

• For fall semester, apply after July 15th.
• For spring semester, apply after November 15.
• For May Session and/or the Summer term, apply after you finish registering for these terms.

Study Abroad students should not apply until after they have filed all necessary study abroad paperwork with the International Education Office.

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How to apply

Apply online through the UMD website or by phone directly with your lender of choice.

When applying, make sure you are applying for the lender’s alternative loan program. Some lenders refer to alternative loans as “private” or “supplemental” education loans.

Do not apply for a Federal Stafford Loan—this is a sister program to the Federal Direct Loan Program used at UMD. UMD students cannot borrow from the Federal Stafford Loan program because they are borrowing from the Federal Direct Loan Program.

Indicate the University of Minnesota Duluth as the school you will attend when you apply. Our federal school code is 002388, branch code 00.

Do not apply to more than one loan program at the same time unless you qualify for and intend to borrow the total amount you apply for.

If you apply to more than one loan program, the University will process your loan applications in the order they are received for school certification until you run out of eligibility.

If you are planning to attend both fall and spring semesters, apply for the total amount you need for both semesters and use the month of September as the loan period start date and the month of May as the loan period end date. Example: To borrow $2000 for each semester of the 2008–09 academic year, apply for a $4000 loan with a loan period of 09/2008 to 05/2009.

Follow your lender’s application instructions for completing the application process. In most cases, the lender will pre-approve your application online or by phone, then mail you a paper loan application or have you print your online application for your completion and signature.

Complete and return your application directly to the lender.

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What happens after my lender approves my application?

Once your lender fully approves your application (usually after they have received your signed application) they will notify UMD that your loan is ready for school certification.

UMD will certify your loan eligibility based on the cost of attendance for the loan period, other aid you will receive, and the amount you requested. We request disbursement dates to correspond with the start dates for your enrollment/loan period.

The Office of Financial Aid and Registrar will send you a revised eFAAN when we certify your loan to the lender.

Your lender will electronically forward your loan disbursements to UMD on the date(s) requested.

UMD will electronically transfer your loan disbursement to your tuition account with Student Accounts Receivable. Funds will first be credited toward any outstanding tuition and fees.

If you are entitled to funds in excess of your tuition bill, Student Accounts Receivable will issue you a surplus check or direct deposit the excess funds to your designated account.

Some lenders disburse paper loan checks, payable to the borrower and UMD. If this is the case with your lender, UMD will notify you via your University e-mail account when it is ready for disbursement and you will then need to claim your funds at the Student Assistance Center.

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