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Alternative Loans…… A Beacon of Hope for Your Students? Alternative Loans…. A Beacon of Hope for Your Students? • What Are Alternative Loans? • Why Borrow an Alternative Loan? • Types of Alternative Loans • Debt Management Tactics What are Alternative Loans? • Alternative Loans are loans that are not federally backed or insured. • Typically the lenders are taking the financial risk on these loans How Lenders Minimize Risk with Alternative Loans • Tiered pricing based on school information • Use of Co-borrower • Tiered pricing based on borrower (and co-borrower) credit record Alternative Loans On the Rise • In 2005-06, private loans represented 20% of all education borrowing - $17.3 Billion (An increase of 900% in inflation-adjusted terms from 1995-96 to 2005-06) • Federal education loan programs totaled $68.6 Billion in 2005-06 Source: ACE Issue Brief titled “Who Borrows Private Loans?” Aug 2007 – author Jacqueline E. King Why such an increase? • Rising cost of tuition • Direct to Consumer campaigns Why Such an Increase • Alternative Locator • http://www.theeasystudentsloans.com/ • Apply For A Student Loan Avoid High Interest Credit Cards & Don't Pay A Cent Until Graduation. www.gmacbankfunding.com • Easy Student Loan Borrow up to $45,000 a year to pay for your college expenses. moneyforcollege.suntrust.com • Astrive Student Loans Learn Now Pay Later - No Payments Until 6 Months After Graduation. www.GetAstriveLoan.com • Student Loan Solution Up To $40K For College, Go To Your First Choice School, Apply Online. www.1.nationalcity.com • Get a Student Loan Fast Apply in Minutes, Check Sent to You. No Payments Until Graduation. www.TuitionWiseLoans.com • Student Loan Solution Borrow Up To $40K Per Year Now With No Payments Until You Graduate. www.citizensstudentloan6.com • Get Loan Online, Quick Approve Bad Credit Rating? Need A Loan? We Have The Top Sites Here. www.hatarka.com • Get A Student Loan Fast Get Your Check in About a Week. Don't Pay a Cent Until Graduation. www.ThinkStudentLoans.com • Chase Loans Low rates, flexible student loan repayment options. We can help you get up to $40,000 per school year. Official Chase student loans Web site. www.collegeloansite.com • College Planning Guide Free Keybank College Planning Guide Order Your Copy Online Today. Key.com/collegeguide Why Borrow an Alternative Loan? No loans “My school does not participate in the FFEL program.” Why borrow an Alternative Loan? • Span the gap between Cost of Attendance and Aid Grants Scholarships Federal Loans Work Alternative Loan COST • Additional costs for special programs, like Study Abroad Why Borrow an Alternative Loan? • Student is not maintaining Satisfactory Academic Progress • Student is not enrolled at least half-time • Student may not be enrolled as a “regular” student Why Borrow an Alternative Loan? • Bar Study Loan • Residency Relocation Loan Types of Alternative Loans • School certified loans • Loans NOT certified by the school What type of loan is best? The answer is the same as it is for all financial aid questions . . . It depends! What type of loan is best? • All are not created equal – Commercial Paper – Libor – T Bill – Minimum credit score requirement – Credit of borrower School Certified Loans • Can control the amount of loan a student borrows (Cost minus other aid) • Record of alternative loans used by your students • More accurate information if you are engaged in debt management counseling. Loans NOT Certified by School • It’s between the lender and the borrower • No opportunity for school to conduct debt management counseling Loans NOT Certified by School • Consumer determines which loan to use, so he/she is not limited by school recommendation • Flexibility in disbursement, etc. • Amount is not tied to cost of attendance Debt Management • What are you doing? • Are you concerned about your students borrowing patterns? PLUS Alternative • Parent debt • Student debt (but • Fixed interest parent might be rate co-borrower) • No FAFSA • Variable interest required (at some rate schools) • No FAFSA • Additional Unsub available if PLUS is denied GPLUS Alternatives • Security • Flexibility • Benefits • Greater amount • Possible • Deal with lender consolidation only • In-school • No FAFSAA deferment • Repayment options Selecting an Alternative Loan Lender Should the student use his Stafford lender? Yes No Combined bill? Perhaps not as Less likely to flexible a default? program? Perhaps won’t be the best deal? Questions/Comments Alternative Loans…… A Beacon of Hope for Your Students?
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