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Even though you are not eligible to apply for federal funding because of your status as a Special Student,
there may be one other option for you if you are looking for a loan to supplement your costs.
After the traditional loan options such as Perkins, Stafford and PLUS have been exhausted, students can look
into the Alternative Loan market. Unlike the Federal Loan Programs, alternative loans are not regulated by
the government. Each lender has its own set of application, credit, and co-signer requirements, and interest rates are variable, not fixed. Generally, alternative student loan payments are deferred while the student is in school (with the interest on the loan accruing). Students should inquire whether this is an option for their loan and for how long the loan will be deferred.
In choosing a lender, it’s always a good idea to start with the lender who provides your Stafford Loan to find out if they also do alternative loans. By doing so, you will be dealing with only one company for all of your loans, and your lender may be able to offer you options like combined billing or auto debit for all of your loan payments. If your Stafford lender does not offer private loans, it is recommended that you explore companies you have worked with in the past or have accounts through. Be cautious of lenders whose names you do not recognize or those who offer you ‘teaser’ or introductory rates or prize incentives. Below are some questions you should ask when considering an alternative loan lender.
- What is my interest rate? Lenders will advertise ‘as low as’ rates but it’s important to know what your rate will be.
- What fees am I being charged (reducing my proceeds)?
- How often do you capitalize interest on the loan? Lenders who capitalize interest less frequently will save you more money over time.
- Is there a prepayment penalty?
- Can I defer payments while I am in school or if I have financial difficulty?
- What benefits or rate discounts are offered, and what conditions do I have to meet to obtain the benefits?
- Is it important to me that my lender have local presence?
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