Private (Alternative) Loan Programs
A private alternative loan is a non-federal educational loan, through a private lending institution, typically issued in the student's name and requiring a co-signer. These loans vary in the terms, conditions, and eligibility requirements. Before submitting any loan applications, you are encouraged to carefully evaluate the criteria for each loan program to determine which one best meets your unique needs and circumstances. It is in your best interest to complete the Free Application for Federal Student Aid (FAFSA) and apply for any federal student loans for which you are eligible prior to borrowing private alternative loans. Private loans typically have variable and higher interest rates, are based on individual credit scores, may require interest payments while you are in school, have more fees, and less flexible repayment options than federal loans.
How to Apply
Private Lender Application Process
- To apply for an Alternative Private Loan you must contact the private lender of your choice and complete their private loan application. The Financial Aid Office does not have access to private lender applications, nor does UNM endorse any particular Lender. The student needs to contact the lender/bank directly for information on the private loan application process.
- Visit Fast Choice to explore some of your private loan options.
- By applying for a Private (Alternative) School Loan the Lender of your choice will send a "School Certification Form" to UNM for processing (the majority of Private loan certifications are done electronically).
- Once UNM receives the certification request from the lender, the Cost of Attendance (COA) and loan eligibility information is sent. NOTE: Private (Alternative) Loans are only available to students whose cost of attendance has not already been met with other aid. If a student applies for a private loan, and UNM is unable to process it due to the COA being maximized with other types of Financial Aid the certification will send it back with "ZERO" ($0) eligibility.
- From the time the certification is received from the lender UNM needs 7-10 days to complete and send back the certification. You (the student) must begin the process of certification with the lender. UNM cannot begin this process for you and is subject to the timeline of the lender as well. Once the funds are received electronically from the lender we need 5-7 business days in order to process and release those funds.
Interest Rates and Fees
- Interest rates and fees vary depending on the lender.
- Lenders must provide a disclosure form during the application process, loan approval, and after the loan has been finalized. Disclosures provide the details of your loan, review these carefully for loan terms and fees.
Situations when a Private Loan is an Acceptable Option
A private loan may be an appropriate choice for you, if:
- You have been offered and accepted the maximum annual amount for all federal loans and still have a difference between the cost of attendance and the total financial aid you have received.
- You are ineligible for a federal loan. You may still qualify for a private loan because such programs are not bound by the same federal regulations. For example, if you are not making satisfactory academic progress, are in default on a federal loan, did not respond to verification requests, you may be eligible for private loans instead.
- You owe a balance from a previous semester. You may be able to receive a private loan for an earlier loan period.
- If you are studying abroad and the costs for your program exceed the allowable amount of federal loans.
- You have read the comparison chart federal vs. private loans and still believe that a private loan is a better choice for you and your family.
Comparing Federal and Private Loans
Federal Student Loans
Private Student Loans
You will not have to start repaying your federal student loans until you graduate, leave school, or change your enrollment status to less than half-time.
Many private student loans require payments while you are still in school.
The interest rate is fixed and is often lower than private loans—and much lower than some credit card interest rates. View thecurrent interest rates on federal student loans.
Private student loans can have variable interest rates, some greater than 18%. A variable rate may substantially increase the total amount you repay.
Undergraduate students with financial need will likely qualify for a subsidized loan where the government pays the interest while you are in school on at least a half-time basis.
Private student loans are not subsidized. No one pays the interest on your loan but you.
You don’t need to get a credit check for most federal student loans (except for PLUS loans). Federal student loans can help you establish a good credit record.
Private student loans may require an established credit record. The cost of a private student loan will depend on your credit score and other factors.
You won’t need a cosigner to get a federal student loan in most cases.
You may need a cosigner.
Interest may be tax deductible.
Interest may not be tax deductible.
Loans can be consolidated into a Direct Consolidation Loan. Learn about your consolidation options.
Private student loans cannot be consolidated into a Direct Consolidation Loan.
If you are having trouble repaying your loan, you may be able to temporarily postpone or lower your payments.
Private student loans may not offer forbearance ordeferment options.
There are several repayment plans, including an option to tie your monthly payment to your income.
You should check with your lender to find out about your repayment options.
There is no prepayment penalty fee.
You need to make sure there are no prepayment penalty fees.
You may be eligible to have some portion of your loans forgiven if you work in public service. Learn about our loan forgiveness programs.
It is unlikely that your lender will offer a loan forgiveness program.
Free help is available at 1-800-4-FED-AID and on our websites.
The Consumer Financial Protection Bureau's private student loan ombudsman may be able to assist you if you have concerns about your private student loan.