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.Choosing a Lender
Loan Comparison Tools
The University of New Mexico has partnered with two private loan comparison tools, Credible and Great Lakes tool, FASTChoice. These private loan comparison tools empower you to take control of the process and make an informed decision in selecting the best private loan for your individual situation.
Credible
Credible is an online tool that allows students to compare personalized loans from multiple lenders. Students can analyze prequalified rates, terms, and eligibility rules side-by-side in just a matter of minutes. Credible is not a lender or bank. Credible partners with student loan lenders so that applicants have a variety of competitive options, each addressing their particular needs.
FASTChoice
FASTChoice, powered by Great Lakes loan guarantor and processor, helps you choose the right loan by presenting you with loan details, including eligibility requirements, interest rates, loan limits and borrower benefits. FASTChoice provides comparison tools for a variety of private educational lenders.
How to Apply
Private Lender Application Process
- Shop Lenders: Visit FASTChoice or Credible to explore some of your private loan options and choose a lender.
- Contact Your Lender: You (the student) must begin the process of certification with the lender of your choice. To apply for an alternative Private Loan you must contact the lender or bank 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.
- Loan Certification Sent to UNM: 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).
- UNM Certifies Loan Information for Private Lender: 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.
- Timeline to Receive Funds: 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.
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 the current 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 or deferment 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. |
