Private/Alternative Educational Loan Information
Private or Alternative Student Loans are non-Federal Student Loans offered by private institutions (such as banks or credit unions) that are intended to help students meet their education related expenses.
Before considering a private loan, make sure that all federal, state and institutional financial resources are exhausted. If there are no other ways to fill the financial gap, shop around and do some homework before choosing a private loan. Remember, keep written records of all forms, applications and correspondence with your lender for the entire life of your loan.
With the exception of students classified as International Students, all students seeking alternative education loan funds must first complete the FAFSA so their eligibility for federal funds may be determined. Students seeking Private/Alternative Loans should first speak with their financial aid counselor to gain an understanding of their eligibility for all potentially available federal funds. If the Alternative Loan is the only option, the financial aid counselor will refer the student to the Alternative Loan Counselor.
Although students are encouraged to only apply with a single lender, they are strongly encouraged to look at several lenders and compare their terms, fees, restrictions, repayments, etc. Students are also encouraged to view their credit report and know their credit score before they contact a lender, this can be checked for free on www.annualcreditreport.com.
- What is the lowest interest rate and fee combination that you offer, and how do I get this rate?
- How much can I borrow without reducing my eligibility for federal, state or institutional aid?
- How often do you capitalize interest?
- What steps do I have to go through to obtain a loan with your company?
- What is the timeframe from deciding to obtain a loan with your company to receiving the funds?
- What is the maximum I can borrow both annually and cumulative, both with and without a cosigner?
- Do you require a cosigner?
- How can my cosigner be released?
- Are payments required while I am in school? If so, just interest or both principal and interest?
Interest Rate Questions:
- Is the rate only for a limited period of time (i.e. introductory rate) or for the duration of the loan?
- Is the interest rate fixed or variable?
- If variable, is there an absolute maximum or minimum rate, both with and without a cosigner?
- If variable, how often is the interest rate adjusted?
- If variable, how is the interest rate determined?
- If fixed, what is the lowest rate I can get on a fixed-rate loan, both with and without a cosigner?
- When does repayment begin?
- Is there a grace period before I have to start repaying the loan? If so, how long is it?
- How long can I defer payments while in school?
- Under what circumstances may I defer payment after graduation (e.g. while attending graduate school, during residency, while studying for the bar)?
- How much will I owe when I do start making payments?
- How long will I be repaying the loan?
- Is there a penalty for early repayment?
- Do you offer on time payment or any other discounts?
- What percentage of borrowers actually receives the discounts you offer?
- Are your discounts guaranteed or are they subject to change later?
Problems with Repayment Questions:
- What if I have problems?
- Do you have any deferment or forbearance options?
- Will I lose any benefits for just one late payment or if I ask for a change in the payment schedule?
- What causes me to lose an earned benefit?
- If I lose a benefit, how can I gain it back?
- If I have difficulty making payments [“economic hardship”] do you allow me to defer or reduce my payment temporarily?
- Under what circumstances and for how long can I defer or reduce my payments?
- Can the loans be discharged upon death or permanent disability of student?
Other questions to ask if applicable to your situation:
- Do you offer any discounts if I have a current relationship with you (bank account, credit card, car loan, mortgage, etc)?
- Are there any restrictions as to where I live or attend school?
- Are these loans available to international students/non-citizens? If so, do I need a US citizen or permanent resident co-signer?
- Do I have to be at least half-time status?
- Do I have to be in a degree seeking program? If not, do you require school certification?
- Can I use this loan to study abroad?
- Can I use this loan for past due semester charges?
Once you have this information in hand make sure you review it closely to decide which options are best for your particular situation.
- Is the maximum yearly or cumulative amount high enough to cover my program?
- Do I have a cosigner? If so, will they be willing to sign each year until I graduate?
- Can I afford to make payments while in school?
- Are the higher fees made up for by the lower interest rate or vice versa?
- Can I realistically expect to benefit from these back-end benefits? If so, do they make one loan better than another in the long run?
- Are the grace period or deferment or forbearance options more valuable to me than a lower interest rate?
- Cosigner released after a certain number of consecutive monthly payments.
- Interest rate reduction for auto-debit.
- Interest rate reduction after a certain number of consecutive monthly payments.
- Interest rate reduction for in-school payments.
- Interest rate and/or principal reduction upon graduation or starting payments.
- Grace period after graduation (or during residency).
- LIBOR – London Interbank Offered Rate – This is the average interest rate (over three months unless otherwise specified) paid on deposits of US dollars in the London Market. Many lenders interest rates are LIBOR + a percentage. The rate can be checked here.
- PRIME – Prime Lending Rate as published in the Wall Street Journal. This is the rate banks charge their most creditworthy customers. Many lenders interest rates are PRIME + a percentage. The rate can be checked here.
- APR – Annual Percentage Rate – This rate factors in interest, fees and other terms of the loan.
- Cost of Attendance (COA) – The maximum a student can receive in total financial aid for the academic year (as determined by the school), this includes funds for tuition, fees, books and living expenses. Students can check this amount on SURFS.
- Other Aid Received (Aid) – Any other Financial Aid received by the student (grants, scholarships, loans, stipends, etc). Unless lenders have a lower limit, the maximum the school will certify per year for a Private/Alternative Loan is COA minus Aid.
- Complete the FAFSA and speak with your financial aid counselor regarding your eligibility for federal funds.
- Meet with the Alternative Loan Counselor who will confirm your eligibility and provide appropriate forms to be completed for the financial aid office.
- Apply directly with the lender you choose; make sure you tell them that you are attending the University of Maryland (Baltimore Campus), school code 00210400.
- As part of the application process with the lender the student must complete three Truth in Lending Forms, one will be provided at application, another once the loan is approved and a third three days before disbursement. Additionally, a student must complete a Self Certification Form and submit it to the lender. All this is in addition to the Master Promissory Note and any other forms the lender may need to collect.
- Once approved by the lender, contact Peggy Buerhaus to obtain one of the Alternative/Private Loan Acceptance Forms. We have four separate forms, one for Undergraduate Students who have exhausted all other forms of aid; one for International Students who are not eligible for Federal Student Aid; Undergraduate or Graduate Students not eligible for being under six credits, due to academic progress or due to being at their aggregate loan limit; and one for Graduate Students who are choosing to Waive their right to Federal Loans.
- UMB will certify the loan electronically up to the student’s eligibility or amount requested, whichever is lower. The loan disbursements will be split evenly (in most cases) between semesters based on the loan period.
- The loan will be disbursed by the lender to the University according to the disbursement schedule based on your loan period if the process is completed before the start of the semester, otherwise there is a three day waiting period as required by law after approval before the loan can disburse.
Q: When are the loans disbursed?
A: Loans are disbursed by the lender to the University no earlier than 10 days before the start of classes each semester.
Q: What is an origination fee?
A: An amount taken off the top of the loan before the loan is disbursed (Loan Amount – Origination Fee = Amount received by school).
Q: Why was my loan split?
A: Loans are split evenly (in most cases) between semesters based on the loan period that a student is enrolled for.
Q: What happens if my loan is denied?
A: The loan is between the lender and the borrower, the University cannot intervene on the student’s behalf. If denied, we would suggest you get a credit worthy cosigner to still get the loan.
Q: When does interest begin?
A: This is decided by the lender of the private loan, but usually interest beings immediately after the first disbursement.
Q: When does repayment begin?
A: Although most private lenders allow for in-school deferment and some even offer a grace period, some lenders do require payments while in school.
Q: How much can I borrow in one year?
A: Students are only limited to the formula of Cost of Attendance minus Other Aid Received, unless the lender has a lower yearly limit.
Q: What is the aggregate limit for Private Loans?
A: Varies by lender.
Q: Can these loans be discharged in bankruptcy?
A: No, private student loans, like federal student loans, cannot be discharged in bankruptcy.
Q: Can these loans be consolidated with my Federal Loans?
A: No, private student loans cannot be consolidated with Federal Student Loans.
Q: What lenders does the University recommend?
A: The University's policy is to not recommend lenders.