Alternative Loans

Institutional scholarships, outside scholarships, and state and/or local funds may fall short of your anticipated budget for educational expenses. Alternative (credit-based) loans from private lenders may help compensate for any shortfall. However, parents and students should be aware that these loans are a more sophisticated and expensive way of borrowing and often require a credit-worthy co-signer. Be sure to read all the information available on these loans to ensure that you choose the lender with the terms best suited to your needs.

Due to the complexity and multitude of private educational loans available, SCAD can offer only general information about these loans and cannot assist students in choosing a lender, filling out an application or processing any other aspect of this type of loan. Regarding private educational loans, the best source of information is the lender.

As you consider whether or not to borrow using an alternative loan, keep these important concepts in mind:

Keep your borrowing to a minimum. First consider ways to save money for college. Next, consider cutting personal spending, getting a federal work-study job to help with expenses, or taking on a roommate to share rent and monthly expenses.
Keep your debt with only one or two lenders. Most likely you will graduate with federal student loan debt that will entail monthly repayments (the average for this is $12.17 per $1,000 borrowed). If you borrow from multiple lenders, you will have multiple monthly loan payments, one for every lender! Remember, alternative loans cannot be consolidated with federal loans because they are totally different programs.
Be a good consumer and do your research. Make a list of key questions to ask each lender, and compare the results. Make your final choice of lender based on this comparison. Here are some samples:

Is the interest rate fixed or variable? If variable, how often does it change?
How does the LIBOR rate differ from the prime rate? Is the loan's interest rate tied to the prime rate or the LIBOR rate?
Is the interest rate "capped" at a certain percentage so it cannot go higher?
Do loan payments ever escalate?
Can you explain capitalized interest? How often is the interest on this loan capitalized?
Is there a grace period for repayment?
How long can repayment take?
Is there a penalty for late payments? If so, how much?
Is there a penalty for paying the loan off early?

Have the lender estimate the amount of your monthly payment based on what you plan to borrow. Project the total amount you will have borrowed by the time you graduate and see what that monthly payment would be.
Some other things to consider: Will you need a credit-worthy co-signer? If not this year, how much debt can you have before your lender will require a co-signer? Do you have a credit-worthy co-signer if necessary?

You may choose a lender from SCAD's or select any lender you believe best meets your needs. The university selects and recommends lenders who have successfully been making student loans for years and who offer competitive pricing, reliable technology, quality services and products to borrowers. These lenders work effectively and efficiently with SCAD and borrowers and are dedicated to delivering quality customer service. Availability, problem solving and quick response times are among the expectations of a successful working relationship with lenders. Feedback from our students indicate these lenders have established a trusted working relationship with our borrowers.

NASFAA (National Association of Student Financial Aid Administrators) recommends these for analyzing, calculating and comparing loan prices.

SCAD adheres to the following rules in processing alternative loans:

•	All students who meet the criteria for federal aid eligibility must complete the federal aid application process and take advantage of all other aid programs before we will certify an alternative loan. Any alternative loan certification requests received prior to the student's completion of the federal aid process are held and certified at the time that federal aid is awarded.
•	Students must apply directly to the alternative loan lender online, by phone or by mail. SCAD will certify completed applications submitted by the lender. Original applications submitted to SCAD are returned to the student for submission to the lender.
•	Students are responsible for accurately representing their current degree and enrollment status to the lender. Most alternative loans require students to be in degree-seeking programs and attending class at least half-time (10 quarter hours). Some loans are available to students in certificate programs.
•	The credit check on most alternative loans is good for 90 days before the first day the loan begins. SCAD will only certify alternative loans for dates that correspond to the terms for which the loan is intended. Applying too early and/or using false dates may result in the expiration of the credit check before the loan is certified. Students are responsible for reapplying for loans that expire before certification.
•	Some lenders allow a student to borrow for past-due balances, with restrictions. When you apply for a loan for a past-due balance and/or a previous aid year, you must indicate this to the lender at the time of the application. Failure to do so may result in the loan being denied when SCADl, which must report the intended use of the funds, certifies it.

SCAD can certify loans only up to the amount of a student's budget minus all other aid (for the same terms as the loan period) - the maximum loan amount. All loans will be certified for either the maximum amount or the amount requested, if it is less than the maximum available to you.

The approved loan amount is evenly divided among the quarters of enrollment indicated in the "loan period" section of the certification request. The loan period may include only terms within the current award year. The amount shown on your award notification may or may not be reduced by fees assessed by the lender. The actual amount disbursed by the lender is applied to the charges on your student account.

If SCAD receives an alternative loan certification request and there is no remaining need (i.e., awarded aid equals the budget), a written clarification is required (for example, if a maximum PLUS loan has been processed and awarded so there is no remaining need left). SCAD must be informed whether to cancel, reduce or leave the PLUS loan intact before the alternative loan application can be processed.

If the loan is processed correctly, i.e. for the amount requested and the terms indicated on the loan certification request, then no changes are permitted. If you need additional monies, you may apply for a new loan, and the application is processed based on student eligibility.

After a student receives an Award Notification from SCAD, any changes to that award, including the addition of an alternative loan, require that the student's entire financial aid award be reviewed by our technical processors. The lender is not asking for certification that you are a student here; rather, it is requesting certification that the loan amount you have requested is within your academic budget. During peak times this can take up to four weeks, as re-processing requests are secondary to all requests for initial processing.

All alternative loans are certified with up to three disbursements, depending on the number of terms that the loan is intended for or what the lender allows. Disbursements are scheduled for the first business day following the drop/add period of the quarter for which the funds are intended or within five business days of certification, whichever is later. However, disbursement only happens after SCAD receives the funds from the lender. Delays may occur due to issues or problems with the lender's processing of the loan. Students should contact their lender directly for assistance in these cases. This is SCAD's policy on disbursement of alternative loans and may supersede any options the lender may offer.

SCAD receives most alternative loan funds electronically from the lender and applies the monies directly to the student's account. Disbursements received in the form of a co-payable check require the student's signature before they can be placed in the student's account. Contact your student account representative for assistance with this.

Alternative loans are not subject to the same regulations as federal loans for withdrawals. When a student receives the benefit of an alternative loan disbursement, those funds are treated as personal payment from the student. Each alternative loan lender has its own guidelines concerning how any or all of a disbursement may be returned to avoid interest and/or fees.

It is your responsibility to contact your lender if you drop below half-time status or withdraw from any quarter for which you have received an alternative loan disbursement, to see how this may affect your loan.