Alternative School Loans are Privately Funded

In today’s world, going to college is becoming more and more important. However, with a bad economy and rising tuition rates at schools, it is becoming more difficult to finance an education. Still, there are several different financial aid options, including one you may have not considered: alternative school loans.

Generally speaking, the first option for financial aid for students is usually student loans. These are federally funded at better interest rates and are dependent on the expected contribution of the student or the student’s family. They are meant to fund the cost of tuition and no more. Sometimes, the expected amount of student loans is not enough, and a student can turn to alternative student loans.

Alternative student loans are similar to federally funded school loans, but they come from private sources. They are still meant for college students, and usually have a stipulation that the student must be enrolled, and as a result, you may not have to start paying for them until after you are no longer enrolled. A benefit of alternative school loans is that you can choose the amount that you borrow – meaning that, even though your student loans may only cover tuition, you can still fund the cost of housing, room and board, and so on, with alternative student loans.

On the other hand, just because the loans are meant for students does not mean they do not have their drawbacks. They are still privately loaned, so they will require a credit check, which will mean a co-signer if the applicant is young and does not have credit established. For the same reason, they will likely have a higher interest rate than student loans. Therefore, it is wise not to take out more in loans than you truly need, even though you will not have to pay for it now.

With the credit crisis and an increase in federal student loan funding in 2008, alternative student loan use has fallen, but that does not mean that it is not a viable option. When deciding how to finance your education, alternative student loans may be the right fit for you.

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Graham Billings

Graham Billings is a senior at the University of North Carolina at Chapel Hill with a double major in Economics and Political Science. He plans to graduate in December of 2009 and then attend law school in the fall of 2010. He is a member of the Economics Club at Carolina, which brings in speakers and hosts events in order to discuss current economic issues and help those who do not have a background in economics become more familiar with it. He is a National Merit Scholar and Dean’s List recipient. He is originally from Greensboro, North Carolina and attended the Early College at Guilford for high school, taking classes at Guilford College. In addition to economics, his academic interests include the legal and political system. He headed the only student-run, high school-level Honor Court in high school and participated in a national model Congress in San Francisco, run by Harvard students, and won awards of excellence for his work on the mock Supreme Court. Additionally, he tutors Carolina students in economics on a volunteer basis.

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