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Students needing to borrow to meet education expenses not covered by other sources of aid may wish to consider alternative or private loan options.
WPCC no longer participates in the William D. Ford Federal Direct Loan Program (also known as Stafford Loans or subsidized and unsubsidized student loans).
There are many resources available online that you can utilize in your search for a private lender. You can research private education loans over the Internet, by using any search engine and entering “private education loans”. However, you will easily locate general consumer information concerning private loans as well as specific information from major lenders who are still providing private loans.
One research source you may choose to start with is Student Lending Analytics.
WPCC does not maintain a preferred lender list, as we believe it is inappropriate for us to endorse or recommend one private loan product over another as families have different needs and priorities.
There are a number of factors to consider when choosing a private lender, including but not limited to: eligibility, loan limits, interest rate, fees, repayment and customer service.
But your first step is to decide who will borrow. Student? Parent? Both? Some loans are only offered to students, some only to parents. Who should the responsible party be? Who is in the best position to assume debt? Who can obtain better credit terms?
You may wish to print and use the Lender Comparison Worksheet to help in your evaluation of different lenders.
What are the eligibility criteria? Does the loan require a cosigner? If the loan does not require a cosigner, are there any benefits to having one?
Most lenders rely on the borrower’s credit score to determine eligibility for private loans. The most popular credit score is the FICO score. Other criteria may include the borrower’s debt-to-income ratio and recent bankruptcies.
Even though a co-borrower, or co-signer, may not be required you may want to consider one with a strong credit history as this will make a difference in the pricing of your loan, as loans with co-signers are less risky for the lender.
What are the minimum and maximum loan limits, including annual and aggregate limits?
Most private lenders require school certification, or approval, which caps the annual loan amount to the price of education (or your student expense budget) less other sources of financial aid, such as scholarships, grants, teaching assistantships, research assistantships, fellowships, other student loans and Federal Work-Study. Some loan programs have minimum annual loan amounts in addition to maximums.
Borrow only what you need even if you qualify for more. Never overextend yourself. For students a general rule of thumb is to keep your monthly student loan repayment to 10-11% of your gross monthly income, but this can vary based on other debt, especially credit card debt.
Is the interest rate fixed or variable? If variable, what is the basis upon which it will vary? Does the rate change every quarter or every month or according to some other time period? When does the interest begin accruing? Do you need to pay the interest as it accrues or can it be deferred or capitalized? If capitalized, how often is it capitalized? Is the interest rate the same for the in school and grace period as it is when the loan enters repayment?
One method of securing a better interest rate is to agree to make loan payments while you are in school. You may begin repayment immediately or make interest-only payments during the in-school period.
While private lenders might advertise a low interest rate, these rates may only be available to the best credit customers. The actual interest rates and fees you pay on a private education loan are based on your credit score, and the credit score of your cosigner, if any. It is better to apply for a private student loan with a cosigner even if you qualify for the loan on your own as applying with a cosigner usually results in a slightly lower rate.
Interest ordinarily accrues from the date of the first disbursement and can be paid while enrolled or deferred and capitalized at the time or repayment.
Be aware of teaser interest rates that disappear when the variable rate indexes start increasing. Be concerned about how the rates might change over the life of the loan unless you are intending to repay the loan in full only a few years after disbursement.
Are there any loan fees? What is the impact of any loan fees on the overall cost of the loan?
The fees charged by some lenders can significantly increase the cost of the loan. A loan with relatively low interest rate but high fees could cost more than a loan with a somewhat higher interest rate and no fees. Some lenders do not charge fees but adjust the interest rate upwards to compensate. A good rule of thumb is that an extra 1% in the interest rate costs more than a 1 point increase in fees: in fact a 1% higher interest rate may be the same as 3 to 4% in fees.
What are the repayment options? How long is the loan term? Are there any consolidation options? Are there any borrower benefits?
Repayment options vary across lenders and may include options for standard, extended and graduated repayment. Find out if there is an optional in-school deferment of principal. Keep in mind that interest will continue to accrue, increasing the amount owed.
Some lenders offer financial incentives, or borrower benefits, to reduce the price of your loans. For example, there may be principal balance or interest rate reductions tied to repayment performance. Some repayment benefit plans are simple and others are complex. Make sure you understand the terms you must meet and the likelihood of receiving the benefit before choosing a private loan on that basis alone.
Loans with different repayment terms are challenging to compare. Keep in mind that the annual percentage rate, or APR, may not be a good tool for comparing loans. For example, a loan with a longer repayment term will have a lower APR even though the borrower will pay more interest over the life of the loan.
Is the application process simple and straightforward? Is it possible to reach a knowledgeable representative to check your loan status? Is customer service available 24 by 7 or at minimum during hours convenient for you? Will the lender handle the origination of the loan as well as the repayment? If not, what organization(s) will?
Some lenders only handle the up-front administration of the loan including the origination and disbursement. It is common for large lenders to have online application and signature processes, including the use of Master Promissory Notes.
If the lender will not service the loan during the in-school or repayment periods make sure you know which organization will, their customer service hours, and how to contact them especially if you want to speak to a representative in person.
Since you are about to enter into what may be a long-term relationship, it is important that you do your research and select a loan program with a demonstrated record of excellent customer service.
After you research private loan options and select a loan program from which to borrow, you need to submit a loan application to the lender you choose. As part of your research you will learn about the lender’s application process, sometimes referenced as origination, as well as the process by which you receive the funds, known as disbursement.
Most lenders have on-line application processes, often with a master promissory note. Ordinarily your school will need to certify your eligibility for the loan. The Financial Aid Office at WPCC performs the certification once we receive a request from the lender. In addition to school certification, you will be required to complete and sign a Private Educational Loan Applicant Self-Certification form and submit it to your lender before your loan can be disbursed. Completion of this form is a federal requirement for U.S. citizens as well as international students. The form may be provided by your lender or is available here. If you need assistance with completing Section 2 of the form, which asks for the cost of attendance and estimated financial assistance, please reference your Financial Aid Shopping Sheet and Financial Aid Award Letter in Pioneer Pass.
Your lender will advise you of any additional application requirements, such as loan entrance counseling.
If you have further questions, call the Financial Aid office directly at (828) 448-6046, Monday, Wednesday, Thursday and Friday from 8:00 a.m. – 5:00 p.m. and on Tuesday from 8:00 a.m. – 7:00 p.m.