Kalamazoo College Financial Aid
frequently asked questions about alternative loans

What are alternative student loans?

Alternative loans are offered by banks or lending institutions to assist students or parents in bridging the gap between college costs and financial aid. These loans are private supplemental loans, and are not guaranteed by the federal government, with the exception of PLUS Loans. Terms and conditions of these loans can vary according to specific lender guidelines. Most lenders have extensive and informative web sites on the Internet and we encourage students and parents to visit each individual lender’s web site. We also encourage parents and students to call or visit the Office of Financial Aid for help with this process: 800-632-5760 finaid@kzoo.edu

Who can apply for an alternative loan?

Both students and parents can apply for alternative student loans. Kalamazoo College encourages all students to apply for federal aid prior to considering applying for an alternative loan. Alternative loans may be an additional resource for educational expenses not covered by financial aid.

A Note to Parents: The more you can help pay for college, the less debt your child will have down the road. If you do not have the funds to pay for your child’s education, consider borrowing on behalf of your child with a Federal PLUS Loan.

Are there strict requirements to obtain an alternative student loan?

Unlike federally guaranteed student loans, lending institutions that offer alternative student loans may impose certain requirements. In most cases a student or parent must have a good credit history, a reasonable debt to income ratio and in the case of a student borrower, a co-signer is required. Since a credit check will probably be performed, not everyone is approved for an alternative loan.

What does it mean to borrow?

Before you borrow a private student loan think about whether you will be able to repay it. Repaying your student loans is a serious legal obligation, so you need to set aside enough money to make your student loan payment on time and in full each month. Ask yourself whether a job in your chosen field will allow you to make your monthly payments on your student loans.

How much can a person borrow?

The actual amount a student or parent can borrow varies according to each student’s individual financial circumstances and is limited to the student’s cost of attendance minus financial aid. We recommend students borrow only what they must to cover their expenses and we are happy to help determine that amount. Remember, this loan will reduce what you can spend in the future on a car, home, furniture and other living expenses so borrow the least amount you can to pay your bills.

What is capitalization?

Some lenders permit interest charges to go unpaid while the student is enrolled in school.  Capitalization is the term that defines what a lender does to interest charged to a loan, but is not paid by the borrower.  If you choose not to pay the interest charges on your loan, the lender adds the interest to the original principal amount borrowed.  Adding unpaid interest to the loan principal is capitalization.  Each subsequent calculation of interest will be based on the new principal amount; basically you will be paying interest on interest if you allow your loan to capitalize.  Allowing interest to capitalize should be a carefully considered decision as it increases the total cost of borrowing.

How much will my loan payment be?

You can find out what a typical payment schedule for your loan might be at the following web site: www.finaid.org/calculators/loanpayments.phtml

When do I have to start paying back my loan?

Each lender has specific repayment schedules and options. Make sure you understand them. Some lenders allow students to defer as long as they are at least half-time enrolled, others have a maximum number of years in deferment. Remember that your loan will accumulate interest during deferment periods and that putting off paying your loan will increase the final cost of repayment. Most lenders allow for early repayment without penalty.

How do I apply?

You should contact the lender directly, with the exception of a PLUS Loan, in which case you should contact Kalamazoo College Office of Financial Aid. Borrowers may apply on-line or by paper applications. Very often you may be able to go through a pre-approval process to determine your eligibility for the loan.

When do I apply?

Since Kalamazoo College does not begin fall term until mid-September, the Office of Financial Aid will not begin to process PLUS or alternative loans until mid-July.  These loans rarely take more than 2-3 weeks to process from start to finish so there is plenty of time to have funds applied to the student’s account if you apply for your loan in July or August.

Questions To Ask When Considering An Alternative Loan
If you decide to take out an alternative loan, it is important to realize that you are making a decision that may impact your life after graduation. You should consider a number of different factors.

• How strict are the credit requirements?
• Is my co-signer creditworthy?
• How long does the application process take?
• How will I receive my funds?
• How much in total loan fees will I pay?
• Does the loan have a fixed or variable interest rate?
  • If variable, how often will the interest rate change?
• What is the current interest rate and how is it calculated?
• How often does the interest get capitalized?
• Are there any enrollment requirements?  (Undergraduate; graduate; full or part-time;.. etc.)
• Do I have a grace period with this loan and if so, how long is the grace period?
• What are my repayment options?
• How long do I have to repay the loan?
• Do I have any deferment options?
• When will my first payment be due?