Most of the Federal student loan schemes need no credit check and provide a student with substantial financial assistance. These programs are however based on need and often carry other criteria which might make it difficult to qualify. Even if a student does qualify, these loans only cover part of the whole education bill in the majority of instances. If students find themselves in that position then they could look to private alternative college loans to make up the shortfall.



However, private alternative college loans also have their pros and cons. A credit check will nearly always be required and this is no problem as long as you have a good credit history. However 'good' is very much a relative term and if your credit history is not quite good enough then you may find that you are paying more than the usual interest rates.

In addition to the stated rate of interest there are other financial implications of private alternative loans. Fees are usually added on to nominal loan amounts and a quite modest loan of $3,000 can easily have 4% in fees applied before distribution. That means that $120 of the total is not seen by the student but nevertheless must be repaid. As a guide, every 3% of fees is equivalent to 1% being added to the quoted interest rate.

However private loans do have a couple of advantages.

The first and probably most obvious advantage is that money is available. Private lenders make their living from the interest and fees which they charge and so have a vested interest in making funds available to borrowers and will work hard to see that each applicant qualifies. On the other hand government lenders adhere to a rigid set of criteria and there is usually no real appeal if your application is turned down.

Not having to deal with that unwelcoming and often unreasonable bureaucracy is another benefit of private loans. Lenders have customer service departments which are there specifically to deal with questions so that borrowers can get the answers which they need. Federal loan schemes usually have contacts and help available too although the answers one gets are more miss that hit in terms of quality.

Other features that make private alternative loans particularly desirable include:

The fact that parents and students do not have to complete FAFSA (Free Application for Student Aid) forms and supply a mass of supplemental documentation. Private loan applications tend to be a lot simpler and the entire process is easier. However, interest rates and fees may be lower of higher according to the particular program.

The most desirable private loans attract no fees and interest rates which are about equal to the prime rate. This is the rate that banks charge one another or charge their biggest and special customers. If you can get a rate at prime then this is a good deal and getting a rate at 1% below prime is a great deal.

In order to obtain that sort of loan it is normally necessary to have a great credit history or have a co-signer to the loan who has a very good credit history.

In the end, the best way to discover whether an alternative loan will suit your purposes is to get out into the marketplace and take a look at exactly what is available.