ALTERNATIVE LOANS
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SOME THINGS TO CONSIDER BEFORE APPLYING FOR AN ALTERNATIVE LOAN:

INTEREST

Interest is the amount you will be charged on your alternative loan. Most private student loans charge a variable interest rate, which means that the interest rate will adjust periodically to reflect the market rate. The interest rate may adjust quarterly, annually or whenever the index changes. Be sure to read your disclosure statement carefully; this will give you detailed information on your interest rate and its formulation and how often it may change/adjust.

Another factor in determining the interest rate is borrower and/or co-borrower credit history.

FEES

Most private loan lenders charge one-time fees as a way to keep your interest rate lower. These fees are sometimes based on your credit rating or on the use of a co-borrower. There are two common types of loan fees:

• Origination fees . These are charged at the time the loan is disbursed and can either be added to or deducted from the loan amount you requested. When origination fees are added to your requested loan amount you actually receive the amount you requested when the loan is disbursed to your school. When origination fees are deducted from your loan amount, you will receive a disbursement amount lower than you requested.
• Disbursement fees . These are assessed to your loan at the time of repayment. These fees are always added to your loan and are calculated based on the total dollars outstanding (loan principal plus all accrued interest) when your loan is entering repayment.

To determine which of the above fees apply to your loan, contact your lender. Note: regardless of whether fees are deducted or added to the amount you're borrowing you will still pay interest on those fees, as they will become part of your loan amount.

CAPITALIZATION

Interest capitalization is the practice of adding unpaid accrued interest to your loan amount. For private student loans that allow borrowers to defer payments while in school, interest is typically capitalized either quarterly, annually or once your loan enters repayment (check with your lender to learn when your interest is capitalized). The more often interest is capitalized, the more interest you pay over the life of the loan. To reduce the cost of your loan, you may choose to make interest payments during periods of deferment. This will eliminate or reduce the effect of interest capitalization on your loan.

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