Private loans are available to students who are not eligible for financial aid or who need additional funds to meet educational expenses.
Private loans are available from lending institutions such as banks or credit unions. Since Private loans are not part of the federal government’s program of guaranteed student loans, the extra cost the lender pays to privately insure the loan is passed on to the borrower with higher interest rates and loan fees.
Private loans are credit-based which means a lender may grant a loan, but the interest rates and fees may be higher if the borrower does not meet the lender’s credit requirements.
Sometimes lenders require a cosigner on a loan; in some cases, the presence of a creditworthy cosigner may keep interest and fees at lower levels.
Private loans cannot be consolidated with other student loans.
A borrower may be denied by one lender and approved by another because of the different ways they interpret borrower financial information.
Private Educational Loan Disclosures
Southwestern University Student Loan Code of Conduct
In accordance with the Higher Education Act of 1965, as amended, the Financial Aid Office at Southwestern University (SU) maintains and enforces the following Student Loan Code of Conduct. This Code of Conduct serves as the formal guiding principles in ensuring the integrity of the student aid process and ethical conduct of employees in regard to student loan practices.
Neither SU as an institution, nor any individual officer, employee or agent shall enter into any revenue-sharing arrangements with any lender.
No employee of the SU Financial Aid Office may receive gifts from a lender, guarantor, or a loan servicer. Agents who are employed in the Financial Aid Office of the university or who otherwise have responsibilities with respect to loans, must not solicit or accept any gift from a lender, guarantor or servicer of education loans.
An agent of the Financial Aid Office at SU or who otherwise has responsibilities with respect to education loans must not accept from any lender or affiliate of any lender any fee, payment or other financial benefit (including the opportunity to purchase stock) as compensation for any type of consulting arrangement or other contract to provide services to a lender or on behalf of a lender relating to education loans.
An agent of the Financial Aid Office at SU or who otherwise has responsibilities with respect to education loans must not direct borrowers to particular lenders or delay the certification of an education loan. Employees of the Financial Aid Office will not for any first-time borrower, assign through award packaging or other methods, the borrower’s loan to a particular lender or refuse to certify or delay certification of any loan based on the borrower’s selection of a particular lender.
Offers of Funds for Private Loans
Neither SU as an institution, nor any individual agent of the Financial Aid Office or employee will request or accept from any lender any offer of funds to be used for private education loans, including funds for an opportunity pool, to students in exchange for SU’s providing concessions or promises regarding a specified number of education loans, a specified loan volume of such loans or a preferred lender arrangement for such loans.
SU will not request or accept any assistance with financial aid office staffing. Exclusions include professional development training for financial aid administrators, providing educational counseling materials, financial literacy materials, or debt management materials to borrowers provided that such materials disclose to borrowers the identification of any lender that assisted in preparing or providing such materials or staffing services on a short-term, nonrecurring basis to assist SU with financial aid-related functions during emergencies, including State-declared or Federally declared natural disasters, Federally declared national disasters, and other localized disasters and emergencies identified by the Secretary.
Advisory Board Compensation
Any employee who is employed in the Financial Aid Office at SU or who otherwise has responsibilities with respect to education loans or other student financial aid at SU and who serves on an advisory board, commission, or group established by a lender, guarantor or group of lenders or guarantors, must not receive anything of value from the lender, guarantor, or group of lenders or guarantors, except that the employee may be reimbursed for reasonable expenses as that term is defined in §668.16(d)(2)(ii), incurred in serving on such advisory board, commission or group.
Southwestern University’s Financial Aid Office does not endorse any lender presented and has not ranked the lenders by any established measure. The list of lenders serves only as a general guide to assist student borrowers with educational funding options to fulfill their educational goals. The following established lenders have been placed on our lender list because they provide exemplary service and financing options that provide a wide range of benefits to their borrowers. A student borrower may select any lender and is not restricted to the lenders presented on the lender list provided. A borrower should not be directed to any specific lender by the University.
Southwestern University does not receive any benefits in exchange for placing on a lender on the lender list. For lender specific borrower benefits please refer directly to the lender’s website.
Preferred Lender List Disclosures
Schools who participate in a Preferred Lender Arrangement must disclose on the school’s website, and in all other informational materials that discuss education loans, the following:
Information required to be disclosed under section 128(e)(11) of the Truth in Lending Act. In accordance with the Truth in Lending Act, students borrowing private education loans must receive three required disclosures from their lender of choice at the following stages of the loan process: on or with the application; after loan approval; at consummation of the loan. The disclosures include for example, information on the amount financed, the finance charge expressed as an annual percentage rate, the number, amount, and due dates or period of payments scheduled to repay the total of payments. Disclosures will be provided by the student’s lender of choice.
A statement that the prospective borrower may qualify for FSA grants and loans, and that the terms and conditions of FSA loans may be more favorable than the terms and conditions of private education loans.
Truth in Lending Act
Under the federal Truth in Lending Act (TILA) § 128(e)(11) and § 128(e)(1) and § 487(a)(28) of the Higher Education Act of 1965, as amended, the following disclosures must be made to the borrower in written or electronic format:
- The Private Education Loan Applicant Self-Certification Form
- The information required to complete the form, including the cost of attendance, estimated financial assistance and the difference between the two amounts.
In addition to the information referenced above, the form explains that:
- Free or lower-cost federal, state or institutional aid may be available. To apply for federal grants, loans and work-study, a student must submit the Free Application for Federal Student Aid. The form is available at www.fafsa.ed.gov or by calling 1-800-4-FED-AID;
- A private loan may lower eligibility for free or low-cost federal, state or institutional aid;
- You (the borrower) are strongly encouraged to pursue the availability of free or lower-cost federal state or institutional aid with the university; and
Applicants must provide a complete, signed copy of the self-certification form to the private loan lender that they choose. The lender must collect and maintain the self-certification form, prior to disbursement of a private education loan.
General information about private loans
Private loans are secondary sources of financing available to students that should only be considered after federal and state aid resources have been exhausted. Southwestern University advises students and parents to pursue all federal and/or state financial aid options they may qualify for before applying for a private education loan. To determine your eligibility for federal and/or state aid, complete a FAFSA at www.fafsa.ed.gov. The terms and conditions of federal and state aid are generally more favorable than the terms and conditions of private loans.
Please read through the information provided by the Southwestern University Financial Aid Office, and do your homework when comparing lenders and loan products.
Private Education Loans – what to consider before borrowing
Exhaust federal loans for both students and parents
For students who are U.S. citizens or permanent residents, maximize your federal education loans first. Contact the SU Financial Aid Office at firstname.lastname@example.org to see if you have federal loan eligibility.
Be an educated consumer
Learn the language of student loans, including terms like interest, deferment, repayment, capitalization, forbearance, default, etc.
Be selective when choosing a lender
Look for a lender that will give you the best interest rate, lowest fees and best repayment plan. Failure to fully research these items can cause you to incur excessive debt.
Borrow only what you need
Avoid the temptation to borrow more, especially if you are informed that you qualify for more than what you need. Remember, you must pay back every dollar borrowed plus interest.
Recognize your long term commitment
Realize that borrowing loans can impact your financial choices and priorities after graduation.
Don’t decide based on interest rate alone
Consider loan comparisons using either long term priorities (the total cost of borrowing) vs. short term priorities (such as the lowest monthly payment requirement) or both. Consider the amount of loan fees charged. Weigh what you can afford monthly vs. how much you are willing to spend over the life of the loan repayment. Use a calculator to estimate your monthly payments, such as http:///www.finaid.org/calculators.
Know your repayment contingencies
Research “what if “ scenarios on repayment, such as: If you leave and later return to school, do you still have to continue payments on your loan?; If you run into financial hardship, can you postpone payments?; or If you die, does your estate and/or cosigner get released?
Avoid loan default
If you fail to honor the terms of your promissory note, you risk default, which will have an adverse effect on your credit. This can have a negative impact for years and may prevent you from using your credit for future purchases and financing.
Keep in touch
It is YOUR responsibility to notify your lender if you move, if you go back to school (and wish to apply for deferment of your loan), etc. You should not rely on any other party to do this for you, including Southwestern.
Why a Preferred Lender List?
The SU Financial Aid Office takes financial advising very seriously. Because of this we use a Preferred Lender List to provide a starting point for families to begin researching private loans with the intention of preventing families from dealing with risky products and unknown lenders, and to make it easier for families to make private loan decisions by having reliable information in one place. There are many student loan lenders from which a student can choose, and students have the right to select the lender or loan product of their choice.
SU has partnered with ELM Resources to provide a lender comparison and application tool. Please visit our ELMSelect (www.elmselect.com) website. You may compare and apply with any lender on the list or with any other lender of your choice, even if they do not appear on SU’s lender list. ELMSelect’s model meets regulatory standards outlined in Section 34 CFR 601.10 and 601.11 of the Code of Federal Regulations.
The lenders we have selected for our list responded to a Request for Information sent to our state listserv of Financial Aid Administrators, and were evaluated by members of the Financial Aid Office staff for excellence in the following areas.
- Demonstrated history and ongoing commitment to student lending (Lender stability & reputation)
- Borrower benefits, such as repayment and graduation incentives
- Broad student eligibility requirements, which provide options to students who may not be eligible for federal student aid
- Zero origination or repayment fees
- Competitive variable and fixed interest rate offerings
- Options for forbearance and death or permanent disability discharge (Default management)
- Options for in-school repayment
- Willingness to provide co-signer release when the student borrower has demonstrated their ability to repay the loan on their own
- Customer service and Technology (online application w/electronic signature)
This evaluation process takes place on an annual basis and as a result, the Preferred Lender List may change.