Private Education Loans, also known as Alternative Education Loans, help bridge the gap between the actual cost of your education and the limited amount the government allows you to borrow in its programs. Private loans are offered by private lenders and there are no federal forms to complete. Eligibility for private student loans often depends on your credit score.
Private student loans may be used to pay for the EFC, the family’s portion of college costs. While some lenders may offer private student loans in excess of the cost of attendance, any amount exceeding the difference between cost of attendance and financial aid is considered a resource. Like an outside scholarship, this will reduce need-based aid. Students cannot borrow beyond the cost of attendance, and all aid combined must not exceed the cost of attendance.
Truth in Lending Information for Students (Regulation Z)
On July 30, 2009 the Federal Reserve approved final amendments to regulation Z that revise the disclosure requirements for private education loans. The amendments implement provisions of the Higher Education Opportunity Act (HEOA) enacted in August 2008. Under the amendments, creditors that extend statements private education loans must also disclose information about federal student loan program that may offer less costly alternatives. Additional disclosures must be provided when the loan is approved and when the loan is consummated. The rules became effective on September 14, 2009, and lenders were required to be in compliance on February 14, 2010.