Alternative loans help to cover the costs of college with low interest rates and long term repayment options where federal funding leaves off.

When you fill out a FAFSA, you are applying for federal government aid to help fund your college education. You can get a hold of several different sources of money this way, including grants and several forms of FFELP federal loans, such as the Stafford, Perkins, and PLUS loans. However, as you add up the sum of these loans that are approved for your schooling, you realize this only covers a fraction of your educational expenses, and you are left with a hefty bill. This is where alternative student loans come into play. Alternative loans help to cover the costs of college with low interest rates and long term repayment options where federal funding leaves off.

There are a number of sources from which you can obtain alternative student loans, with some offering better terms than others. The number one thing to remember is that, when working with private lenders, you shouldn't expect to get the best interest rates, since banks and other financial institutions focus on profiting from lending money. That means that, if you are going to make use of such sources, you need to shop around for the best rates and the lowest fees.

On the other hand, most states have a sanctioned party that offers alternative student loans that are similar to federal funding, using the same tax exempt state educational bonds to fund these programs so that they can pass on a great deal of savings to consumers. Such loans typically have very low interest rates, are free of lending fees, and have flexible, long-term repayment options that are similar to or even better than those offered through federal plans.

Keep in mind that alternative student loans are going to be credit-based, meaning that students who apply will need to have a good credit history or a co-borrower with excellent credit and a low debt-to-income ratio. Most are contingent upon students being enrolled at least half time in school and do not require repayment until the end of a six month grace period beyond graduation. Many offer further interest rate cuts as a reward for continuous on time payment or for direct withdrawal payments. These terms can also include the ability to release your cosigner after a certain period of time.