What are alternative loans?

Alternative Student Loans are credit-based student loans offered by alternative lenders.  Alternative loans are not based on need, but on the applicant’s creditworthiness. Alternative loans should be considered as a last resort since they typically have higher interest rates and less favorable repayment terms than government-backed student loans.

A Student may want to consider an alternative loan if:

  • They need funds in addition to their federal aid to meet educational expenses
  • They are not eligible for federal aid 
  • They have reached the loan limit for the Direct Loans Subsidized and Unsubsidized loan programs, but still need money for their education
  • They are dependent students whose parents are not willing to take out a PLUS Loan

Things to remember before applying for an alternative loan:

  • Discuss all of your options with a financial aid counselor prior to completing an application.
  • Be sure to follow each step of your lender's process when applying for an alternative student loan. Should you need assistance, please contact your lender as they will be able to provide you with assistance about the loan process.

When choosing a lender, consider the following:

Interest Rate:

What is the formula used by the lender to calculate interest and how often is interest capitalized (added to the principal balance of the loan)?  For instance, a lender might use the Prime Rate +1% as its formula, they may adjust the rate and capitalize each quarter. Other lenders might use the LIBOR as the index. 


Does the lender charge fees and, if so, what percentage of the loan does the fee comprise?  Some lenders may have a fee scale depending on the borrower’s credit worthiness.

Loan Amount:

Does the lender place an annual or aggregate cap on the amount the student can borrow?

Other eligibility requirements:

Does the lender require that the student be enrolled at least half time or will loans be made to students who are taking a lighter load?  Does the lender require that the student be in a degree program or will it lend to students taking courses for other purposes (personal and/or career development) that do not lead to a degree program?

Below is a list of lenders who continue to participate in the Alternative Student Loan Program and from which UMSL students have received alternative loans in the past 3 years. You may choose any educational loan lender you prefer, including lenders not on this list. 

Here is a List of Lenders that can provide alternative loans.