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Alternative Credit-Based Loans

Private educational loans (alternative loans) are credit-based loans provided by nationally recognized lending or banking institutions to eligible students. The maximum amount a student may borrow per academic term is the total cost of attendance minus the total of other financial aid received. Loans will typically be scheduled to disburse at the start of each term.

To ensure your funds are available to you when your classes begin, be sure to start the application process with your lender at least 2 months prior to the start of the term. To assist you in finding a lender, the following handouts provides an alphabetical historical listing of all lenders that students at American University have borrowed from in the past three years. Lenders that are no longer providing loans have been removed from the list. You may select any lender of your choosing, and you will not be penalized for choosing a lender not listed below. American University does not endorse, recommend, or promote any of the listed lenders.

Tips for Comparing Lenders

You may apply with any lender of your choosing. However, you are responsible for comparing the terms of the loans you are considering and selecting the loan that will best meet your needs. The following are some tips for you to consider when evaluating your options.

If you are not admitted and enrolled in a Bachelors, Master’s or PhD program at AU, then be sure to let the lender know up front that you are attending AU as a non-degree student. Certificate programs are considered non-degree.

Some loans, like the Federal Direct Loans, have a "fixed" interest rate meaning that the rate will not change over the life of the loan. Many alternative loans will have a variable interest rate, meaning that the rate can change over the life of the loan based on market rates. Variable interest rates can increase significantly resulting in higher minimum monthly payments or more payments over the life of the loan.

Some common fee names are origination fee, disbursement fee, or default fee. Some lenders may have a sliding scale of the fee that is charged based on the strength of your credit.

Front end benefits are discounts offered up front when the loan is disbursed. This can be a reduction of fees or a rebate. Back end benefits are discounts offered when the student goes into repayment. These might include an interest reduction for auto-debit payments. It is best to focus on discounts which you can't lose or on discounts that are immediate. Be aware of fine print that requires you to repay a fee rebate if you consolidate with another lender or charge a penalty to pay off the loan early (pre-payment penalty).

Find out from your lender how long it typically takes to process a loan application and whether it is a paper process or an electronic process. A paper application process can take 6-8 weeks if an original document needs to be mailed back and forth.

Lenders can let you know their average response time and satisfaction ratings. Many lenders will also now provide self-service options via telephone or the internet allowing you to get information on your loans even faster.

Some lenders will hold the loan for the life of the loan, guaranteeing you their service until you finish repayment. Other lenders may sell your loan to a new servicer.

Not all lenders will provide a loan for a term that has already ended. Let the lender know up front if you are applying for a loan for a past due balance so that they can let you know that you if you are not eligible or direct you to the correct loan product.

 

Step by Step Application Process

Students interested in applying for an alternative loan must follow the instructions from the lender carefully. These instructions will guide the applicant step by step through the process. Let the lender know up front if you are applying as a nondegree student, will be enrolled less than full-time, or are applying for a loan to pay a past due balance as these factors my impact your eligibility.

  • Submit a loan application directly to the lender of your choice. Please be sure to indicate that you will be attending American University. Applying with a credit-worthy co-borrower can enhance your credit rating and lower your interest rate and fees.
  • Enroll in your classes. Your loan application will not be certified by the Office of Financial Aid until you are enrolled in the minimum number of credits required by the lender and/or loan product.
  • The maximum loan amount is the amount of the total Cost of Attendance (COA) not covered by other financial aid. You should apply for the amount you will need for both the fall and spring semesters. Your lender will typically disburse the loan proceeds to American University in equal disbursements each semester.
  • Your lender will complete a credit check and advise you of the decision. If, for any reason, you feel that you may have difficulty with this credit check process, please contact the Office of Financial Aid at financialaid@american.edu to discuss your alternatives. It is important, given the lengthy processing time, that you explore your options and have a back-up plan in the event your loan application is not approved.
  • After initiating your application with the lender, a pre-printed promissory note will be provided to you by the lender. Sign and return the promissory note to the lender. Some lenders may allow you to sign your promissory note electronically via your lender's website. A signed promissory note is required prior to disbursement of loan funds.
  • Once approved, your lender will forward your application to the Office of Financial Aid at AU. We will certify the loan to verify your enrollment and eligibility and return the data to your lender. The maximum loan amount we can certify is the lesser of: the total COA not covered by other financial aid; the maximum amount allowed by your lender; or the amount you requested.
  • Loan funds will be applied to your student account when American University receives them from your lender. Until then, the loan amount will show on your award letter as estimated. Funds will be sent to AU via a paper check. You will be notified by the Office of Financial Aid if this check requires your endorsement. Student enrollment is verified prior to disbursement.
  • As loan processing depends on operations inside and outside of AU, please allow 6-8 weeks processing time. Please contact your lender with any status inquiries.
  • All non-federal loans require a new Private Education Loan Applicant Self-Certification form. This form must be completed by the student, signed and returned to the lender before any funds can be disbursed. Your lender may provide a blank form to you as part of the application process. You may also contact the Office of Financial Aid to speak with a counselor if you have any questions on how to complete this or if you would like to discuss your loan options in greater detail.
  • The lender must provide an application disclosure, an approval disclosure and a final disclosure. You will receive these throughout the application process. Keep these disclosures in your files for future reference.
  • A "rescission period" is mandated by the federal regulations. The intent of the rescission period is to allow borrowers a final opportunity to evaluate their needs for a private student loan and/or cancel the loan without penalty. Lenders cannot disburse funds until the end of the rescission period. The actual time frame for disbursement will vary from lender to lender. If you have completed all paperwork with your lender, then funds will pay at the start of the term or approximately two weeks after the Office of Financial Aid certifies your enrollment, whichever is later.