Private (Alternative) Education Loans
A private education loan, or alternative loan, is a type of student loan offered by private lenders such as banks, credit unions, state agencies or online lenders to help pay for college tuition or other educational expenses. Unlike federal student loans, private education loans are based largely on the borrower's creditworthiness and often require a cosigner for students with limited credit history. Interest rates and eligibility are based on factors such as credit score, income and debt history. Rates may either vary over time with a variable-rate loan or remain constant with a fixed-rate loan.
Private education loans are regulated under the federal Truth-in-Lending Act (TILA); these loans are not issued, insured or guaranteed by the federal government. Federal student loans may offer more favorable terms and protections than private education loans, including flexible repayment options, deferment opportunities and loan forgiveness programs.
While it is ultimately up to students to determine the best means for themselves to pay for their education, CT State strongly encourages students to:
- Complete the FAFSA Application to determine eligibility for federal loan options.
- Compare federal and private (alternative) loans to determine the best way to finance their education.
Students who have questions regarding private education loans are encouraged to contact the financial aid office directly.
Finding Lenders
CT State will process private education loans for any lender selected by the student; the college does not recommend, endorse or maintain a preferred lender list for any specific lender. In administering private education loans, CT State adheres to a student loan code of conduct.
Borrowing Limit
A private education loan lender may approve you for a higher amount based on factors such as your credit history, income and debt obligations. However, CT State must certify the loan before it can be finalized, and the certified amount cannot exceed your cost of attendance. Your cost of attendance is largely determined by the number of financial aid-eligible classes you are enrolled in during the loan period.
Private Loan Certification
A private education loan certification request is sent to CT State after the lender has approved the loan and provided the required disclosures. CT State then reviews the student's account to confirm eligibility requirements, which may include enrollment status, cost of attendance and academic standings before certifying the loan.
CT State is required to provide the Private Loan Self-Certification Form to students who may be interested in taking a private education loan. This form is also available from private education loan lenders.
Disbursement of Funds
The Higher Education Opportunity Act requires lenders to provide borrowers with a minimum three-business-day right-to-cancel period and an additional three business days for the borrower to receive the final disclosure. Lenders will not disburse your funds until they have received all required documents, disclosures and borrower signatures.
The disbursement process begins once the lender releases funds to the college; funds sent electronically may take up to three business days to be received while paper checks will take longer. Once CT State has received your loan funds, there may be an additional 2-4 days of processing before funds are posted to the student account. Credit balance refunds resulting from private education loan proceeds will be processed within 14 business days of loan disbursement.