Commercial (otherwise known as private, or alternative) loans are offered by many private banks or lenders and are used for education expenses not covered by other sources of financial aid. In general, federal education loans have better overall terms than commercial education loans, specifically in the area of loan repayment. We encourage you to utilize all federal student loan eligibility before seeking an alternative student loan.
Commercial loans cannot be consolidated with federal loans, nor do they qualify for the many income-based repayment plans federal loans have. If you have excellent credit, you may qualify for a better interest rate than the federal loans’ fixed rates. If you are not concerned about possible future changes to loan terms the lender might dictate, you might prefer this kind of loan. The Law School does not include alternative loans in its financial aid packages, so if you choose to borrow a commercial loan, let us know.
Commercial loans are available to those law students who feel they will need more than the $20,500 maximum available from the Federal Direct Stafford Loan program, or who are either ineligible, or do not want a Federal Direct Graduate PLUS--or any federal loans, for that matter.
- Maximum amount: cost of attendance less other financial aid received
- Enrollment requirement: at least half-time, and be a U.S. citizen or a permanent resident, or provide a U.S. cosigner if you are not a U.S. citizen or permanent resident
- Rates: variable or fixed interest rate determined by the lender; may change as often as every 30 days, and have no interest rate cap.
- Approval: based on your credit history, which may also affect the interest rate; depends on lender.
- Credit criteria, application process and maximum lifetime borrowing limits depend on lender.
- Deferment: usually only for six or nine months after you have withdrawn/graduated from an institution. If you were to enroll in another program, your loan would not be deferred again.
- Not automatically discharged upon death or total and permanent disability. Lenders collect from your estate or, if a co-applicant signed with you, your co-applicant.
- Loan subject to TILA (Truth in Lending Act) requirements
Each commercial loan product has specific enrollment level requirements and prior balance coverage standards. Make sure the lender’s enrollment requirements and other standards meet your specific needs. The final approval and disbursement decision rests with the lender; school certification of the eligible amount is not a guarantee of loan funds delivery. Once approved, alternative loans have a rescission period during which time you have the right to cancel the loan prior to its disbursement. Required lender disclosures to you and rescission period will slow down the disbursement of the loan.
Due to recent changes in federal regulations, the Law Financial Aid Office is not allowed to offer recommendations on any lending program (see our Code of Conduct). It is wise to shop around for different lenders and products to find the loan option that best suits your needs. An internet search for "Commercial education loans," "private student loans," and or "alternative student loans" provides a valuable starting point for both learning about the terms of the loans and reviewing the products available from various lending institutions.