Alternative Loans

Alternative education loans (also known as a private loan) are offered by banks, credit unions, and other private lenders. These loans can help cover educational expenses when federal financial aid and scholarships are not enough.

Unlike federal student loans, private loans are based on credit approval and may have fewer borrower protections. We encourage students and families to carefully review all options before borrowing.

Alternative vs. Federal Loans

There are several key differences between alternative and federal loans:

Alternative Loans

  • Lender sets the terms & conditions
  • Loan terms vary from lender to lender
  • Generally have a higher variable or fixed interest rate
  • Higher interest may increase the total repayment amount
  • Interest received will depend on your credit score
  • Repayment may begin while in school

Federal Direct Stafford Loans

  • Terms and conditions are set by the federal government
  • Loans are guaranteed by the federal government
  • Federal government determines the interest for the loans
  • Interest is fixed
  • Repayment plans vary
  • No credit check required
  • Payment deferred while enrolled half time or more

Before considering a private loan, you should explore:

  1. Grants and scholarships (do not need to be repaid)
  2. Federal student loans (typically offer lower, fixed interest rates and flexible repayment options)
  3. Private loans are generally a last option after other aid has been used.

 

Interest Rates and Rate Accrual

The following table compares interest rates and rate accrual for a $10,000 loan.

Type of Loan Interest Rates Daily Accrual while in school Daily Accrual after 6-month grace period
Federal Direct Stafford Subsidized 6.39%* *$0 $1.77 per day
Federal Direct Stafford Unsubsidized (Undergrad) 6.39% $1.77 per day $1.77 per day
Federal Direct Stafford Unsubsidized (Graduate) 7.94% $2.17 per day $2.17 per day
Federal Direct PLUS (Graduate or Parent) 8.94% $2.44 per day $2.44 per day
Alternative Loan Varies from 4.0% - 15.0% $1.09 - $4.10 per day $1.09 - $4.10 per day

*Subsidized loans do not accrue interest while student is enrolled at least half time or during the 6-month grace period after graduation.

How Private Loans Work

Private loans are not part of the federal financial aid process. This means:

  • You apply directly with a lender (not through the FAFSA)
  • Each lender has its own application, terms, and approval process
  • If approved, funds are typically sent directly to the school

Before Applying for an Alternative Loan:
Student must be enrolled in courses for the semester

How to Apply

Before Applying for an Alternative Loan:

  • Student must be enrolled in courses for the semester. SJSU will only certify for Fall, Spring, Summer, or the current academic year.
  • Open University Students are considered non-matriculated. Student must apply with a bank or credit union that allows non-matriculated status. 

Application Process

  1. Select a lender by going to ELMSelect Private Student Loans. In the "School Search" box, enter San Jose State and select a lender program from drop-down list.
  2. Contact the selected lender and complete an application. Note: Students can apply with any bank or credit union that offers student loans. ELMSelect is a great resource to compare lenders, but it is not a comprehensive list.
  3. The lender will complete a credit check and make an approval or denial. The lender will contact you if any additional information, or a co-signer, is needed. The applicant will receive various disclosure statements from the lender explaining interest rates, terms, fees, and total cost of the loans. The lender may ask for a self-certification form.
  4. Once the applicant has been approved and the lender has received all required documentation, the lender will notify SJSU to complete a certification form. The form verifies the student's enrollment data, cost of attendance and estimated financial assistance. Remember: The school cannot certify more than your cost of attendance minus other aid received. Certifications can take 2-3 weeks to certify.
  5. Funds are received and posted by the Bursar’s Office. For questions regarding funds received, contact the Bursar. Please note: Loan disbursements may take an additional 5-10 business days after the funds are received by the school.

Students that have questions regarding certification or loan amounts should contact the Financial Aid & Scholarship Office at 408.283.7500 or fao@sjsu.edu.

Additional Information

To help you better understand private education loans and make informed borrowing decisions, we encourage you to review the following resources on the following links: