Responsible Student Loan Borrowing
Evaluating Student Loan Lenders
RIT recognizes that after all other financing options have been exhausted, families may choose to use alternative sources of lending to help offset the cost of attendance.
We strongly suggest that prior to a dependent student applying for an alternative educational loan through a private lender that the parents of the student consider the Federal PLUS Loan program since it is generally a less expensive loan with a lower, fixed interest rate as compared with an alternative loan. Parents should understand that PLUS loans are obligations of the parent and not the student. Private or alternative loans obligate the student for repayment, but in most cases a parent acts as the cosigner for the alternative loan thereby obligating the parent if the student fails to repay the loan.
Graduate students should apply for the Federal PLUS Loan for Graduate Students rather than a private loan since the federal loan has a fixed interest rate and for most students does not require an additional creditworthy cosigner unlike the majority of private lenders.
Various lenders offer alternative loan programs to students. Students and their cosigners should be educated consumers and carefully compare the programs and terms offered. Alternative loans are not subsidized by the federal government. Students must be creditworthy and/or have a creditworthy cosigner. Interest rates for these loans are largely based on the credit scores of the borrower and/or cosigner.
The maximum amount that a student may borrow is equal to RIT’s cost of attendance minus other financial aid. If a student does not know how much to borrow or if a student needs to borrow for additional educational-related expenses such as computer equipment, they should contact their Financial Aid Counselor to discuss their specific situation.
After determining how much to borrow, we encourage students to carefully evaluate the terms offered by lenders. Compare the following lender services when deciding which lender to select:
- Does the lender have a 24-hour toll free phone number that you can use to reach a “live” associate?
- Does the lender have online account access?
- Will the lender sell your loan at repayment? And if so, how will the lender notify you of the sale so that you know where to send your payments?
- Does the lender offer an on-line loan application process?
- How will you be notified of the credit decision on your loan application?
- If your loan application is declined, does the lender have an appeal option?
- Does the lender charge a processing fee when originating the loan?
- Does the lender charge late fees during repayment? When are late fees assessed to the loan?
Loan Disbursement of Funds
- Can the lender disburse the funds on a semesterly basis to match RIT’s tuition billing schedule? Or is the lender limited to the number of disbursements it can send to the school?
- Is the loan disbursed directly to the school? Or is the loan paid to the student?
- How does the lender calculate the interest rate on your loan?
- How often can the variable interest rate adjust on the loan? Annually, quarterly, or monthly?
- Does the lender offer an interest rate reduction for auto debit repayment?
- Does the lender offer an interest rate reduction after you make a certain number of on-time payments?
- Does the lender offer a grace period after the student leaves school prior to starting repayment?
- Are there any penalties for late payments?
- Does the lender offer deferment options for times of unemployment or illness?
Remember each lender is different. We will be happy to work with any lender a student decides to secure alternative loan funding through, however, we strongly suggest that students avoid applying for loans that are paid directly to them instead of the school. These loans are known as Direct-to-Consumer loans and in most cases have higher interest rates than other alternative loans that disburse directly to RIT. Many students who use Direct-to-Consumer loans go into greater debt due to the higher interest rates and borrowing more than what they actually need. Again, if you are unsure as to how much you need to borrow, contact our office to speak to a Financial Aid Counselor.
RIT does not recommend or endorse particular lenders. We encourage students and parents to review all of the available information very carefully. Another helpful website to visit is the Loan Section of FinAid.org.