FAP565: Financial Aid Podcast Starter Pack, episode 4 of 5

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Welcome to Episode 4 of the Financial Aid Podcast Starter Pack, a 5 episode miniseries designed to help you get started on the path of paying for college, as well as introduce you to the podcast and the Student Loan Network. My name is Christopher Penn, founder, host, and producer of the Financial Aid Podcast.

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This miniseries contains 5 episodes. Episode 1 is about scholarships and grants. Episode two is about the FAFSA, the free application for federal student aid Episode three is about federal student loans. Episode four, which you’re listening to now, is about private student loans. Episode five is about student loan consolidation and career stuff, things you do after you graduate. Let’s roll right into private student loans.

Fundamentally, private student loans are student loans, which are only funded by nongovernmental organizations like banks and financial institutions, and not guaranteed by the federal government, unlike federal student loans.
They provide supplementary funding in financial aid for students.
They are essentially unsecured consumer loans.
When you strip away all the stuff about them, they are just an unsecured consumer loan.
They do not require things like collateral.
You do not have to leverage a house or a car or anything.
What they are really about in terms of benefits is kind of four areas, options, freedom, flexibility, and availability.
In options, scholarships and federal financial aid are by no means a given when it comes to making college affordable.
Scholarship hunting takes time to generate results and there are no guarantees that you will find what you need.
Some federal financial aid and federal student loan programs are based on demonstrated financial need.
You have to file the FAFSA and you have to demonstrate that you are in a position where you need to get financial aid like the subsidized Stafford Loan, the Perkins Loan, the Pell Grant, and things like that.
Some loans, of course, do not require that like the PLUS Loan and the unsubsidized Stafford Loan, but if you fall in the category of not-poor-enough-for-lots-of-free-money-from-the-government-but-not-rich-enough-to-pay-for-a-college-out-of-pocket, federal financial aid may not be able to cover all of your educational expenses.
Act Education Loans like the ones here at AlternativeStudentLoan.com and ActEducationLoans.com can function as gap-filling loans meaning they can help make up a difference between federal financial aid and the bottom line, on your tuition bill.
You may still have some money, some expenses that you did not predict that just sprang up over the last second that is a great place for private student loans to operate.
Act Education Loans are not need-based, which means that eligibility is not confined to the neediest students.
In terms of freedom, there are thousands of educational institutions in the United States and not all of them are certified under the title for the Higher Education Act, which is a federal student loan program.
This does not mean they are not valid educational institutions, not at all.
Some schools simply choose not to accept federal funding and the requirements that come with them.
Act Education Loans are available to students attending any approved school.
That includes more and more private nontraditional educational institutions giving you the freedom to pursue whatever path in life you want to follow.
In terms of flexibility, deadlines are kind of the key for it.
At every point in the federal financial aid process, there is another deadline to watch from the FAFSA to when you can apply for student loans, when you can receive disbursements, and things like that, paperwork, meetings, sessions, entrance counseling, you name it, it is all in there.
private student loans give you the flexibility to apply for an Act Education Loan whenever the need arises during your time as a student.
So, if the tuition is due before the semester starts, no problem.
While federal loans may not disburse until a month into the semester, these private student loans can fund as few as five business days after receipt of a completed application.
Past due balances also are no problem.
So, if you have graduated or you are out of school now or it is just sometimes you have got a past due balance, you can apply a private student loan to a past due balance.
There are no deadlines to worry about.
The last area is availability.
Federal financial aid is limited and it is, unfortunately, not a secret that appropriations for financial aid have not kept up with rising tuition calls and inflation.
Act Education Loans provide up to $30,000 per year minus existing financial aid, a far more realistic loan limit for many of today’s private undergraduate institutions filling the gap between federal financial aid and the total cost of education.
So, let us talk about the requirements for a private student loan.
Let’s talk a bit about the requirements for an Act Education Loan.
Act Education Loans can be provided to you as non-need-based loans specifically because they are credit-based loan.
It is similar to an unsecured consumer loan.
As such is vital, understand exactly what your credit score is and where it comes and all that stuff.
What is credit?
Fundamentally, it is a record really of how timely you are in paying back money you have borrowed.
Credit scores are the numerical indexes that determine credit.
Credit scores are based on algorithms, including one of the best known built by the Fair, Isaac and Company called the FICO score.
Scores are negatively impacted by events like late payments, incomplete or partial payments, defaults, judgment liens, kind of anything really that goes wrong with the payment and the scores range from 300-900, 900 as a perfect credit score, 300 is absolutely a bizmo.
You have to — multiple bankruptcies and defaults and there has been a lot of trouble somewhere in the past.
The actual algorithm is a trade secret of the Fair, Isaac and Company, but the following breakdown approximates the way they device or compose a score, 35% of your FICO score is based on your payment history, how untimely were you, how did you make at least some down payments, 30% is an outstanding debt, how much you currently owe, so it is a debt-income ratio thing, 15% is the length of your credit history, looking for a long history of making payments on time, 10% are recent inquiries on your credit report, so it is very important if you are shopping around for a loan.
[FICO citation: HYPERLINK "http://www.myfico.com/CreditEducation/" http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx ]
You do not actually file a bunch of applications because that will, of course, cause your credit score to decline and 10% are types of credit in use or lines of credit.
So, creditors want to just generally see a variety of different types of credit rather than your eight credit cards and nothing else have a credit card on auto loan and a mortgage, it just looks better.
The average credit score for what is called good credit is around 675 or higher for most major lenders like mortgage lenders and then scores lower than 625 demands scrutiny while scores lower than 600 will often be denied outright.
Now, an important thing to note for a lot of students especially undergraduate students is that they usually do not have a lot of credit history and not a lot of variety in the trade lines like types of credit in use.
So, for undergraduates especially, but even for some graduate students, it is vitally important that if your credit is not really, really extensive and solid that you get a co-signer.
A co-signer can be any person who has good credit or who meets the credit conditions for an Act Education Loan.
So, that is kind of the brief overview of credit.
The best thing to do if you want to actually go through the process is actually call us at 866-229-8900 and see what the situation is because if you talk to one of our reps, we can take your application over the phone and you’ll be notified in as little as 15 minutes if you’ve been pre-approved.
Let us talk about the loan application process now.
So, let us talk about the application process.
If you go to AlternativeStudentLoan.com or ActEducationLoans.com, you will find a whole bunch of information on the sites about how to apply for things, how to get things.
Before you apply, you are going to need to have some information:
1.
The Act Education Loan is available to U.S.
citizens or permanent residents attending schools within the United States of America or international students with a U.S.
citizen co-signer.
A co-signer is strongly recommended for you as citizen as required without exception for international students.
You or your co-signer must meet the credit guidelines that have been provided on the site.
2.
What information do you need to apply? You are going to need to have some paperwork gathered that will make the application go by that much faster.
You are going to need your full name, social security number, date of birth, permanent mailing address (PO Boxes are not permitted) and number of years you have been living in that address, monthly rate of house payment, home phone number, occupation or position if you have one, employer and how long employed, again, if you have one, a business phone number if you have one, gross annual income, proof of enrollment like a tuition invoice or letter of acceptance or something like that.
References, nearest friend or relative not living with you.
It must be a different reference from the co-signer.
Now, if you are applying with a co-signer and again, I strongly, strongly encourage that you do so, your co-signer has to provide all these information to you as well.
There is a set of fees, schedules, and things for origination fees and things like that.
Again, check the websites AlternativeStudentLoan.com and ActEducationLoans.com because all the fees and qualifications and things and interest rates change.
They change on a monthly basis.
So rather than put them into an audio file, which would have to be remixed every month, we just say, “Check the sites, AlternativeStudentLoan.com or ActEducationLoans.com or for the very, very latest, most up-to-date information, give us a call, 866-229-8900.”
Now, what happens? You file your application request online.
Your credit is reviewed, your application is reviewed by our quality control department and then if you have been accepted, if the loan is okay, it will be disbursed — this is what is called a direct to consumer loan, DTC, it is sort of the inside terminology.
What that really means is that like for example the Stafford Loan, which you can get at StaffordLoan.com, the proceeds from that are sent as a check to the school’s Financial Aid Office where they apply.
With the direct consumer loan, instead of going to the school, the check actually comes to your house.
Again, a good reason to have a valid permanent address, then it is up to you to manage the money as to how you need to apply.
The reason for this is pretty simple.
A lot of the education expenses outside of tuition and things are stuff that you probably are going to be managing.
So, for example you will apply for federal student loans like at StaffordLoan.com and then that will take care of the percentage of tuition, but you also have things like books and rent, possibly some transportation expenses, all sorts of stuff, off-campus activities fees and things, anything that can be tied back to an educational purpose with documentation is an eligible expense and the money is sent to you so that you can pay it out.
The school does not have to try and manage it because, admittedly, a lot of these education expenses and things can be overwhelming to cut checks for constantly.
So, the system is such that you are the one writing out the checks rather than making the school do it, which some financial aid officers prefer.
So, that is the process.
Now, if something goes wrong or your application is not approved, you will be contacted and someone will let you know what you need to do next to get the loan.
Usually, it is going to involve just getting either a co-signer if you did not apply for one or if your co-signer, if their credit is not as good as we would like to see, then of course, we will recommend that you find a different co-signer.
Unlike the federal PLUS or the Parent loan, which you could find at ParentPLUSLoan.com, the Act Education Loan does not require you to use a parent, so you can use a grandparent, an uncle, aunt, relative, friend, anybody who would be willing to essentially be a co-borrower on your loan and that is the application process.
As long as everything goes smoothly and you are able to return the documentation that is requested things like pay stubs and stuff like that, the application should be disbursed within five business days of a completed application and that means that everything is taken cared of, the paperwork has been approved, everything is all set, the loan could be then disbursedd and you should receive a check in the mail.
So, that is a quick overview of the private student loan program at AlternativeStudentLoan.com and ActEducationLoans.com.
Again, if you have any questions about this product, if you need any advice or just someone to talk to about it, give us a call, 866-229-8900 and someone will be more than happy to help you, more than happy to talk to you about it.

Podsafe Music
- It’s traditional for the Financial Aid Podcast to have independent music in every show, and this miniseries is no exception.
- Black Lab, See the Sun

Get in touch with the Financial Aid Podcast!

Reminders
+ Join the Financial Aid Podcast Loyalists on Facebook
+ Make me your Facebook friend
+ Buy Virtual Hot Wings, the Matthew Ebel live bootleg album!
+ Private student loans available at any time - visit AlternativeStudentLoan.com
+ Stafford federal student loans at StaffordLoan.com
+ Student loan consolidation at StudentLoanConsolidator.com
+ FAFSA form tutorials and free help at FAFSAonline.com
+ Financial Aid Podcast Show Notes at FinancialAidPodcast.com.
+ The Financial Aid Podcast is a publication of the Student Loan Network.

Questions? Comments? Suggestions? Email me at financialaidpodcast {at} gmail {dot} com, visit http://www.FinancialAidPodcast.com, or call 206-350-1208. AIM: FinAidPodcast Add me to your iTunes by visiting http://www.FinancialAidPodcast.com/itunes/

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