Private Loans

The federal loan programs, particularly the PLUS-loan program, will probably provide you with all the borrowing power you need. But if you're looking for additional funds -- or would prefer a private lender to the federal government -- several not-for-profit organizations make education loans to students and parents at rates that in most cases are slightly higher than those on PLUS and Stafford loans. Loans for undergraduate education are described below. All three organizations also have loan programs for graduate students.

Nellie Mae. Besides making Stafford and PLUS loans, Nellie Mae (Braintree, Mass.; 800-367-8848; www.nelliemae.com) offers parents EXCEL education loans at variable rates that are calculated monthly or annually. The annual rate is prime plus 2 percentage points, calculated August 1, and the monthly rate is prime plus 0.75 percentage point, adjusted if necessary at the beginning of each month. You can borrow up to the full cost of college annually, minus any financial aid you receive.

If you're creditworthy, you qualify -- regardless of your financial need. You must have a clean credit history (with no major delinquencies) for at least two years, and your debt payments, including a mortgage and the EXCEL loan, cannot exceed 40% of your gross monthly income.

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You pay an up-front guarantee fee of 6% (2% with a co-borrower), which goes into an insurance fund that covers loan defaults.

Sallie Mae. In addition to buying Stafford student loans (as described above), Sallie Mae makes its own supplemental student loans, called Signature Loans, for up to the full cost of college, less other financial aid. The interest rate is variable. (It equals the prime rate plus zero to two percentage points, depending on the creditworthiness of the borrower and whether or not there is a co-borrower.) A fee of 0% to 6% (depending on the same variables) is subtracted from the loan proceeds.

One nice thing about these loans is that your child can take them out at the same time as a Stafford loan at lenders that participate in the Signature Loan program. That means all of his or her loans will be serviced as one account. And borrowers are eligible for on-time repayment discounts.

The Education Resources Institute (TERI). TERI (800-255-8374; www.teri.org) makes its Alternative Loans for up to the annual cost of college, minus financial aid, to parents or to students, although most students need a parent as a co-borrower. Loan approval is based on creditworthiness, with criteria similar to those for Nellie Mae's EXCEL loans.

TERI offers the loans through several lenders who can serve Alternative Loan borrowers nationwide. They include Bank of America, Bank One, First Union and PNC Bank. The rate is prime minus 0.5 points. TERI charges a 5% to 6.5% origination fee, which is determined by the repayment schedule. The fee can be added to your loan balance.

PLUS Loans