ALPLN Loan Overview
An ALPLN loan is a type of private student loan. The terms “private” and “alternative” may be used interchangeably to describe this student credit facility. They tend to carry higher rates of interest than government-issued products like PLUS, Stafford, or Perkins loans. As such, most experts recommend using them only to supplement federally-backed loans and scholarships.
Since ALPLN typically comes with higher loan limits than their federal counterparts, they are often used to cover the cost of tuition at expensive private institutions. Graduate students who do not qualify for financial aid may also utilize ALPLN loans. The base rates of interest on these products vary according to the proclivities of their issuers and the credit ratings of their borrowers. Once issued, most ALPLN loans adopt variable interest rates that closely track the LIBOR benchmark and change quarterly. Some lenders may offer low “teaser” rates for a specified period at the outset of the loan’s term, making alternative loans an attractive option for families who can afford to pay back a significant portion of their balance in short order.
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ALPLN Loan: What You Need to Know
Since they are not backed by the full faith and credit of the U.S. government, ALPLN loans may require borrowers to find a co-signer. This is especially common for young borrowers and older students attending college for the first time. In fact, many lenders have taken to requiring a co-signer for their ALPLN loans regardless of the circumstances.
In order to remain eligible to receive disbursements, borrowers generally must take enough school credits to be considered a half-time student. Once a student drops below half-time status, they must begin repaying their loan immediately and may forfeit future disbursements. Most lenders require students who wish to renew their full-time status to reapply for their loans.
The repayment term on a standard ALPLN loan may range from 10 to 25 years. Any fees associated with the loan’s origination are added to the balance to be repaid. Most lenders offer three basic repayment options:
- Immediate repayment
- Interest-only repayment
- Full deferral
Borrowers must begin repaying student loans specified as “immediate repayment” vehicles as soon as the loan is granted. Doing so may be challenging for a full-time student with limited employment opportunities. However, it can benefit students whose parents have chosen to assume the cost of the loan: If their parents can pay off most or all of the loan before its low teaser rate expires, they may save considerable amounts of money. Alternatively, members of the workforce who attend graduate school on a half-time basis may elect to use this method for the same reason.
While they’re attending school, “interest-only” borrowers must repay the interest on their loan’s principal as it accumulates. Once they graduate, they will be held responsible for repaying its full principal and any additional accumulations of interest.
“Full deferral” ALPLN loans must be repaid after a pre-determined grace period that may last as long as 12 months after graduation.