Alternative Loans

An alternative student loan (also known as a private loan) is a private educational loan offered by private lenders, such as banks and credit unions. Always read all of the terms and conditions before applying for any type of loan.

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 applying for alternative loans, students should consider lowest-cost options first, i.e. grants and scholarships (which do not have to be repaid) and federal direct loans (which have low, fixed interest rates). 

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 5.05%* *$0 $1.38 per day
Federal Direct Stafford Unsubsidized (Undergrad) 5.05% $1.38 per day $1.38 per day
Federal Direct Stafford Unsubsidized (Graduate) 6.60% $1.80 per day $1.80 per day
Federal Direct PLUS (Graduate or Parent) 7.60% $2.08 per day $2.08 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 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.

Students that have questions regarding certification or loan amounts should contact the Financial Aid & Scholarship Office at 408.283.7500 or