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What are Institutional Loans for Students?

Nearly 70% of undergraduate students graduate from college owing student loans. In addition to federal, state, and private educational loans, many colleges and universities offer their own loans to help students and their families pay for college expenses. Funds for these institutional loan funds come from the college’s resources, alumni, corporations, foundations, donors and repayments from prior college loan borrowers.

Each college’s loan funds may have its own set of rules in terms of amount available to borrow, specific eligibility requirements, as well as loan terms and repayment conditions. In many instances, schools offer more competitive interest rates and deferment provisions than federal and private student loans.

For example, several private colleges in Southern California offer an interest-free loan to high school graduates from a specific geographic region of the state. Recipients of such funds are determined by each college campus, have no origination or insurance fees, are subsidized by the respective college, and are given up to 10 years to repay the amount borrowed. Additionally, in many cases, repayment of these funds may be deferred (again interest-free) during periods of graduate study or post-graduate employment in certain occupations.

Oftentimes, college institutional loans may be available regardless of the student and his/her family’s federal financial aid eligibility, specifically federal loan eligibility.

Because each school’s own loan eligibility criteria may vary, students and their families are encouraged to check with the college or university they plan to attend to learn about the possible availability of institutional loan funds. As with any type of consumer indebtedness, borrowers should carefully review the terms and conditions for student loans whether the funds are derived from the federal, state, private or college sources.

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