If you are borrowing money for college and need money for more than just tuition, you might want to consider getting an uncertified student loan. Most student loans are certified, meaning the school approves the loan amount and verifies that it is for tuition and other education related expenses. Schools and lenders communicate through a central clearinghouse and the school receives the loan money directly from the lender. Federal direct student loans are always certified loans. This system allows the lender to check up on the student and make sure they are not receiving more than the tuition cost and also whether they are receiving any other financial aid.
Uncertified loans, also called non-certified loans, are loans from private lenders that go directly to the borrower. The lender does not verify that the loan is used for education related expenses, although it will ask for proof that the borrower is enrolled in school.
The advantage of uncertified student loans is that you may be able to get much more money than you need to cover tuition. The lender will not limit the loan to what you owe in tuition and you don`t need any approval from your school to borrow the money. You also don’t need to fill out the Free Application for Student Federal Aid.
Having an uncertified loan can allow you to have extra money to pay for non-education expenses, such as food and rent. It gives you a lot more flexibility in paying for school. As with any other student loans, you don`t have to start making payments on uncertified loans until six months after you leave school.
Uncertified loans can be a good option for students who don`t qualify for a federal direct loan. They come with disadvantages, however. Firstly, the interest rate is often higher for such loans, mainly because there is more risk involved and there may also be high origination fees. You also have to have a very high credit score to be able to get such loans and may even need a co-signer if you don`t meet the requirements for income and employment history.
Another disadvantage of uncertified loans is that they are hard to get. Many banks and other lenders have stopped offering the loans, although some large banks, including Wells Fargo, still do offer them. Uncertified loans can also negatively affect your eligibility for financial aid. It`s also not the best financial strategy to borrow money for non-school expenses. Tuition costs are high enough without adding additional debt.
If you do get an uncertified loan for college, you need to make sure you don`t borrow more than you need. You also need to ensure that you are responsible enough to handle the money, because you will have to pay your own tuition bill with the loan money you receive.