Taking out a private educational loans is a serious decision and understanding how they work is essential before you borrow. We’ll walk you through key concepts, examples, and considerations to help you make an informed financial decision.

What are educational loans?

An educational loan is money that a student or parent borrows in order to pay for a part of a student's educational expenses.

What loans are available at Southeastern?

Southeastern can process private educational loans that students take out from private lenders such as banks. Southeastern does not participate in any federal loan programs 

How do loans work?

Loans are complicated and it is important that you take the time to understand how they work before you take one out. If you do decide to take out a loan, you should pay close attention to the terms of the loans you your loan in particular, since the terms of loans can vary greatly.

Key terms

Borrower - the individual taking out a loan who is responsible for repaying it.

Cosigner - an individual who agrees to share the responsibility for repaying a loan if the borrower is unable to. Lenders may require a cosigner if the borrower is below a certain age or if they have a bad credit score.

Cost of Attendance - The estimated cost of attending school for one academic year. Schools are required to provide Cost of Attendances for each program. The Cost of Attendance includes charges billed directly by the school (tuition and academic fees, meal plans, housing charges for institutionally owned housing), but also charges associated with being a student that the school does not charge: food and housing for off campus students, personal expenses, transportation expenses, dependent care expenses. A student cannot borrow money that exceeds their Cost of Attendance after other financial aid has been applied.

Credit Score - a number that reflects a borrower's ability to repay a loan based on their previous history of borrowing. Credit scores typically range from 300-850, with higher numbers being better. Scores of 300-579 are considered poor, 580-669 are considered fair, 670-739 are considered good, 740-700 are considered very good, and 800-850 are considered excellent.

Default - A formal declaration by the lender that the borrower has broken the repayment terms of the loan. The amount of time it takes for a loan to enter default status varies and is set out in the terms of the loan, but it can range from 90 to 180 days of missed payments. There are many consequences for entering default, notably the borrower's and co-signer's credit score will be lowered, and the lender can require the borrower pay the entire balance of the loan immediately and may take legal action against the borrower.

Deferment/Forbearance- A temporary pause or decrease in the required payments on the loan. Different lenders will have different terms for which they may grant a borrower deferment. Interest is still charged on the loan while in deferment.

Delinquency - Failing to make the required payment of a loan by its due date. Being delinquent on loan payments may cause late fees to be charged and cause the borrower's credit score to decrease.

Disbursal - When the school applies the loan to your student account, giving you access to the money.

Grace Period - The period of time of time after the student graduates, withdraws from school, or drops below half-time enrollment during which a student is still not required to make repayments. It is essential to understand that while payments are not required, interest is still being charged against the principal that has been borrowed.

Interest - the cost to borrow money above and beyond the principal that is borrowed.

Simple Interest - You pay interest based on the remaining unpaid principal of the loan

Compound Interest - You pay interest based on the remaining unpaid principal as well as any unpaid interest.

APR - The Annual Percentage Rate describes the annual cost of a loan, including fees, that must be repaid in addition to the principal that is being borrowed.

Fixed rate - an interest rate that remains the same for the duration of the loan.

Variable rate - an interest rate that starts lower, but will increase over time, often increasing once the loan enters the repayment period.

Lender - the entity, often a bank or company, who provides the loan to the borrower, and to whom repayments are made.

Loan fees - additional fees that a lender charges, in addition to the interest rate

Minimum Payment - The monthly payment amount required by the terms of the loan. Failing to pay the minimum payment amount can cause late fees to be applied, can lower your credit score, and can eventually cause the loan to enter default.

Principal - the amount of money that an individual borrows from a lender and that must be repaid over the term of the loan.

Repayment Period - The period when the lender requires that loan payments are made. Educational loans normally do not require that payments are made while a student is enrolled in school in at least half-time enrollment. and during a grace period.  It is essential to understand that while payments are not required, interest is still being charged against the principal that has been borrowed.

Right to Cancel period - a time frame after your loan is approved by a school (normally 10 days), during which you may change your mind and cancel the loan without consequence. The school cannot give you access to the loan funds until after this period.

Term - the length of time that the borrower has to repay the loan. Educational loan terms can range from 5 to 20 years.

Repaying loans

 While payments may not be due until after the grace period of a loan, interest will begin building the moment the loan is disbursed.

A loan calculator can be used to determine the total amount of principal and interest you will pay if you make all of your payments on time according to your repayment schedule.. 

You can pay more than the required payment and instruct the lender to apply the extra payments to the loan principal, which will allow you to pay the loan off more quickly and pay less interest over the course of the loan.

You can also begin making payments on the loan while you are still in school, before payments are due, which will reduce the amount of interest you will have to pay over the course of the loan. 

Examples of loan repayments:

Here are two examples of what it will cost to pay back a loan. 

If you borrow $16,000 at a fixed interest rate of 5.5% for 10 years, with loan fees of 3.2% and a minimum monthly payment of $100, you will end up paying $21,300.46 total-that's the $16,000 you borrowed plus $4,771.53 in interest.

If you borrow $20,000 under the same terms (a fixed interest rate of 5.5% for 10 years, with loan fees of 3.2% and a minimum monthly payment of $100), you will end up paying $26,625.48 total-that's the $20,000 you borrowed plus $5,964.32 in interest.

What should you consider when thinking about loans?

Never borrow more than you need. While loans can be used to pay for any part of your Cost of Attendance, you should never use loans for unnecessary expenses.

Remember that if you fail to make your payments, your credit score will likely be impacted. A lowered credit score could make it far more difficult to borrow money in the future, for example, if you want to take out a mortgage to buy a home.

Ministry jobs are not normally high-paying jobs, which may make it more difficult to repay loans. In general, it is considered unwise to take out more in loans than you expect to make in your first year of working after graduating. 

Some ministry pathways, like serving as a missionary, may be limited by large amounts of debt. The IMB evaluates the amount of debt a student has when considering appointing them and may reject students with too much debt.

Loan forgiveness does not exist for private educational loans. You will be responsible to repay what you borrow, along with all interest that is charged. Even bankruptcy may not help discharge private educational loans.

What are other options besides loans?

Proactively pursue all scholarship opportunities available to you, including external scholarships. Talk with your state convention, local associations, and your local church to see if scholarship opportunities are available to you.

Consider working a part-time job while in school and during breaks from school. Or perhaps you might take fewer classes for a semester. Make sure you talk with Accounting Services about setting up a payment plan. Working, taking fewer classes, and setting up a payment plan may help you afford the cost of school.

Be sure to meet with the Financial Aid office to ensure you've exhausted all your options!

How do you take out a loan at Southeastern?

1. Prayerfully consider whether an educational loan is the best option. We recommend you talk with someone     who can help provide good counsel on whether a loan is necessary and how much to borrow.
2. Determine how much you actually need to borrow and make sure you borrow as little as possible.
3. Research private lenders to find a loan option that works for your situation. Read the information carefully to make sure you understand all the terms of the loan. Complete the application process for the lender.
4. Complete Southeastern's loan certification process.

Once the Financial Aid office has your completed loan certification form, we will verify that your requested loan amount is within our loan requirement terms and that your loan does not exceed your unmet cost of attendance. At that point we will certify your loan, wait for the right to cancel period to pass, and then disburse the funds to your account. The loan will first be used to cover any unpaid charges on your account. Afterwards, if there are leftover funds, you may request a check from Accounting Services for the balance and use the loan to cover any additional expenses associated with your Cost of Attendance.

Important Resources