Students are encouraged to apply for all scholarships, Federal grants and Federal loans for which they are eligible before considering a private education loan, sometimes called an alternative loan. Terms and conditions for Federal student loans may be more favorable than those of private education loans.
Private education loans allow students to borrow in their own name, without any government guarantee. The loans are based on the borrower's credit, and it is often beneficial to have a credit-worthy co-signer. Since these are not governmental loans, the lender assumes more risk and may charge a higher interest rate, larger loan fees, or have more stringent credit requirements than the federal loan programs. Private loans cannot be combined with federal loans if a student wishes to consolidate his/her loans after graduation.