Private student loan programs generally issue loans based on the credit history of the applicant and any applicable co-signer/co-endorser. This is in contrast to federal loan programs which deal primarily with need-based criteria, as defined by the EFC and the FAFSA. For many students, this is a great advantage to private loan programs, as their families may have too much income or too many assets to qualify for federal aid, but insufficient assets/income to pay for schooling without assistance.
Additionally, many international students studying in the United States can obtain private loans (they are ineligible for federal loans in many cases) with a co-signer that is a United States citizen/permanent resident.
Student loans from private guarantors are based on the contract between student and lender, and do not offer many of the protections that borrowers may expect from government based student loans should they face difficulties during repayment.
The terms for alternative loans can vary greatly from lender to lender and even from the era the loan is made. Some do not even call for expiration of the contract at the death of the borrower, which means the holder of the loan can go after the estate. Deferments, forbearances, and federally subsidized consolidations may not be available or may be more difficult with substantially shorter duration. Such protections of the borrowers are solely based on the contract and the private guarantor and not by Department of Education policies. Yet, borrowers of privately subsidized student loans face the same restrictions to bankruptcy discharge as are government based loans.