Many lenders offer alternative, or private student loans, which provide low-cost funds to qualified borrowers who do not wish to borrow under the Federal Direct Loan Program or who require funding in addition to Direct loans. These alternative student loans often give students extra flexibility in choosing a school or taking advantage of a specialized course of study because borrowers do not have to worry about federal forms or deadlines. Private student loans help fill in the gaps when other sources of aid have been depleted or when annual federal loan limits have been reached.

Private student loans are for students (at the age of majority), parents of students, other guardians or credit-worthy related co-signers or "co-makers". While many alternative student loan programs require strict, non-negative credit and evidence of repayment capacity, individuals can sometimes borrow from $2,000 up to $15,000 and more per academic year based on cost of attendance minus other financial aid awarded. Some repayment options include:

• Monthly principal and interest payments
• Interest only during the in-school period
• Deferment and capitalization of interest during the in-school period

Interest rates for private student loans are generally variable student loan interest rates adjusted quarterly based on an index plus some percentage.