« | Accueil | »



Private Student Loans without a Cosigner

In many cases it is possible to obtain private student loans without a cosigner. This, of course, is easiest if the borrower has established credit that is good. Today, private student loans are growing far more rapidly than federal loans, and if the trend continues, private student loan volume will exceed the federal student loan volume by the year 2025. So you are definitely not alone if you find yourself seeking private student loans.

Students should make sure that they carefully compare the rates and terms on the different private student loans available to them. Recent increases in the federal government loan limits as well as the increase in money available through Pell Grants has shifted some borrowing from private to federal, but many students still borrow privately when the federal aid is insufficient. Federal loan limits do not generally go up from one year to the next, even though college tuition generally increases every year. For that reason alone, private student loans will continue to be necessary.

Generally speaking, students should consider getting private student loans without a cosigner once they have maxed out their federal student aid. They should fill out and file the Free Application for Federal Student Aid, or FAFSA forms, which may show that they qualify for work study programs, grants, and other types of student aid. Students should also consider the Federal PLUS loan, which is usually less expensive and has better terms than private student loans.

When looking at private student loans without a cosigner, a student should compare the fees charged by lenders. Low interest rates coupled with higher fees can end up costing more than a loan with a slightly higher interest rate and no (or very low) fees. A rule of thumb that you should follow is that 3 to 4% in fees is roughly equal to a 1% higher interest rate.

It is also critical for potential borrowers to compare loans with different terms based on the annual percentage rate, or APR. Longer loan terms cut the APR, but the total interest paid is greater, due to the longer term of the loan.

The best deals on private student loans will have interest rates of either :

and no fees. (LIBOR stands for London Inter-Bank Offer Rate, the rate banks charge each other for unsecured funds.) Private loans with these terms will be competitive with the Federal PLUS loans. However, these interest rates generally require that the borrower have a high credit score and sometimes a cosigner. About 20% of borrowers will qualify for terms similar to these.