Standard Interest Rates for Student Loans with No Cosigner

It is possible to get student loans with no cosigner, and it may even be advisable to do so. Many lenders will push students toward having a cosigner because it provides them with additional security. They know the cosigner, a high-credit borrower, will value his or her financial future enough to ensure the loan is paid on time. However, when a student uses a cosigner, the student gains few to no credit benefits from paying off the loan. Students should focus on building credit now to help with getting loans in the future. This means taking a loan with no cosigner, which will result in a higher interest rate.

Interest Rate and Risk

The riskier a loan, the higher the interest charged by a lender. This happens for a number of reasons. First, the lender has to compensate for the risk by collecting more profits on the loan, offsetting the chance the high-risk loan will default in the future. The more high-risk loans a lender issues, the more it needs to raise rates on each loan. Further, the lender knows the borrower has few options, which generally means the borrower will sign a loan contract even with high expense. 

Student Loan Fixed Rates

Even if you are going to take a high-rate student loan, which may be several percentage points above the national prime rate, you should still aim for a fixed-rate student loan. This will prevent the interest rate from skyrocketing in the future when it comes time to start repaying the debt. Some lenders will offer low to no interest while a student is in college only to raise the rate substantially once the student graduates. Stay away from these loans by always getting a fixed rate.

Student Loan Grace Periods

The grace periods you elect on your loan can raise the total cost of financing. If you do not pay debts while you are attending school, interest will still be charged, and this interest can compound, greatly increasing your principal debt due to financing costs. Instead of allowing this to happen, pay off interest as it accrues, even in grace periods. While you attend school or immediately after you graduate, do not allow a grace period to pass with interest accumulating. Take a part-time job if needed so you can make the minimum payments and keep your principal low.

Student Loan Repayment Plans

Private lenders offer several repayment plans similar to those of federal lenders. These include standard, extended, graduated and income contingent. Standard is the shortest option, and it will typically come with the lowest interest rates. Extended and graduated options can place a higher debt burden on you in the future, and they can fail to significantly reduce your principal debt in the years after college. These options tend to end up being the most costly. The income-contingent option is unique because it can either be very cheap or very pricey depending on the income you secure upon graduating. This can be an excellent option for a career-minded individual who expects a moderate salary upon graduation.


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