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Finding a Low Interest Rate on Student Loans Without a Cosigner

written by: Faith Oh•edited by: Donna Cosmato•updated: 6/29/2011

With the increasing cost of higher education, it has become imperative that college students seek funding sources outside of their family resources. One question that comes up is whether it is possible to get student loans without a cosigner but with low interest rates. Read on to learn more.

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    The Importance of a Good Credit History

    You cannot underestimate the importance of a good credit history in finding any kind of loan and especially student loans. This is more essential if you are older and or trying to get funding for a second degree, because it is expected that you would have built a credit history. If you are 18, just starting out in college, and have not done much borrowing, you may be able to find some funding without a cosigner. However, if you are an international student and are borrowing from banks, you will be required to provide a U.S. citizen or permanent resident as a cosigner. Let's find out more about student loans without a cosigner and with a low interest rate.

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    Explore Government Funding

    The lowest rates on student loans almost always come from the government - either state or federal. When making your educational plans, apply for both federal and state financial aid. To get federal financial aid, you need to file a FAFSA (Free Application for Federal Student Aid) application. Your individual and your family's financial situation is evaluated, and you receive a commensurate aid package that could include a combination of grants and loans. The loan portion typically offers the lowest interest rate available in the market. Federal student loans include Stafford and Perkins loans, as well as other direct lending programs.

    If your financial aid package is insufficient to meet education costs, then explore state funding. Check with your state Department of Education website, your prospective college's financial aid office, or your high school counselor to get more information about these programs. Some states also have a combination of grant and loan programs patterned after those of the federal government.

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    Peer-to-Peer Lending and Institutional Funds

    One little known area to explore to obtain student loans without a cosigner is peer-to-peer lending. Here is how it works. Go to a peer-to-peer lending site and tell your personal story, including as much detail as you can about your personal situation. Regular everyday people who are members of these sites read your story, and decide to lend you as much as they can afford toward your goal. By the time many people pitch in, you have enough money to borrow.

    The individual lenders receive a return on their investment via the interest rate you are charged. The rates available on these sites are flexible, as it is also part of your proposal when you want to borrow. The rates could be lower than market rate but not as low as the government rates. Most importantly, you won't need a cosigner. Some of these lenders may have a minimum credit score requirement. Examples of peer-to-peer lenders include Lending Club and Prosper.

    Another source of educational loans is the school you plan on attending. Many colleges and universities have their own private loan programs and you may be able to get good rates from them without needing a cosigner. Graduate and professional programs also have this arrangement and in some cases allow international students to borrow from institutional funds without having a U.S. citizen or permanent resident cosigner. For example Harvard University Law School and the School of Public Health provide such loans.

    With persistence and good research skills, you can arrange for student loans without a cosigner and with a low interest rate.