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Student loans without co-signers more than double in three years

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An alliance of Iowa banks has made more than 1,100 loans without co-signer requirements to Iowa college students in the past academic year, through a program designed to help students who can’t get other college loans.

The Iowa Alliance Private Student Loan Program, which is being offered this academic year by 12 banks and Iowa Student Loan, originally was formed in 2008 in response to the frozen credit markets during the financial crisis. Since then, the number of loans made each year through the program has more than doubled.

“The cost of going to college is a stretch for even the most financially prepared students in today’s economy,” said Christine Hensley, chair of the Iowa Student Loan board. “So supplemental loan programs like this one are truly needed.”

Since the 2009-10 academic year, every loan made through the program has been issued without a co-signer requirement, said Tara Deering Hansen, communications manager for Iowa Student Loan. To qualify, students must have been denied a supplemental private loan requiring a co-signer and meet specific underwriting criteria, among them not having any credit accounts that are more than 60 days delinquent.

Bankers Trust Co. and Northwest Bank are two Central Iowa institutions participating in the alliance.

The interest rate charged on the Iowa Alliance loans is tied to the prime rate plus 4.5 percent with a cap of 21 percent, but given the current record-low interest rates, the rate being charged is at the minimum of 9 percent. The interest rate for subsidized (Stafford) loans is 3.4 percent and 6.8 percent for unsubsidized loans.