A student loan co-signer is an adult with a good credit history and a good score who signs a loan with you. Having a co-signer can help you get the most out of it student loan rate, but it may also be necessary for you to qualify.
Do you need a co-signer for student loans?
Whether you need a co-signer for student loans depends on the type of loan you take out – federal or private.
For the majority federal student loans, you can apply without a co-signer. This is because all undergraduate loans and some graduate student loans do not require a credit check and are therefore available to all eligible students who wish to apply. With some graduate student loans, the US department requires an endorser if you have an adverse credit history.
Private student loans require a co-signer if you don’t have a lot of credit history or if your credit score is low. However, you may be able to get a private student loan without a co-signer with lenders who have non-traditional application requirements or those who are more flexible on credit scores.
Keep in mind that your co-signer shares legal responsibility for your loan. In other words, they are forced to repay the loan if you don’t, and their credit score could suffer if you make late payments. This is why it is essential to carefully consider who you are asking to co-sign your loan.
Co-signing federal student loans vs private student loans
The process for co-signing a student loan differs depending on the lender. Here’s what to know if you’re applying for a federal or private student loan.
Federal student loans
All undergraduates can apply for federal student loans without a co-signer, and the same is true for graduates who apply for direct unsubsidized loans. For grad PLUS loans, graduate students must go through a credit check; if you have an adverse credit history, you will need an endorser, who basically serves as the co-signer of the loan.
To apply for these government guaranteed loans, you will need to complete a Free application for federal student aid, or FAFSA. If you are dependent on your parents’ tax return, they will also need to provide their information. Endorsers do not need to apply with you, but they will need to submit an endorser addendum.
Private student loans
Private student loans, unlike their federal counterparts, are issued by banks, credit unions and online lenders. Instead of completing a FAFSA, you apply for private student loans by submitting a loan application. This app takes your credit history, credit score, income, and work history into account to determine if you qualify and what rate you will receive.
If you don’t meet a lender’s credit requirements, you’ll need a co-signer to get a private student loan. This is why most undergraduates who take out a private student loan do so with a parent or other family member. You will need to include the co-signer information when submitting your request.
Release a co-signer on your loan
Private lenders typically require co-signers, but some lenders may release student loan co-signers once the primary borrower can meet certain requirements (e.g., creditworthiness, a certain number of on-time payments, etc.).
Unfortunately, getting a co-signer version can be tricky. A Report of the Consumer Financial Protection Bureau as of 2015 found that 90 percent of private student loan borrowers who requested a co-signer release were turned down.
If you plan to eventually release your co-signer from the loan, look for lenders who are upfront about their co-signer release policies. From there, make sure you make timely payments on your loans and take steps to build your credit score to give yourself the best chance of qualifying.
How to get a student loan without a co-signer
Your best option for getting a student loan without a co-signer is to apply for a federal student loan. If you need to apply for a private student loan, you will need to make sure that you are in good financial health to qualify for a loan without a co-signer.
Here are the best ways to increase your chances of getting approved:
- Make timely payments on existing credit. Make your payments on your credit cards on or before the due date. This shows that you are trustworthy and will help increase your credit score.
- Don’t max out your credit card. Each credit card has a maximum credit limit. If you consistently use the full amount, it will negatively impact your credit score. It is recommended that you use 30% or less of your loan amount to be considered a safe borrower.
- Establish a stable income. Many lenders have a minimum annual income requirement, but they also usually look for borrowers with a stable source of income.
- Find a lender with fewer requirements. Some student lenders want to make it easier for borrowers with little credit to access student loans. These lenders can review your school’s information, major and future income to qualify you for a loan.
The bottom line
When you need help paying for your education, think about all of your options before taking out a loan with a co-signer. A co-signer can help you get a student loan when your personal credit or income is not strong enough to qualify on your own, but they are also responsible for the student loan debt, as much as if they were the only one. borrower. You don’t want to hold someone responsible for your loans if you don’t have to. If you are hiring a co-signer, have an honest conversation beforehand about the expectations once the loan goes into repayment.