If you’re taking out a private student loan to pay for college, you may need a cosigner to help you qualify if you can’t meet a lender’s eligibility requirements. But if you’re using federal dollars to cover the cost of your education, you probably won’t need one.
Regardless of whether you have someone to cosign, your first move should be filling out the Free Application for Federal Student Aid (FAFSA) to see if you’re eligible for federal student loans.
Here’s what you should know if you’re a parent considering cosigning your child’s student loans.
Whether you’re the borrower or the cosigner, Credible lets you compare private student loan rates from multiple lenders, all in one place.
Parents don’t have to cosign student loans. Your child likely won’t need a cosigner for federal loans since most of them don’t require a credit check.
But since federal loans have a borrowing limit, your child may have to turn to private loans to fill in funding gaps. When this happens, they may need a cosigner if they can’t meet a lender’s credit requirements on their own.
Before you cosign your child’s student loans, consider the pros and cons. Here are some advantages of cosigning your child’s student loans:
Although cosigning your child’s student loans can help them pay for school, here are some potential risks you should keep in mind:
If you plan to cosign a private student loan, visit Credible to compare private student loan rates from various lenders in minutes.
Several student loan options don’t require a cosigner. For starters, remember that most federal loans don’t require a cosigner. This means a borrower’s eligibility is based on financial need and not their credit history.
To check if your student is eligible for federal loans, they have to fill out the FAFSA. They must provide personal and financial information, such as their Social Security number, bank statements, W-2s, and federal tax returns.
If they’re an independent student, they’ll only have to provide their personal and financial information. But if they’re a dependent student, they’ll also have to include your same information. Your financial information will help determine what type of federal loan they might qualify for.
Once they submit the FAFSA, they may qualify for these types of federal loans:
Your child typically needs good credit to qualify for a private student loan on their own. But some lenders offer student loans without a cosigner. And it may be possible for them to qualify for a student loan with bad credit.
If they apply for a private student loan with bad credit, keep in mind they’ll likely be charged a higher interest rate. To boost their approval odds and chances of securing a low interest rate, consider adding yourself as a cosigner.
A Parent PLUS Loan is a federal loan that’s available to parents of undergraduate students. With this option, your name will be the only one on the loan. This means you’ll be solely responsible for repaying the loan.
By contrast, cosigning a student loan means your name and your child’s name will be on the loan. If your child can repay the loan on their own, you won’t be on the hook for making payments. As a result, more of your hard-earned money can be directed toward other goals, like retirement or a dream vacation.
That said, a Parent PLUS Loan isn’t necessarily better than a cosigned private student loan. The option that’s better for your child may not be what’s better for you. You’ll have to consider which option is best for you based on your unique circumstances.
With Credible, you can compare private student loan rates without affecting your credit.