If grants, scholarships, and federal loans don’t cover the full cost of your college tuition, you may consider applying for private student loans. While you don’t need good credit to get a federal student loan, your credit does matter when applying for private student loans.
Applying with a cosigner with good credit can improve your odds of approval and help you secure the best rates and terms on your loan.
Some private lenders may require you to apply with a cosigner if your credit history is limited. If you’re wondering how to find a cosigner for your student loans, it’s helpful to understand how the process works.
Comparing loan offers from multiple lenders can help ensure you find the best private student loan rates available to you. Credible makes it easy to compare rates in just minutes.
A cosigner is someone with good credit who signs the loan with you, the primary borrower, and agrees to take responsibility for repaying the debt if you can’t. When you apply with a cosigner, your lender knows it’s more likely that one of you will repay the loan.
If you stop making your loan payments, your cosigner is responsible for repaying the full amount. And if you miss any monthly payments, they’ll appear on your cosigner’s credit report and their credit score will take a hit along with yours.
Some lenders will release the cosigner from the loan after you’ve improved your credit score or made a specific number of on-time payments. It’s unlikely your lender will tell you when you’re eligible for a cosigner release, so you’ll need to contact them directly for more information.
It’s a good idea to look for a financially secure cosigner with good credit. Your lender will probably want to see a cosigner with a stable job who has the income and ability to repay the loan. And because of the risks that come with cosigning for a loan, you may want to look for someone who’s invested in your future.
CALCULATE YOUR DEBT-TO-INCOME-RATIO AND FIND OUT WHERE YOU STAND
Technically anyone can be a cosigner as long as they have good credit and will commit to repaying the loan. But because of the added responsibility, some people may be more willing to help you with your student loans than others. Here are a few individuals you might consider as potential cosigners.
Your parents will probably be your first choice for potential cosigners since they’re usually the most invested in your college education. And if they’re already helping pay for your tuition, they may be more likely to agree.
If your parents are unable or unwilling to cosign for you, you might consider asking extended family members. You may have a grandparent, aunt, or uncle who’s willing to cosign your student loans. And if that person is in a good financial position, they may be more willing to help out.
Close friends are also potential cosigners. Ideally, a friend who cosigns for you would be someone you’ve known for most of your life and with whom you have a good relationship.
Potential cosigners may feel more secure about cosigning your student loan if you can give them an idea of the interest rate and terms of the loan. Before approaching your cosigner, consider comparing private student loan rates with Credible — it’s 100% free and won’t affect your credit.
Even if it isn’t a requirement, applying with a cosigner can be helpful for most borrowers. By using a cosigner, you get to take advantage of that person’s strong credit history. This can help you build your own credit score. And applying with a cosigner may help you qualify for the lowest interest rates on your loan.
In spite of the benefits, many risks come with cosigning on a loan. If you stop making your loan payments, your cosigner is responsible for repaying the full balance. And if you miss a few monthly payments, their credit score could be damaged.
Further, while some loan servicers will release cosigners after a specific period of time, this isn’t a guarantee. It’s not impossible, but most people find it difficult to get out of loans they cosigned for. The Consumer Financial Protection Bureau found that private student loan lenders rejected 90% of borrowers who applied for cosigner release.
5 WAYS TO IMPROVE YOUR CREDIT SCORE IN 2022
If you can’t find a cosigner for your private student loans, you’ll want to be sure you really have exhausted your federal loan options. Federal student loans don’t require a cosigner, so it’s a good idea to max out any federal aid you’re eligible for first.
You may also be able to find private student loan lenders that will allow you to borrow without a cosigner. But you’ll generally need good to excellent credit (a credit score of at least 670) and a steady income to qualify. And you may face higher interest rates. If you’re able to improve a low credit score and show steady income, you may have a better chance of securing a private student loan without a cosigner.
You can also look into scholarships and grants to help cover your tuition costs. You don’t have to repay grants or scholarships, making them a better option than student loans.
If you’re still unable to cover the full cost of your tuition, reach out to your school’s financial aid office. They may have additional resources available or may be able to help you cut back on some of your tuition costs.
If you need to take out student loans, most borrowers start with federal loans first. To begin this process, you’ll need to fill out the Free Application For Federal Student Aid (FAFSA). The FAFSA is a requirement if you hope to qualify for federal loans, grants, or work-study programs.
Two types of federal loans are available — Direct Subsidized Loans and Direct Unsubsidized Loans. Subsidized loans are need-based, and if you qualify, the government will pay the interest that accrues while you’re still in school full-time. Unsubsidized loans are available to everyone, and you’ll be responsible for paying the interest that accrues while you’re in college.
Since private lenders offer private student loans, you don’t have to fill out the FAFSA to qualify for one. For private loans, you’ll complete the lender’s application. It’s a good idea to shop around and compare the rates and terms you receive from different lenders. Credible makes this easy, allowing you to compare student loan rates from multiple lenders in just minutes.
If you can’t apply with a cosigner due to bad credit, it’s a good idea to build your credit history before applying for private student loans. Here are a few ways you can get started: