Although a cosigner will usually improve your chances of being approved, having someone cosign a loan with you isn’t always possible. But if you want to get student loans without a cosigner, you have options for both federal and private student loans.
Getting federal student loans without a cosigner
Generally, it’s easy to get federal student loans without a cosigner, since there’s no credit check involved. However, you do need to fill out the Free Application for Federal Student Aid (FAFSA) in order to apply for federal student loans so you can get financial aid. You might need some help from your parents (like including their financial information) if you’re a dependent student.
Here are some of the different federal loan options you can consider without needing a cosigner:
|Type of federal loan||Pros||Cons|
|Direct subsidized loans (also known as Stafford loans)||• Based on the student’s financial need|
• You don’t pay interest while you’re still in school at least halftime
• A six-month grace period after graduation, meaning that any interest that accrues during your college career and six months afterward is completely paid for
|• Only available to undergraduate students.
• You can defer your student loans, but if you wish to put your loans in forbearance interest will still accrue during this time
|Direct unsubsidized loans (also known as Stafford loans)||• You are not required to demonstrate financial need so the amount you can take out is higher than what you can take out with a subsidized student loan|
• Available to undergraduate and graduate students
|• Interest begins accruing immediately, from the date of your first loan disbursement, though you’re not required to pay that interest until you finish school|
|PLUS loans||• Available for graduate students, as well as parents of dependent undergrads|
• You can take out all the PLUS loans you need to up to your school’s certified cost of attendance
|• Interest rates on PLUS loans will be 7.0 percent starting July 1, 2017. On top of that, PLUS loans carry a 4.3 percent up-front disbursement fee|
Don’t assume your parents make too much money for you to qualify for financial aid either. It’s always a good idea to fill out the FAFSA and see. You might be surprised. And even if it turns out you don’t qualify for aid, you still have other options like private student loans.
Getting private student loans without a cosigner
Unlike federal student loans, private loans require a cosigner in certain situations. Getting a private student loan without a cosigner can be difficult, especially if you haven’t begun to build your credit, but it is possible.
The key to getting a private loan without a cosigner is to demonstrate that you have the ability to pay off your student loans. Along with credit score, most lenders consider the following factors:
- Credit history: If you have a limited credit history or have delinquent payments in your past, you most likely won’t be able to get a loan without a cosigner. You should take a look at your repayment history before applying. If you have any dings in your credit history, paying down your existing debt and making sure that you always make on-time payments can help you improve your credit and improve your chances of being approved for a loan.
- Income: You need to be able to show proof of income when you apply for a loan, so if you’re unemployed, you might need to hold off on applying for a loan.
- DTI: Your debt-to-income (DTI) ratio is also an important factor. This is calculated by dividing your total monthly debt by your total gross income.
- Citizenship: Most private lenders require you to be a U.S. citizen or permanent resident alien to take out a loan.
Keep in mind, though, that having a cosigner will usually get you better loan terms and better rates. Because your cosigner backs up the loan repayment on your behalf, it’s often easier to receive loan approval, as well.
Build credit so you don’t need a cosigner
Lenders typically look for borrowers with at least two to five years of credit history. So, if you have a limited credit history or a low credit score, it’s best to try and build up your credit before applying for a loan so that you don’t need a cosigner. Some of the easiest ways to begin building credit are:
- Become an authorized user: Ask a parent to add you as an authorized user on one of their credit cards. Although you are not legally responsible for the debt as an authorized user, this can still help you build credit easily and safely.
- Apply for a secured credit card: Secured credit cards let you deposit a certain amount of money that you can then borrow against — similar to a debit card.
- Keep an eye on your credit: If you ever see any errors on your credit history, make sure to dispute them and get them removed from your report. If you’re careful about paying down your debt quickly and always making timely payments, your credit score will improve over time. Because your DTI takes into account your monthly payments, paying down debts quickly can help lower your DTI, so you can aim toward a good credit score.
Pros and cons of using a cosigner
A cosigner doesn’t always have to be a parent. It can also be a spouse, relative, or any adult who is a U.S. citizen or permanent resident alien and has a stable credit history and a good credit score.
|• Better interest rates|
• Helps build your credit and your cosigner’s
• Allows you access to loans you might not be able to get otherwise
|• If you fail to make payments, it falls on your cosigner as their responsibility and could harm their credit|
If you’re considering cosigning a loan for a college student, remember that cosigning a student loan can affect your credit.
How to remove a cosigner from a student loan
Nearly 94 percent of private undergraduate student loans are taken out with cosigners; there’s no shame in using one. If you’ve already gotten a loan with a cosigner and want to take them off of it, some private lenders will offer you the option of cosigner release. Though it differs from lender to lender, it typically takes 12 to 48 months of consecutive on-time payments to become eligible for the option. You might also need to undergo a credit check before your cosigner can be released.
You can also release your cosigner by refinancing your student loans. When you refinance your student loans, you’ll essentially be paying off your old loan and obtaining a new one without a cosigner. Visit Credible to learn more about the best student loan refinance options available.
Ariha Setalvad contributed to the reporting of this article.