Higher education can be an expensive endeavor – with limited credit history and income, it can be difficult for new students to access funds they need to pay for school.
One option is to find a cosigner to apply with you for a student loan. However, there are some serious risks to this kind of partnership. Here’s how to decide if student loans without a cosigner are the best option for you.
Do you need a student loan cosigner?
Before applying for a new student loan and finding a cosigner, make sure you’ve exhausted all your options. Federal student loans work best for students who don’t have a cosigner, so try going this route before choosing private student loans.
Working with a loved one who’s helping you apply for a loan takes a lot of trust on both sides and you don’t want to damage your relationship in the process. When figuring out if getting a student loan cosigner is the right option for everyone involved, consider the following benefits and drawbacks.
Student loans with cosigner
If you’re having trouble qualifying for a student loan, working with a cosigner can be very advantageous. Here are some of the reasons why.
1. Higher chance of qualifying for a loan
One of the main pros to having a cosigner is the fact that you have a higher chance of getting a private student loan. If you have poor credit or even no credit, a cosigner can help you qualify by using their history of credit in addition to yours.
2. Lower interest rates
Likewise, your credit history may only allow you to qualify for a high interest rate, whereas a cosigner may have a better credit score which can significantly reduce the total interest rate.
Having a lower student loan interest rate can decrease your monthly payments and save you a lot of money in interest payments over the long run.
3. Opportunity to build credit
Any time you apply for a loan and make consistent, on-time payments, your credit history will improve. This is especially true when you have a cosigner. If you choose to refinance your student loan later or apply for a different kind of loan, a solid credit history will allow you to do so without a cosigner.
Student loans without cosigner
In addition to the pros of having a cosigner, there are some cons as well. Here are some of the reasons why working with a cosigner may not be the best choice as a new student.
1. Risk to the relationships involved
Cosigners are usually family members or close friends, but you’ll want to be careful when partnering up with a loved one as this situation can add additional strain to the relationship.
If you miss payments, your cosigner is equally responsible. Don’t ask a cosigner to help you out with a student loan unless you’re willing to stay current on payments, or they’re willing to take over the payments if you’re unable.
Be sure to consider the consequences to their credit score if you fail to meet your end of the deal.
2. Cosigner is responsible for the loan
As mentioned, the person who cosigns your student loan will ultimately be responsible if you’re unable to make the payments. This person might not have the financial means or willingness to do so if that happens.
There have even been cases where the student, who owned the student loan, passed away and the cosigner was still responsible for making payments.
3. Difficult to remove a cosigner
It’s not easy to remove a name from a student loan account, as not all lenders offer cosigner release. And, depending on the lender, it can take anywhere from 12-48 months of consecutive, on-time payments to be approved to have the cosigner’s name removed.
Additionally, you must meet the income requirements and have a satisfactory credit score to even be considered as a standalone borrower. It’s also highly difficult to discharge student loans in bankruptcy, so if you and a cosigner decide to sign for your student loan, you can expect to share the debt.
Applying for student loans without a cosigner
Before signing on the dotted line and asking a loved one to do the same, be sure to weigh out all the pros and cons. Are there any other avenues you can take or options available? Exhaust all your financial aid opportunities before considering private loans for college.
In the end, if you find that you still need a cosigner, only borrow the money you absolutely need. This will help keep your budget in line and not overextend you or your cosigner in the event payments are difficult to keep up with.
Need a student loan?Here are our top student loan lenders of 2019!
|2 Important Disclosures for College Ave.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
(1)All rates shown include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
(2)This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7% variable Annual Percentage Rate (“APR”): 96 monthly payments of $179.28 while in the repayment period, for a total amount of payments of $17,211.20. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
(3)As certified by your school and less any other financial aid you might receive. Minimum $1,000.
Information advertised valid as of 5/29/2019. Variable interest rates may increase after consummation.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
3 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
4 Important Disclosures for Discover.
5 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
©2019 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
* Offer valid for new Custom Choice Loans for which applications are submitted for a credit decision between 12:00:00am EST on June 1, 2019 and 11:59:59pm EST on August 31, 2019. A 0.50% interest rate reduction will be included in the loan options presented to an applicant during the online application process, upon passing the initial credit review. The interest rate reduction will be applied as of the first disbursement date and will be effective for the life of the loan.
6 Important Disclosures for LendKey.
7 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
8 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|3.99% – 11.98%2||Undergraduate, Graduate, and Parents|
|4.50% – 11.35%*,3||Undergraduate and Graduate|
|4.84% – 11.99%4||Undergraduate and Graduate|
|3.27% – 10.80%5||Undergraduate and Graduate|
|4.46% – 9.43%6||Undergraduate and Graduate|
|3.74% – 9.72%7||Undergraduate, Graduate, and Parents|
|3.99% – 11.64%8||Undergraduate, Graduate, and Parents|