Don’t take it personally, but some lenders see you as a flight risk.
That’s why they won’t approve you for a student loan without a co-signer. A co-signer is the one assumes responsibility for your debt in the event you can’t pay it back.
In fact, most students won’t qualify for a private student loan without a credit-worthy co-signer. And even they could, they’d likely qualify for better terms by applying with a financially stable parent or friend.
Here are four signs you need a loan co-signer to borrow funds for college.
1. You need a private student loan
According to the Consumer Financial Protection Bureau (CFPB), over 90 percent of private student loans were co-signed in 2011. Although the CFPB has not released more recent data, it’s likely the vast majority of private student loans continue to require co-signers today.
Private student loans come from banks or independent lenders, such as Citizens Bank and CommonBond. Most private lenders want a loan co-signer if your credit score and income don’t meet their requirements. Some lenders request all undergraduate and graduate student loans have a co-signer, regardless of your financial circumstances.
Federal student loans, however, typically do not require a co-signer. Undergraduates can borrow up to $31,000, and grad students can take out a maximum of $138,500. With the average cost of a private four-year college at $32,410 for just one year, according to CollegeBoard, many students need more money.
For additional funds, you’ll have to borrow from a private lender — and will probably need a co-signer to qualify.
2. Your credit score is low
When reviewing your application for a student loan, private lenders take a look at your credit score. Credit scores are based on a number of factors, including your credit card history, debt repayment record, and debt-to-income ratio.
If you’re an 18-year-old who’s never had a credit card, you won’t have a strong credit score yet. You’ll need to apply for a student loan with someone who does.
Although most lenders don’t set a specific credit score cutoff, some experts suggest you need a score of 650 or higher. If your score falls below 650, you’ll need to apply for loans with a co-signer.
3. You don’t have many years of positive credit history
Beyond your credit score, the length of your credit history is also a factor. Lenders want to see several years of responsible credit card use and on-time payments of any debt.
If you have a mark on your report — defaulting on a loan or declaring bankruptcy — lenders will see it as a red flag.
Without a good credit history, you’ll need to apply for a loan with a co-signer with a positive credit history. They will need a few years of strong credit with no recent derogatory marks.
4. You have little to no income
In addition to your credit, lenders also look at your income when approving you for a loan. Your income indicates if you’ll have the means to pay back your debt.
If you’re going to college or grad school, you might have no income. You’re investing in your education so you can have a high-paying job after graduation.
But lenders aren’t willing to wait and see. If you don’t have much income at the time of application, you’ll probably have to apply for a loan with a co-signer who does.
Some lenders offer co-signer release
Asking someone to be on the hook for your student debt is a big request. Your co-signer must agree to foot the bill in the event you can’t pay back your debt.
But they might not be accountable for your student loans forever. Some lenders offer co-signer release after a period of on-time payments.
Citizens Bank, for instance, can release your co-signer after 36 months. And CommonBond requires just 24 months of on-time student loan payments.
So even if your co-signer joins your loan, they might not be responsible for the debt forever. For more on co-signer release, check out this complete guide for parents.
Need a student loan?Here are our top student loan lenders of 2018!
|1 Important Disclosures for CollegeAve.
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.
2 Important Disclosures for Discover.
3 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB) or Turnstile Capital Management, LLC (TCM), which are not affiliated entities. Certain restrictions and limitations may apply. Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. All loan products may not be available in certain jurisdictions. Other terms and conditions apply. Ascent is a federally registered trademark of TCM and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
* 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.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for PNC.
PNC Bank is one of the nation’s largest education loan providers. For over 40 years, PNC has been committed to helping students and their families make possible the adventure of college.
6 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.
SunTrust Bank, Member FDIC. ©2018 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
7 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
8 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.
9 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|3.69% – 10.94%1||Undergraduate, Graduate, and Parents||Visit CollegeAve|
|3.82% – 12.82%3||Undergraduate and Graduate||Visit Ascent|
|4.34% – 12.99%2||Undergraduate and Graduate||Visit Discover|
|4.12% – 10.98%*,4||Undergraduate and Graduate||Visit SallieMae|
|5.03% – 11.23%5||Undergraduate and Graduate||Visit PNC|
|3.88% – 12.88%6||Undergraduate and Graduate||Visit SunTrust|
|4.72% – 9.81%7||Undergraduate and Graduate||Visit LendKey|
|3.72% – 9.68%8||Undergraduate, Graduate, and Parents||Visit CommonBond|
|4.04% – 12.01%9||Undergraduate, Graduate, and Parents||Visit Citizens|