4 Signs You Need a Cosigner for Your Student Loan

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After learning about the credit requirements for a private student loan, you might be wondering, “Do I need a cosigner for a student loan?” For the majority of undergraduates, the answer to this question is yes.

Most students won’t qualify for a private student loan without a creditworthy cosigner. And even if they could, they’d likely qualify for better terms by applying with a financially-stable parent or friend.

Do I need a cosigner for a student loan? 4 times the answer is yes

Here are four signs you need a loan cosigner to borrow funds for college, as well as a partial list of lenders that allow you to drop your cosigner later:

1. You need a private student loan
2. Your credit score is low
3. You don’t have many years of positive credit history
4. You have little-to-no income
Plus: Some lenders offer cosigner release

1. You need a private student loan

According to data firm MeasureOne, 92% of new private student loans were cosigned in 2019-2020.

Private student loans come from banks or independent lenders, such as Citizens Bank and CommonBond. Most private lenders want a loan cosigner if your credit score and income don’t meet their requirements. Some lenders request all undergraduate and graduate student loans have a cosigner, regardless of your financial circumstances.

Federal student loans, however, typically do not require a cosigner. 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 cosigner 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 in the mid-600s or higher. If your score falls below this range, you’ll likely need to apply for loans with a cosigner.

And if you can’t find a cosigner, you’ll need to look for other options, such as applying for scholarships or attending a less expensive school.

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, for example — lenders will see it as a red flag.

Without a good credit history, you’ll need to apply for a loan with a cosigner 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 cosigner who does.

Some lenders offer cosigner release

Asking someone to be on the hook for your student debt is a big request. Your cosigner 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 cosigner release after a period of on-time payments.

Citizens Bank, for instance, can release your cosigner after 36 months. And CommonBond requires just 24 months of on-time student loan payments.

So even if your cosigner joins your loan, they might not be responsible for the debt forever. For more on cosigner release, check out this guide for parents.

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