Do You Need a Cosigner for Federal Student Loans?

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If you’re looking for ways to pay for school, you’ve likely come across both federal and private student loans. The U.S. Department of Education offers federal student loans, while banks, credit unions and private lenders offer private student loans.

One big difference between the two types of loans hinges on which debt requires a cosigner. Do you need a cosigner for student loans, either federal or private? For federal student loans, the short answer is no. But let’s look at the issue in a little more detail:

Do you need a cosigner for federal student loans?

If you’re seeking federal loans, there’s good news: You almost never need a cosigner for student loans offered by the Department of Education. This is a big benefit for federal student loan borrowers, as finding a cosigner for student loans — or any type of loan — can be tough.

A cosigner is a guarantor who signs on to a loan on your name and agrees to repay it if you don’t.

Additionally, cosigning a student loan can be risky for cosigners, as they are legally on the hook for paying back your debt if you are unable to make payments.

Plus, taking advantage of any federal student loans first is a good idea anyway. Not only can you finance your education without using a cosigner, but you can also enjoy federal loan benefits such as income-driven repayment options, fixed interest rates and deferment and forbearance.

One exception to the norm

While most federal student loans don’t require a cosigner, there is one exception. If you are applying for Direct PLUS loans and have a poor credit history, you may not be eligible without an “endorser,” who is similar to a cosigner. So, if you get an endorser who does not have an adverse credit history, you can receive a Direct PLUS Loan.

Essentially, an endorser acts as a cosigner in this situation. If you’re applying to graduate school or you are a parent with an adverse credit history who is taking out a loan on your child’s behalf, this one caveat could affect your financial aid, requiring you to get a cosigner. But if you’re applying for federal financial aid for your undergraduate degree, you likely won’t need to worry about someone cosigning a student loan for you.

If you are a parent or applying for financial aid for your graduate degree, you should check your credit score and credit report first to see where you stand. If you have decent credit, you probably don’t need to worry about a cosigner. But if you have poor credit, you may need to find an endorser.

Can you be denied a federal student loan?

Though a cosigner isn’t necessarily needed for a federal student loan, know that you can be denied a federal student loan for several reasons. This may happen if you don’t meet the basic eligibility criteria, which includes:

  • Demonstrating financial need
  • Being a U.S. citizen or an eligible noncitizen
  • Having a high school diploma or GED certificate
  • Completing and submitting a Free Application for Federal Student Aid (FAFSA)
  • Being enrolled or accepted as a regular student in an eligible degree or certificate program
  • Maintaining satisfactory academic progress

If you are denied federal aid, talk to your student aid office. The Federal Student Aid Office website provides tips to regain eligibility for financial aid.

Do you need a cosigner for private student loans?

While most federal student loans don’t require a cosigner, private student loans are a different story. These loans are made through financial institutions or private lenders, which often have underwriting criteria that’s similar to other types of loans.

According to a 2017 report by the Consumer Financial Protection Bureau (CFPB) and the U.S. Department of Education, more than 90% of new private student loans are cosigned. If you have limited or poor credit, you may need a cosigner to receive private student loans. A cosigner can help you get approved for a loan as well as avail of a lower interest rate. However, you can still get a private student loan without a cosigner if you have an excellent credit score.

Dangers of cosigning a student loan

Remember that there are serious consequences for borrowers and cosigners alike if those payments aren’t made on time. If the borrower is unable to pay their student loans, the cosigner is liable for the debt. If a payment is missed, both parties face a hit to their credit.

Getting a student loan cosigned may make it easier for you to get approved for financial aid, but it can often be hard to release a cosigner when one is no longer needed. In fact, the CFPB said in 2015 that 90% of private student loan borrowers were denied cosigner release. Even worse, some student loan borrowers faced “auto default” when their cosigner died or went bankrupt, in which case the loan balance was due in full.

Since the majority of federal student loans don’t require a cosigner and come with a host of government-backed benefits, it’s a good idea to take advantage of these first. Then if you need to borrow more money, investigate your private loan options.

Yael Bizouati contributed to this report.

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CollegeAve Disclosures

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 a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. 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 11/4/2019. Variable interest rates may increase after consummation.


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Discover Disclosures

  1. Students who get at least a 3.0 GPA (or equivalent) qualify for a one-time cash reward on each new Discover undergraduate and graduate student loan. Reward redemption period is limited. Please visit DiscoverStudentLoans.com/Reward for any applicable reward terms and conditions.
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  3. Aggregate loan limits apply.
  4. Lowest rates shown are for the undergraduate loan and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments. The interest rate ranges represent the lowest interest rate offered on the Discover Undergraduate Loan and highest interest rates offered on Discover student loans, including Undergraduate, Graduate, Health Professions, Law and MBA Loans. The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable Margin percentage. The margin is based on your credit evaluation at the time of application and does not change. For variable interest rate loans, the 3-Month LIBOR is 2.250% as of October 1, 2019. Discover Student Loans will adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change date”), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both. Please visit discover.com/student-loans/interest-rates for more information about interest rates.
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Offered terms are subject to change and state law restrictions. Loans are offered through CommonBond Lending, LLC (NMLS #1175900).

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Undergraduate Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of December 1, 2019, the one-month LIBOR rate is 1.70%. Variable interest rates range from 2.80% – 11.06% (2.80% – 10.91% APR) and will fluctuate over the term of the loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. Fixed interest rates range from 4.72% – 12.19% (4.72% – 12.04% APR) based on applicable terms, level of degree earned and presence of a co-signer. Lowest rates shown requires application with a co-signer, are for eligible applicants, require a 5-year repayment term, borrower making scheduled payments while in school and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of the loan.

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

Published in Paying for College, Student Loan Repayment