Do You Need a Cosigner for Federal Student Loans?

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Cosigner for Federal Student Loans
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Do you need a cosigner for a student loan? If you’re borrowing a federal student loan, the answer is usually no. But if you’re in need of a private student loan, you’ll likely need a cosigner if you can’t meet a lender’s criteria for credit and income on your own.

To take find out if and when student loans need a cosigner, let’s answer the following questions:

Do you need a cosigner for a student loan from the federal government?

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 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. 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.

Taking advantage of any federal student loans first is a good idea. 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

While most federal student loans don’t require a cosigner, there is one exception. If you are a graduate student or parent 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 find 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?

Although 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. You might be able to regain eligibility for financial aid.

Do private student loans need a cosigner?

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.

In other words, a lender checks your credit and income before approving you to borrow money. So if you have limited or poor credit, you may need a cosigner to receive private student loans.

According to data firm MeasureOne, the majority of undergraduate private student loans — 92% — had a cosigner in the 2019-2020 academic year. A cosigner can help you get approved for a loan and get a lower interest rate.

However, you can still get a private student loan without a cosigner if you have an excellent credit score.

What are the downsides to cosigning a student loan?

Remember that there are serious consequences for borrowers and cosigners alike if student loan 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. 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, research your private student loan options.

Rebecca Safier and Yael Bizouati contributed to this report.

Need a student loan?

Here are our top student loan lenders of 2021!
LenderVariable APREligibility 
1.04% – 11.98%1Undergraduate, Graduate, and Parents

Visit College Ave

1.13% – 11.23%*,2Undergraduate, Graduate, and Parents

Visit SallieMae

1.24% – 11.99%3Undergraduate and Graduate

Visit Discover

1.78% – 11.89%4Undergraduate and Graduate

Visit SoFi

1.05% – 11.44%5Undergraduate and Graduate

Visit Earnest

2.76% – 7.14%6Undergraduate and Graduate

VISIT CITIZENS

2.46% – 12.98%7Undergraduate and Graduate

Visit Ascent

* 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.

1 Important Disclosures for College Ave.

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.

Rates shown are for the College Ave Undergraduate Loan product and include autopay 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.
 
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. This informational repayment example uses typical loan terms for a first year graduate student 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 7.10% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $141.66 while in the repayment period, for a total amount of payments of $16,699.21. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

Information advertised valid as of 3/25/2021. Variable interest rates may increase after consummation. Lowest advertised rates require selection of full principal and interest payments with the shortest available loan term.


2 Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.

3 Important Disclosures for Discover.

Discover Disclosures

  1. Aggregate loan limits apply.
  2. Get a cash reward on each new Discover undergraduate and graduate student loan when you earn at least a 3.0 GPA (or equivalent) in any academic period covered by the loan. Limitations Apply. Visit DiscoverStudentLoans.com/Reward for terms and conditions.
  3. Lowest APRs shown for Discover Student Loans are available for the most creditworthy applicants for undergraduate loans, 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 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. For variable interest rate loans, the 3-Month LIBOR is 0.250% as of April 1, 2021. Discover Student Loans may 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. Your APR will be determined after you apply. Learn more about Discover Student Loans interest rates at DiscoverStudentLoans.com/Rates.
  4. Lowest APRs shown for Discover Private Consolidation Loans are available for the most creditworthy applicants who are approved and choose a shorter repayment term, and include a 0.25% interest rate reduction while enrolled in automatic payments. 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. For variable interest rate loans, the 3-Month LIBOR is 0.250% as of April 1, 2021. Discover Student Loans may 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. Your APR will be determined after you apply. Visit Discover.com/student-loans/consolidation.html for more information, including up-to-date interest rates and APRs.
Lowest APRs shown for Discover Student Loans are available for the most creditworthy applicants for undergraduate loans, and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments.

4 Important Disclosures for SoFi.

sofiDisclosures

UNDERGRADUATE LOANS: Fixed rates from 4.23% to 11.26% annual percentage rate (“APR”) (with autopay), variable rates from 1.88% to 11.66% APR (with autopay). GRADUATE LOANS: Fixed rates from 4.13% to 11.37% APR (with autopay), variable rates from 1.78% to 11.73% APR (with autopay). MBA AND LAW SCHOOL LOANS: Fixed rates from 4.30% to 11.52% APR (with autopay), variable rates from 1.95% to 11.89% APR (with autopay). PARENT LOANS: Fixed rates from 4.60% to 10.76% APR (with autopay), variable rates from 1.88% to 11.16% APR (with autopay). For variable rate loans, the variable interest rate is derived from the one-month LIBOR rate plus a margin and your APR may increase after origination if the LIBOR increases. Changes in the one-month LIBOR rate may cause your monthly payment to increase or decrease. Interest rates for variable rate loans are capped at 13.95%, unless required to be lower to comply with applicable law. Lowest rates are reserved for the most creditworthy borrowers. If approved for a loan, the interest rate offered will depend on your creditworthiness, the repayment option you select, the term and amount of the loan and other factors, and will be within the ranges of rates listed above. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Information current as of 11/04/2020. Enrolling in autopay is not required to receive a loan from SoFi. SoFi Lending Corp., licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. NMLS #1121636 (www.nmlsconsumeraccess.org).


5 Important Disclosures for Earnest.

Earnest Disclosures

  1. Rates include 0.25% Auto Pay Discount
     
  2. Explanation of Rates “With Autopay” (APD)
    Rates shown include 0.25% APR discount when client agrees to make monthly principal and interest payments by automatic electronic payment. Use of autopay is not required to receive an Earnest loan.

    Available Terms
    For Cosigned loans – 5, 7, 10, 12, 15 years. 
    Primary Only – 10, 12, 15 years

    In school deferred payment is not available in AL, AZ, CA, FL, MA, MD, MI, ND, NY, PA, and WA).


6 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

Undergraduate Rate Disclosure: Variable interest rates range from 2.76% – 7.14% (2.76% – 7.14% APR). Fixed interest rates range from 3.01% – 7.50% (3.01% – 7.50% APR).

Graduate Rate Disclosure: Variable interest rates range from 2.19% – 6.73% (2.19% – 6.73% APR). Fixed interest rates range from 2.89% – 7.09% (2.89%-7.09% APR).

Business/Law Rate Disclosure: Variable interest rates range from 1.36% – 9.54% (1.36% – 8.82% APR). Fixed interest rates range from 4.13% – 9.84% (4.13% – 9.12% APR).

Medical/Dental Rate Disclosure: Variable interest rates range from 1.36% – 8.34% (1.36% – 8.04% APR). Fixed interest rates range from 4.03% – 8.64% (4.03% – 8.34% APR).

Parent Loan Rate Disclosure: Variable interest rates range from 2.10% – 7.41% (2.10%-7.41% APR). Fixed interest rates range from 4.69% – 7.83% (4.69% – 7.83% APR).

Bar Study Rate Disclosure: Variable interest rates range from 4.45% – 9.60% (4.45% – 9.53% APR). Fixed interest rates range from 7.39% – 12.94% (7.38% – 12.81% APR).

Medical Residency Rate Disclosure: Variable interest rates range from 3.55% – 7.05% (3.55% – 6.77% APR). Fixed interest rates range from 6.99% – 10.49% (6.97% – 10.07% APR).

Variable Rate Disclosure: Variable Rates are 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 March 1, 2021, the one-month LIBOR rate is 0.11%. Variable interest rates will fluctuate over the term of the loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree and presence of a co-signer. The maximum variable rate is the greater of 21.00% or Prime Rate plus 9.00%. 

Fixed Rate Disclosure: Fixed rate ranges are based on applicable terms, level of degree, and presence of a co-signer.

Lowest Rate Disclosure: Lowest rates require a 5-year repayment term, immediate repayment, a graduate degree (where applicable), 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. Rates are subject to additional terms and conditions, and are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.

Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer.  Borrowers should carefully review federal benefits, especially if they work in public service, are in the military, are considering possible loan forgiveness options, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision on our website including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.

Eligibility Criteria: Applicants must be a U.S. citizen, permanent resident, or eligible non-citizen with a creditworthy U.S. citizen or permanent resident co-signer. For applicants who have not attained the age of majority in their state of residence, a co-signer is required. Citizens Bank reserves the right to modify eligibility criteria at any time. Citizens Bank private student loans are subject to credit qualification, completion of a loan application/Promissory Note, verification of application information, and if applicable, self-certification form, school certification of the loan amount, and student’s enrollment at a Citizens Bank participating school.

Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.

Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.


7 Important Disclosures for Ascent.

Ascent Disclosures

Ascent Student Loans are funded by Richland State Bank (RSB), Member FDIC. Loan products December not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions December apply.  For Ascent Terms and Conditions please visit: www.AscentStudentLoans.com/Ts&Cs

Rates are effective as of 12/01/2020 and reflect an automatic payment discount of 0.25% on the lowest offered rate and a 2.00% discount on the highest offered rate.  Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month.  For Ascent rates and repayment examples please visit: www.AscentStudentLoans.com/Rates

1% Cash Back Graduation Reward subject to terms and conditions. Click here for details.