Do You Need a Cosigner for Federal Student Loans?

 December 11, 2020
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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?

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LenderVariable APREligibility 
2.49% – 13.85%1Undergraduate
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Visit College Ave

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3.25% – 13.59%3Undergraduate
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0.00% – 23.00%4Undergraduate
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3.25% – 9.69%6Undergraduate
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VISIT CITIZENS

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* 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 Firstrust Bank, member FDIC, First Citizens Community 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. As certified by your school and less any other financial aid you might receive. Minimum $1,000.
     
  2. 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.
     
  3. 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.

Information advertised valid as of 9/15/2022. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.


2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.

Earnest Disclosures

Actual rate and available repayment terms will vary based on your income. Fixed rates range from 3.47% APR to 13.03% APR (excludes 0.25% Auto Pay discount). Variable rates range from 2.80% APR to 11.69% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. Although the rate will vary after you are approved, it will never exceed 36% (the maximum allowable for this loan). Please note, Earnest Private Student Loans are not available in Nevada. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.


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

4 Important Disclosures for Edly.

Edly Disclosures

1. Loan Example:

  • Loans from $5,000 – $20,000
  • Example: $10,000 IBR Loan with a 7% gross income payment percentage for a Senior student making $65,000 annually throughout the life of the loan.
    • Payments deferred for the first 12 months during final year of education.
    • After which, $270 Monthly payment for 12 months.
    • Then $379 Monthly payment for 44 months.
    • Followed by one final payment of $137 for a total of $20,610 paid over the life of the loan.

About this example

The initial payment schedule is set upon receiving final terms and upon confirmation by your school of the loan amount. You may repay this loan at any time by paying an effective APR of 23%. The maximum amount you will pay is $22,500 (not including Late Fees and Returned Check Fees, if any). The maximum number of regularly scheduled payments you will make is 60. You will not pay more than 23% APR. No payment is required if your gross earned income is below $30,000 annually or if you lose your job and cannot find employment.

2. Edly Student IBR Loans are unsecured personal student loans issued by FinWise Bank, a Utah chartered commercial bank, member FDIC. All loans are subject to eligibility criteria and review of creditworthiness and history. Terms and conditions apply.


5 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  • Variable Rate Disclosure: Variable interest rates are based on the 30-day average Secured Overnight Financing Rate (“SOFR”) index, as published by the Federal Reserve Bank of New York. As of September 1, 2022, the 30-day average SOFR index is 2.23%. Variable interest rates will fluctuate over the term of the loan with changes in the SOFR index, and will vary based on applicable terms, level of degree and presence of a co-signer. The maximum variable interest rate is the greater of 21.00% or the 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 are only available for the most creditworthy applicants, require a 5-year repayment term, immediate repayment, a graduate or medical 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.

     

    Undergraduate Rate Disclosure: Variable interest rates range from 3.25%-10.35% (3.25% – 9.69% APR). Fixed interest rates range from 4.24% – 10.59% (4.24% – 9.93% APR). 

    Graduate Rate Disclosure: Variable interest rates range from 3.75%-9.90% (3.75% – 9.68% APR). Fixed interest rates range from  5.22% – 10.14% (5.22% – 9.91% APR). 

    Business/Law Rate Disclosure: Variable interest rates range from 3.75%-9.35% (3.75% – 9.16% APR). Fixed interest rates range from 5.20% – 9.59% (5.20% – 9.39% APR).

    Medical/Dental Rate Disclosure: Variable interest rates range from 3.75%-9.02% (3.75% -8.98% APR). Fixed interest rates range from 5.18% – 9.26% (5.18% – 9.22% APR). 

    Parent Loan Rate Disclosure: Variable interest rates range from 3.25%-9.21% (3.25% – 9.21% APR). Fixed interest rates range from 3.96%-9.50% (3.96%-9.50% APR).

    Bar Study Rate Disclosure: Variable interest rates range from 6.58%-11.72% (6.58% – 11.62% APR). Fixed interest rates range from 7.39% – 12.94% (7.40% – 12.82% APR). 

    Medical Residency Rate Disclosure: Variable interest rates range from 5.67%-9.17% (5.67% – 8.76% APR). Fixed interest rates range from 6.99% – 10.49% (6.97% – 10.08% APR).


6 Important Disclosures for Funding U.

Funding U Disclosures

Offered terms are subject to change. Loans are made by Funding University which is a for-profit enterprise. Funding University is not affiliated with the school you are attending or any other learning institution. None of the information contained in Funding University’s website constitutes a recommendation, solicitation or offer by Funding University or its affiliates to buy or sell any securities or other financial instruments or other assets or provide any investment advice or service.