If you went skydiving for the first time, you probably wouldn’t jump out of a plane on your own. Instead, you’d skydive in tandem with an experienced, qualified instructor.
A student loan cosigner plays a similar role for college students who are often borrowing money for the first time. Enlisting a cosigner allows the borrower to benefit from the student loan cosigner’s financial experience and credit history.
Similar to skydiving, borrowing comes with risks along with the benefits — even if you have an experienced partner. Here’s how to decide if you should take the leap and get a student loan cosigner.
What is a student loan cosigner?
If you’re a college student looking to take out a private student loan to pay for school, you need to fill out an application with a lender you select.
To get approved, you need to meet the lender’s eligibility criteria. A lender will look at your financial background and use that information to try to predict how likely it is you will repay this debt.
Qualifying for private student loans usually requires at least the following:
- Good credit score
- Established history of positive debt repayment
- Steady income
Unfortunately, college students don’t usually fit the profile of an ideal credit applicant — despite being exactly the people who need private student loans. That’s where a student loan cosigner can come in.
How a student loan cosigner can help
If you can’t qualify for a private student loan on your own, you’ll need a student loan cosigner to give your application a chance of approval. The student loan cosigner applies for a loan alongside the primary borrower.
Although you would remain the primary borrower, you get to essentially borrow the good credit history and background of your cosigner. The lender considers the student loan cosigner’s background along with the primary borrower’s before making a final decision on the application.
A cosigner with good credit and decent income can greatly increase your chances of student loan approval and can even help you qualify for lower interest rates.
One thing to keep in mind: The cosigner also agrees to take equal responsibility for repayment of the debt if you are unable to make payments accordingly.
5 questions to ask before seeking a student loan cosigner
So should you add a student loan cosigner to your application process? The answer will ultimately depend on your financial situation. Here are some questions to help you figure out if it’s the right course of action for you.
1. Are federal student loans an option?
Federal student loans do not have any credit requirements and do not require you to apply with a cosigner. This makes federal student loans an accessible way for college students to borrow.
However, there are scenarios where federal student loans might not work out. Perhaps you have costs that exceed the annual federal student loan limits, or you missed the “satisfactory academic progress” requirement and lost access to federal student loans.
If federal student loans aren’t an option for you, you’ll likely need to turn to private student loans to cover costs.
2. Can you get private student loans without a cosigner?
It is possible to get private student loans without a cosigner, but you’ll need to be able to qualify on your own.
That means having a decent credit score to get a private student loan — typically in the mid-600s at least, though 700 or higher is best. Check your credit score and reports to see if you’re likely to meet these standards.
Lenders might also have other eligibility criteria. It’s common to require specific college enrollment or income status, for example. Before applying, check out specific requirements via private student loan reviews and lender sites.
However, it’s unlikely you can qualify for and get approved for private student loans without a cosigner. Most college students simply won’t meet income and credit requirements for private student loans on their own.
Check out how many private student loans involved cosigners from 2017-2018, according to a report from MeasureOne:
- 92.1 percent of student loans for undergraduates
- 62.2 percent of student loans for graduates
3. Can you get lower rates with a student loan cosigner?
For well-qualified borrowers or those with quality cosigners, private student loans could offer a significantly better deal when it comes to student loan rates.
Although federal student loans are the easiest and least expensive way to borrow for college, that’s not always the case — especially if you’re stuck with PLUS loans.
The federal government charges its highest interest rates on Grad PLUS Loans and Parent PLUS Loans: 7.00% for the 2017-2018 school year. Plus, both types of PLUS Loans levy a 4.264 percent loan origination fee. Private student loans, meanwhile, can see interest rates starting as low as 3.00% APR.
4. Do you have a student loans cosigner readily available?
Another consideration is whether you can actually find a student loan cosigner.
Being a cosigner comes with risk, as they are equally responsible for the debt. If you can’t make payments for any reason, they can be held responsible for repaying the entire remaining balance.
Many students turn to their parents for student loans cosigners, but most lenders allow anyone who is willing and qualified to cosign to do so. Here’s a quick checklist you can refer to as you search for a student loan cosigner.
Find out if your potential cosigner can qualify for a student loan
If there are a few people who are viable student loan cosigner candidates, find out what kind of credit score each one offers and whether they can meet income requirements for the loan application.
Talk through the student loan application process
Make sure your cosigner understands that the student loan application needs to be submitted promptly. The lender might also request follow-up information or documents.
Clarify the responsibilities of cosigning
Make sure your student loan cosigner understands their legal responsibility attached to this debt, and how it could impact their credit.
Discuss how you’ll manage repayment
Talk about potential problems that could arise in repayment and make a plan for handling them. If you have any informal arrangements related to paying this debt, make sure you fully discuss and agree on how that will work.
5. Can I get cosigner release in repayment?
For many reasons, both you and your cosigner might not want to share responsibility for this debt in the foreseeable future. Here are a couple of options available:
Choose a lender with a cosigner release option
Cosigner release allows your cosigner to be released from any legal responsibility for the debt when you satisfy certain requirements. Citizens Bank offers cosigner release, for example, after the primary borrower has made 36 on-time payments.
Refinance student loans to remove a cosigner
Certain lenders, such as SoFi and LendKey, will allow you to refinance your student loans in a way that removes your cosigner from liability for this debt. You might have to wait until you can qualify on your own, but it’s a step worth exploring.
Getting student loans can be scary, but a student loan cosigner can make the process less daunting. With their help, you can get the student loans you need to pay for college today and access interest rates that can make it easier pay it all off in the future.
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 Nationwide Bank, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Information advertised valid as of 11/1/2018. Variable interest rates may increase after consummation.
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). 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. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (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
|3.94% – 12.78%1||Undergraduate, Graduate, and Parents|
|4.06% – 13.06%3||Undergraduate and Graduate|
|4.34% – 12.99%2||Undergraduate and Graduate|
|4.37% – 11.23%*,4||Undergraduate and Graduate|
|5.03% – 11.23%5||Undergraduate and Graduate|
|4.12% – 13.13%6||Undergraduate and Graduate|
|5.62% – 10.01%7||Undergraduate and Graduate|
|3.93% – 9.81%8||Undergraduate, Graduate, and Parents|
|4.26% – 12.13%9||Undergraduate, Graduate, and Parents|