If you’re worried about paying for college, you might need to find backup to secure some student loans. That’s where a cosigner comes into play. They back you up in cases where you can’t repay a loan on your own.
Unfortunately, the most obvious choice for a cosigner — mom or dad — isn’t always the best one. The potential negatives of a parent cosigner could even lead you to consider student loans without cosigner backing.
Why you might need a cosigner for your student loan
Before we get to cosigning student loan pros and cons, let’s review why you might need a cosigner in the first place.
If scholarships and other gift aid isn’t enough to foot the bill for college, you might need to take out a private student loan, which will likely require you to get a cosigner. About 90 percent of lenders require undergraduate students to obtain a cosigner, according to Consumer Financial Protection Bureau (CFPB).
Private lenders might ask you for a cosigner if you don’t have a positive or robust credit history. After all, any potential lender wants to make sure you’d repay the debt you owe. That’s where your mom or dad come in. With their credit history, if they agree to cosign on a loan, that signals to the lender that the debt will more likely be repaid on time and in full.
Since your cosigner’s credit history is considered when you take out a loan, you might qualify for a lower interest rate. However, their name will also appear on the loan. So if you fail to keep up with payments after you leave school, they will be held responsible for repayment.
4 cons of mom or dad cosigning your student loans
You might think that having mom or dad cosign a private loan could be nothing but good. After all, they’d be helping you afford college.
But before you and your parent agree to this arrangement, know that there are downsides.
1. You’ll be leaning on mom or dad a bit longer
When you go off to college, you’re taking a big step toward adulthood. You’re likely moving out of the house.
Even if you’re still a dependent in the eyes of the Department of Education, you’re taking one step toward being financially independent. At college, you’ll be responsible for managing your everyday expenses, such as campus meal plans and school books.
Taking out a loan with your parent’s support could be a step backward. It creates a tether between you and your parent that will last years. Still, this leash connecting you to mom or dad might not be enough to get you thinking about getting student loans without cosigners.
2. Putting family in harm’s way is possible
You might be OK with leaning on mom or dad to cosign your student loan. But you might be less thrilled with putting them in the unpleasant position of having to repay your loan if you need help down the line.
A cosigner is not only your backup plan, they’re also your lender’s. If you struggle to find regular income after graduating college, for example, you might need to rely on mom or dad for help in repayment. Even if you hesitate to ask your parent, your lender won’t.
Before asking your family member to cosign your loan, consider whether they’re in a good spot to help. If your parent already has debt, asking them to potentially shoulder more might be an unfair request. The same could be true if you have younger siblings who will be following in your footsteps to college. They’ll likely need your parent’s financial backing, too.
3. Achieving cosigner release is not easy
Reputable private lenders offering student loans typically tack on the perk of cosigner release. It allows you to remove mom or dad from a loan they cosigned once you prove your ability to repay it.
Receiving it is another story. Nine out of 10 private loan borrowers who apply for cosigner release are rejected, according to the CFPB.
At Sallie Mae, for example, borrowers must clear 10 hurdles to qualify for cosigner release. Some of the list’s more complicated items include providing proof of income and submitting to a credit check.
The key hurdle is making on-time payments on your loan. Although Sallie Mae sets the bar at 12 months, this varies by lender. At CommonBond, for example, you must make 24 consecutive on-time payments before applying.
Lenders also have different processes for applying for or granting cosigner release. There are several steps to qualifying for cosigner release with Navient, for example.
4. You’ll be left hanging if your cosigner passes away
Although you don’t want to imagine this scenario, it could help you prepare for the consequences. You can do this by reading your loan agreement to see what conditions your lender might have set in the event your cosigner parent passes away.
In this scenario, you’d still be responsible for repaying the loan. But with some less-reputable lenders, your cosigner’s death could trigger an automatic default, reported the CFPB.
In cases where your cosigner dies, you’ll lose a loved one. But that awful situation could be made even worse if you also lose the central figure of your financial support system.
Student loans without cosigner backing
It’s unlikely that these four cons of having a parent cosigner would make you jump straight to student loans without cosigner backing. But the potential downsides might make finding an alternative cosigner your top priority.
A cosigner — whether it’s another family member, a friend, or someone else — can help you secure a lower interest rate from a private lender.
But remember that federal student loans without a cosigner is a possibility. Given the added protections of federal loans, these are probably your first priority.
Every option besides PLUS Loans, including Direct Subsidized Loans and Direct Unsubsidized Loans, can be applied for and granted without a cosigner.
It’s also possible yet riskier to rely on a private student loan without cosigner requirements. College Ave, for example, has a credit pre-qualification tool to see what rates you could qualify for on your own.
Credit history is the primary factor affecting a quote you’ll receive from a lender. As a high school graduate, you likely haven’t had time to build up your credit score yet. Even if you do have an exceptional credit score for your age, be aware that adding a creditworthy cosigner can lower your rate even further.
Before focusing on a private student loan without cosigner requirements, make sure you meet the basic criteria, such as attending an eligible school. Then you can explore ways to receive a discount on your interest rate, such as by promising to make in-school payments. These benefits could make student loans without a cosigner more realistic.
Don’t immediately resort to student loans without a cosigner
You might Google “cosigning student loan pros and cons” and hope for a black-and-white answer. The truth is that when it comes to cosigners and student loans, it’s best to look at your options in your context, and no one else’s. There’s gray area when it comes to the positives and negatives of taking out a private loan alone.
If your mom or dad is a willing and financially able cosigner, they could help you score a lower interest rate than you’d be able to qualify for on your own. Just be sure to weigh the surprising downsides before deciding to move forward.
If your parents aren’t an option, don’t consider yourself stuck looking at student loans without cosigner requirements. You can explore alternative cosigner options before going at it alone.
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|1 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.
2 Important Disclosures for College Ave.
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.
Information advertised valid as of 4/1/2019. Variable interest rates may increase after consummation.
3 Important Disclosures for Discover.
* 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 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. ©2019 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
6 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
7 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.
8 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|4.24% – 13.24%1||Undergraduate and Graduate|
|4.07% – 11.32%2||Undergraduate, Graduate, and Parents|
|4.84% – 13.49%3||Undergraduate and Graduate|
|4.50% – 11.35%*,4||Undergraduate and Graduate|
|4.25% – 13.25%5||Undergraduate and Graduate|
|6.08% – 7.22%6||Undergraduate and Graduate|
|3.95% – 9.81%7||Undergraduate, Graduate, and Parents|
|4.45% – 12.42%8||Undergraduate, Graduate, and Parents|