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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2 = CollegeAve Autopay Disclaimer: 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.
* 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.
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