When it comes to affording your next semester of college, you might feel boxed into a corner.
Lacking financial support, you could be considering student loans without cosigner requirements. But even if a private student loan without cosigner backing seems to be among your last options, ensure it’s also the best one.
Be wary of student loans without cosigner requirements
If you already have a year or two of college experience under your belt, you might think you’re readier than ever to be financially independent. Managing your on-campus budget or signing an apartment lease could have you feeling especially confident about your finances.
But before you consider a private student loan without cosigner backing, be aware of the disadvantages.
First of all, you might have to settle for a higher interest rate or less favorable loan terms overall. Credit history is the top criteria used by lenders to assess your riskiness as a borrower. The riskier you are, the higher your rate. That’s bad news because a higher interest rate means you’ll pay more interest over the life of the loan.
Secondly, taking out student loans without cosigner backing might also leave you in the lurch. The top benefit of having a cosigner is that you have someone to go to when you can’t keep up with your monthly loan payments. Everyone needs some level of support, and your cosigner could be yours.
Your repayment likely won’t start until after you’ve graduated. But although that might seem like the distant future, having a cosigner now can set you up for success later.
When it’s wise to take out student loans without a cosigner (and when it’s not)
Count financial independence among the pros and cons of forgoing a cosigner. In fact, it’s both a pro and a con.
By going it alone, you’re taking full responsibility for your student loan debt and not leaning on mom or dad, for example. There’s a lot to like about that.
But by insisting on that independence, you might forgo important benefits, such as financial support in the case of a job loss or another unforeseen event.
To review whether student loans without cosigner requirements are right for you, see if you relate to one of these three scenarios.
1. Unwise — an underclassman who’s new to student loans
You’re probably already familiar with financial aid that doesn’t need to be repaid, such as scholarships. But if you’re relatively new to the college experience, some financing tools might still seem foreign.
A loan could help you bridge the gap between your cost of attendance and the amount you’ve been able to raise through gift aid and help from your family.
Taking out a private student loan without cosigner requirements would likely be unwise in your case. This is because federal loans, which almost always don’t require a cosigner, come with added protections. You can pause your loan repayment, switch repayment plans, and potentially qualify for student loan forgiveness, to name a few examples.
So if you haven’t borrowed money for your education yet but need to shortly, it’s likely wiser to go the federal route first. There are different maximum borrowing amounts depending on your dependency status and your year in school. A dependent freshman, for example, would be eligible to receive $5,500 in Direct Loans.
2. Wise — a financially independent student headed for a high-paying career
Maybe an unstable home environment forced you to become an adult sooner than your peers. Or perhaps you’re returning to campus to transition between careers. No matter how you achieved financial independence, it might be wise to consider a private student loan without cosigner requirements.
But being independent isn’t enough. Having a strong credit history and debt-to-income ratio could help you score a low interest rate, even without a cosigner. Just ensure you can receive a lower rate than with federal loans.
An undergraduate applying for the government’s Direct Subsidized and Unsubsidized Loans would be handed a 4.45% interest rate up until July 1, 2018. Many of our recommended private loan lenders start their interest rates at about 3.00%.
Still, be aware that even top private lenders can’t match many protections offered by the federal government. That’s where your major or career path might come into play. A degree in one of the majors with the highest ROI might be less likely to lead to federal loan forgiveness — unless you plan on teaching or working for the government.
3. Unwise — an upperclassman without an obvious cosigner
If you’re an in-school borrower edging closer to your degree, you might need some extra help to get over the hump.
It’s possible you already borrowed the maximum federal loan allotment. That’s $31,000 over your college career if you’re a dependent student. It would grow to $57,500 if you’re an independent student or have a parent who is unable to qualify for a Parent PLUS Loan.
If your mom or dad isn’t creditworthy enough to borrow a PLUS Loan in their name, they might also fall short of being your cosigner on a private loan. But don’t jump straight to private student loans without cosigner requirements.
Because a cosigner can help you secure better loan terms, explore ways to find a non-parent cosigner. You might check another branch of your family tree. An aunt, uncle, or grandparent who’s already made it financially might be willing to go to bat for you.
Lenders also typically don’t mind if you’re not related to your cosigner. Whether you find a friend, mentor, or someone else to stand in, ensure they’re eligible. College Ave offers a free pre-qualification tool.
Think twice before resorting to student loans without a cosigner
You might not fit neatly into any of these three scenarios. Maybe your real-life situation is a mix of two or three of them. That will make understanding the risks of student loans without cosigner backing even more important. You’ll need to decide what’s best for your unique situation.
If you decide to go it alone, make sure you’re willing to live without the benefits of teaming up with someone you trust. Taking out student loans without a cosigner could be wise for someone else, but unwise for you.
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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|