Do You Need a Cosigner for a Student Loan?

Posted by in Loans | Updated on May 30, 2023
At a Glance: Federal loans are almost always achievable without a cosigner. You will only need one if you are a graduate or parent with bad credit applying for a direct PLUS loan. Also, a cosigner will be needed if you apply for private student loans and have poor credit.

Sometimes, there might be obstacles getting in the way of you obtaining a student loan. So, you might be thinking of getting a cosigner. But do you need a cosigner for a student loan?

When someone is about to apply for a student loan for the first time, there are a lot of unknown things, including the necessity of a cosigner. Luckily, you’ve come to the right place, as we’re about to dive into whether cosigners are needed for student loans or not.

When a Cosigner Is NOT Needed

There are situations when a cosigner is not necessary when applying for student loans. More specifically, you will not have to worry about cosigners if you are going to apply for a federal student loan. Most of the time, it’s possible to apply without one.

This is because credit checks are not required to qualify for a federal student loan. That being said, having bad credit or no credit at all will not get in the way of you obtaining the finances. So, having someone as a cosigner becomes unnecessary.

But even private student loans can be obtained without a cosigner if you have a good credit score. Anything over 650 is considered good credit, so if your score is at this level, you can breathe a sigh of relief. Moreover, having a no-late payment history will work in your favor. This way, you’ll be eligible for the financing without a cosigner.

Some lenders also provide loan options for students without requesting a cosigner.

When a Cosigner MAY Be Needed

Qualifying for a private student loan with a poor credit score is extremely challenging. Most lenders are likely to reject your application after taking a look at your score. So, to boost your chance of getting accepted, you will need a cosigner.

In some cases, private student loan providers will accept borrowers with bad credit, but the rates will not be the best. You’ll most likely be faced with a high interest rate and a lack of benefits. So, having a cosigner is the best alternative as it will increase your chance of getting better rates for your loan.

Cosigners for Federal Student Loans

Are you going to apply for a federal student loan? Well, if that’s the case, you do not have to get a cosigner. As federal loans are offered by the Department of Education, a cosigner is rarely necessary. This is why federal loans are so popular.

At the same time, there are exceptions to this situation. If you apply for a direct PLUS loan and you are a graduate student or parent with bad credit, then an endorser will be necessary for qualification. An endorser is just like a cosigner. Of course, the endorser must have a good credit history in order to make things work.

If you are an undergraduate student, you generally don’t need to get a cosigner. Still, if you are a graduate or a parent taking out a student loan for your child, then an endorser is needed.

Before considering a federal student loan, you must first analyze your situation to see where you’re standing. Check out your credit score and history and see if you have the opportunity to apply without an endorser.

It’s recommended to consider a federal student loan before going for a private one. Federal loans come with numerous benefits, such as fixed interest rates, a repayment grace period, and no credit history requirement. Besides, you escape the need for a cosigner.

Keep in mind that you can be denied a federal student loan even if you have good credit. You will not be granted access to this financial aid if:

  • You are unable to prove financial need
  • You did not complete and submit your FAFSA
  • You are not a U.S. citizen or eligible non-citizen
  • You are unable to maintain good academic progress, etc.

Cosigners for Private Student Loans

We’ve established that for federal student loans, you will most likely not need a cosigner. Still, private student loans are different. They operate similarly to other types of loans, as they are offered by private lenders or certain financial institutions.

You do not fill out the FAFSA this time, but rather an application to the lender’s office or an online application on the lender’s website. So, a private loan lender will perform a credit check.

This means that if your score is not exemplary, your chances of obtaining financing are low. In this case, a cosigner is needed. When you submit an application for a private student loan, you must also send the information of the cosigner.

92% of undergraduate private student loans had a cosigner in 2019-2020 according to the MeasureOne data firm.

Downsides to Cosigning a Student Loan

Cosigning a student loan is great for the student that needs the finances, but it also has some drawbacks.

For instance, if the cosigner is not required anymore, it can be extremely difficult to release him or her. Also, if payments are not made on time, they can affect the credit scores of both the student and the cosigner. This lowers their chances for financial aid in the future.

Furthermore, there have been cases when a cosigner either went bankrupt or died. When this happens, “auto default” comes into play. This means that the borrower has to pay the loan balance in full. It’s not a situation you ever want to face.

How to Get a Student Loan Without a Cosigner

If you want to get a student loan without a cosigner, you should go for federal student loans. However, there are also ways to qualify for private student loans without a cosigner. You just need to know what to do to make this possible.

Let’s take a look at some things that boost your chances of getting a student loan without a cosigner:

  • Avoid Maxing Out a Credit Card – It can be very tempting to use the full amount of money available on your credit card. Unfortunately, this can significantly impact your credit score. Ideally, you shouldn’t use more than 30% if you don’t want your credit score to suffer.
  • Always Pay Your Debt on Time – If you took out credit in the past, always make timely payments.
  • Go for Lenders with Fewer Requirements – Some lenders have fewer requirements, making it easier for students to obtain financing.
  • Look for a Profitable Job – If you have a good and stable income, lenders are more likely to accept your application.

How to Release Your Cosigner

It’s possible to release a cosigner when he or she is no longer needed.

In order to do so, you must fill out a form where you request the cosigner’s release. A credit check will also possibly occur following this request. You should always check out the lender’s cosigner release policy beforehand.

Read More

Final Thoughts

You do not always need a cosigner for a student loan. If you have good credit, you will be able to obtain a student loan without a cosigner. However, if you want a private student loan and have poor credit, a cosigner will be necessary.