Most federal student loans do not require a credit check and can be borrowed without a cosigner. While the vast majority of students who take out private loans have a cosigner to guarantee the loan, that’s not an option for everyone. A cosigner — generally a family member or close friend — is someone who guarantees they will pay back your student loan if, for some reason, you can’t.
If you don’t have enough established credit to qualify for a private student loan on your own, turning to a cosigner, if possible, may also help you get approved at a better interest rate. However, not everyone has someone to cosign their student loans, and that’s okay too. There are plenty of ways to potentially qualify for both private and federal student loans without a cosigner.
Purpose of a Cosigner
Typically, a cosigner is someone with a solid credit history, who could step in if something goes wrong with your payments, but who trusts you to pay back the loan.
Cosigners provide reassurance to lenders when a borrower alone may not have a strong enough credit history to qualify for a loan. Because a cosigner agrees to pay for the loan if the primary borrower is unable to, lenders may be more willing to offer a loan.
Some borrowers may need a cosigner to qualify for a private student loan, because a cosigner with more financial security or a better credit history can make you a stronger applicant in the eyes of the lender. If you don’t have enough established credit to qualify for a loan on your own, turning to a cosigner, if possible, can also help you get approved at a better interest rate.
Applying for a Student Loan Without a Cosigner
With the average cost of undergrad at $38,185 a year for a private education for the 2021-2022 school year, it’s no surprise that many students will take out student loans to pay for their education. These student loans come in all shapes and sizes: federal or private, subsidized or unsubsidized, cosigned or not. Read on for information on getting a student loan without a cosigner.
Can You Get a Federal Student Loan Without a Cosigner?
Yes, it’s possible to get a federal student loan without a cosigner. For the most part, federal student loans do not require a credit check and can be borrowed directly by students, even if they do not have an established credit history. Direct PLUS Loans, which are primarily offered to parents, or graduate or professional students, require a credit check.
The first step in qualifying for a federal financial aid package is to fill out the FAFSA® (Free Application for Federal Student Aid). If you are a dependent student, the form will also require you to submit your parent’s financial information. Depending on your financial need, you’ll then be offered a combination of
federal student loans — including subsidized and unsubsidized Direct Loans or PLUS Loans — work-study programs, scholarships, and grants.
Keep in mind that there are borrowing limits for federal student loans. For example, dependent students cannot take out more than $5,500 as a first-year undergrad. And, no more than $3,500 of that money can be in subsidized loans. For more information on loan limits, check here .
Can You Get a Private Student Loan Without a Cosigner?
Even with federal loans, grants, and scholarships, some students rely on private student loans to help them pay for college. In general, private student loans are considered only after all other financing options have been reviewed. This is because they don’t always offer the same borrower protections afforded to federal student loans — things like income-driven repayment plans or forgiveness programs.
To qualify for a private student loan, you generally have to be 18, a U.S. resident, and enrolled in school at least part time. Additionally, certain lenders may only approve loans if you are enrolled at schools that meet their criteria, which can vary from lender to lender.
Recommended: A Guide to Private Student Loans
You may also have to meet certain credit requirements (typically, a certain minimum credit score and length of credit history). If you don’t meet their credit requirements, most private loans require a cosigner. Those loans that are offered without a cosigner — and they do exist — often have higher interest rates. And unfortunately, the private loans offered to students with no cosigner typically come with specific qualifications.
For example, they could only be available for U.S. citizens or residents, or for older college students or graduate students. It truly depends on the lender. Private lenders and banks look at many factors, including credit history, to determine eligibility for a loan.
Establishing Credit
One option, if you know you’re going to need a student loan without a cosigner, is to start building credit as early as you can. If you’re over 21, you could consider applying for a low-limit credit card. (The Credit Card Act of 2009 limits your ability to get a credit card without an income.)
The advantage of a low-limit credit card is it can help keep you from going overboard on spending, while still allowing you to establish credit. If you pay your statement balance in full at the end of each billing cycle, you can potentially build credit up over time.
Does Having a Cosigner Impact Interest Rates?
Federal interest rates are set by Congress, the current rates for loans disbursed for the 2021-2022 school year are: 3.73% for undergraduate Direct subsidized and unsubsidized student loans, 5.28% for unsubsidized Direct Loans for graduate or professional students, and 6.28% for PLUS Loans. These interest rates are fixed, meaning they won’t change for the life of the loan.
Private student loans without a cosigner can give you the flexibility to pay for school and additional school-related expenses like books. While a cosigner can help bring down the interest rate you qualify for, it also means the cosigner’s credit is impacted by this new loan, which could be a concern for your potential cosigner. If the loan is only in your name, you’ll also be able to build your own credit history once you start making payments.
Why It Can Help to Have a Cosigner on a Private Student Loan
Federal loans are one way to apply for student loans without a cosigner, since most simply do not require a cosigner at all. However, there are limits on how much you can borrow, as we mentioned above.
The downside of not having a cosigner for your private student loan is you might pay more in fees and/or interest. That is definitely something to consider when deciding if you are going to apply for a private student loan with or without a cosigner.
Other Ways to Help Finance Your Education
Besides taking out federal student loans or private student loans without a cosigner, there are a few other options to help finance your education. There are many grants and scholarships available that you can apply for that you do not need to repay.
However, there may be certain eligibility requirements you need to meet in order to receive this “free money.” For example, there are scholarships for residents of certain states, or scholarships for certain majors.
Additionally, there are merit-based grants (grants available for students who reach a certain level of academic excellence) or need-based grants. The options are almost limitless for the grants and scholarships available. You can always search online or ask your school counselor for information on scholarships you can apply to and additional grants you may be eligible for.
The Takeaway
Applying for a private student loan with a cosigner can help a potential borrower secure a more competitive interest rate or preferable loan terms. This is because the cosigner provides additional security for the lender — if the primary borrower runs into any issues repaying the loan, the cosigner is responsible.
Federal student loans, aside from Direct PLUS loans, do not require a credit check or cosigner. If you find that your federal loans aren’t going to cover your education, a private student loan may help. Keep in mind that private student loans lack the borrower protections offered by federal student loans and are generally borrowed as a last resort option because of this.
If you’re interested in a private student loan, consider SoFi, where there are origination fees or late fees. The application process can be completed entirely online — with or without a cosigner. And when it’s time to repay your loans, SoFi offers flexible payment options that fit your post-grad lifestyle.
Learn more about SoFi’s private student loan offering.
SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
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Source: sofi.com