With the average cost of undergrad nearly $40,000 a year for a private education, 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.
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 Adding a Cosigner
There are two reasons why a cosigner may make sense, to improve your chances of being approved for a loan and to potentially help secure a more competitive interest rate.
If you’re applying for student loans, you may not have a long credit history yet. To lenders, a lack of credit history can be seen as risky because you haven’t proved how well you can manage your financial obligations. You might need a cosigner to convince a lender to give you a student loan, because having a cosigner with more financial security or a better credit history may allow them to reduce the risk of lending.
A cosigner with a strong credit history may help you get approved for a loan or get approved at a lower interest rate, which could help reduce the amount of money you pay in interest over the life of the loan.
A cosigner will need to share their financial information with the lender, so it’s a good idea to make sure that your cosigner has plenty of time to get their documents in order and discuss loan applications with you.
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Can You Get a Federal Student Loan Without a Cosigner?
The short answer is yes. The first step in qualifying for a federal financial aid package is to fill out the FAFSA® (Free Application for Federal Student Aid).
You’ll submit your financial information and your parents’ information too, if you’re a dependent student. 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 — and work-study programs.
Most federal student loans do not require a cosigner, and they often have competitive interest rates. In addition to not requiring a cosigner, most federal student loans do not require a credit check.
Direct PLUS Loans , which are primarily offered to parents, or graduate or professional students, require a credit check. Don’t forget, there are limits on how much you can take out in federal 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 . Because of these limits, students may look for additional sources of funding.
Can You Get a Private Student Loan Without a Cosigner?
Even with federal loans, grants, and scholarships, you may still need to take out a private student loan to fully fund your education. 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.
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 lender credit requirements, most private loans require a cosigner. Those loans that are offered without a cosigner — and they do exist — may 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. If you know you’re going to need a student loan without a cosigner, one option is to start building your credit as early as you can.
There are several ways to begin building credit. One is to be added as an authorized user on a credit card held by someone (usually a parent) with a high credit score and good credit. You do not need the credit card in your possession to be an authorized user, and this can help you potentially begin to build credit.
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.
Applying for a Student Loan Without a Cosigner
Federal interest rates are set by Congress, the current rates for loans disbursed on or after 7/1/22 and before 7/1/23 are: 4.99% for undergraduate Direct Subsidized and Unsubsidized Loans, 6.54% for Direct Unsubsidized Loans for graduate students, and 7.54% for PLUS Loans. Those interest rates 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, borrowing limitations may be a factor in considering other loan options.
The downside of not having a cosigner for your private student loan is you might pay more in fees and/or interest. Depending on your credit history, not having a cosigner may also make it harder to get approved for a loan in the first place. But different lenders have different requirements for cosigners. Some lenders, for example, can “release” a cosigner from a loan after the primary borrower meets certain requirements, like a certain number of payments and a credit check. You also may consider refinancing your loan once you’re out of school, which will then be a way to have the loan in your own name. It’s a good idea to talk through what your cosigner expects and anticipates for the life of the loan, so that you’re both on the same page.
Also it’s important for your cosigner to be aware of what cosigning may mean for them. One implication of being a cosigner is that the loan will be added to the cosigner’s overall credit report. This, plus a credit check, may affect their overall credit score.
Talking about the potentials of cosigning early can help you and your cosigner avoid stress and can make sure you’re on the same page when it comes to the loan. That is definitely something to consider when deciding if you are going to apply for a private student loan with or without a cosigner.
What is the Minimum Credit Score for a Student Loan?
There is no exact credit score requirement for a student loan, but in general, the higher the score, the more likely you are to be approved. In general, most lenders are looking for scores in the mid-600s or above. The higher your score, the more likely you may be to get approved for a loan and the lower your interest rate may be. Checking your credit report prior to applying for a loan, as well as pulling your score, can give you a sense of where you may stand in the eyes of a lender. You also can check your credit report for any errors, which could bring down your score.
Who is Eligible for Student Loans That Don’t Require Cosigners?
Some lenders don’t require a cosigner for a student loan, but may have certain eligibility requirements. For example, some lenders may look at academic performance alongside your credit history to determine eligibility. It can also be helpful to establish credit, or an income history, prior to applying for a loan. Having a job and building credit, even if you have a low credit limit or a part-time job, can all prove to a lender that you have the ability to fulfill financial obligations.
You also may have the option to check your loan eligibility. This triggers what’s known as a soft credit check. A soft credit check does not affect your credit score, but can give you an approximate idea of whether or not you’ll be approved for a loan and what the interest rate on the loan may be. Keep in mind, though, that your loan won’t be finalized until you apply for the loan. At this point, a hard credit check will be performed and final approval decisions will come through. But checking loan eligibility is one way to know whether or not a lender may consider your application without a cosigner.
What are Your Options If You Can’t Get a Student Loan Without a Cosigner?
If you can’t get a student loan, don’t panic. There are other potential paths forward depending on your goals and your circumstances:
• Take a year off. Some students take a year off to build credit, grow their income, and reapply once they feel their finances are on more secure footing.
• Consider a less expensive school. Some students who can’t get a cosigner decide to go to a community college and take core credit courses. They may also work during this time. Then, when they feel their finances are on more secure footing, they transfer to their intended school to finish their degree.
• Rethink your education priorities. If you can’t get a cosigner and are having trouble shouldering loans on your loan, you may recalibrate your educational goals and consider different degree programs or institutions that may have a less expensive price tag. It can be helpful to talk to people who work in your future career field — they may have thoughts on how you can save money on education or may have tips for alternate paths toward the job you want.
• Talk with your financial aid office. Chances are, your financial aid office has seen similar situations and may have ideas. They may also be able to connect you with students who have independently financed their education, so you can bounce ideas off someone who has been there, done that.
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.
You also may consider whether it makes sense to work alongside studying. Some students find they can manage a job alongside their studies, while others find that it’s challenging to find a balance. There is no “right” way to finance your education. Some students may take a year or several years off to save up for school, and then focus full-time on school. Talking to graduates can help you see different pathways and that there is no “one size fits all” when it comes to financing an education.
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 find that your federal loans aren’t going to cover your education, SoFi private student loans might be just what you’re looking for. SoFi student loans come with no origination fees or late fees. You can apply 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.
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