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Many students take out loans to pay for college. While federal student loans don’t require a credit check, private student loans typically do. And, since students often don’t have much credit history, they typically require a cosigner. A cosigner can be a parent but it doesn’t have to be. You can ask other family members, friends, or even mentors to cosign your student loan.

Since a cosigner will be responsible for paying back your loan in the event you’re unable to, it’s important to choose someone you feel comfortable entering a financial agreement with. A cosigner with good credit and high income could result in lower interest rates on your loans.

Read on for a simple, step-by-step guide on how to get someone to cosign your student loan.

How to Ask Someone to Cosign Your Private Student Loan

You may have someone in mind who would make a good cosigner. The problem is, how do you ask someone to cosign a loan? It’s a big ask, and approaching the topic can be intimidating. Not to worry. What follows are some tips that can help ensure you come to the conversation prepared.

Recommended: Avoidable Mistakes for Choosing Student Loan Cosigners

1. Research Your Financial Aid Options First

Before you ask someone to cosign a private student loan, it’s a good idea to explore all of your college funding options. Around 85% of students receive some form of financial aid to pay for college.

Filling out the Free Application for Federal Student Aid, or FAFSA, will give you access to any federal student aid you may be eligible to receive. This might include grants, work-study, federal subsidized loans, federal unsubsidized student loans, and even private scholarships. Completing the FAFSA is free, and it’ll also show potential cosigners that you’ve done your due diligence and have tapped all your available options to finance your education before asking for help.

Recommended: 11 Strategies for Paying for College and Other Expenses

2. Explain Why You Need a Cosigner

Once you’ve decided who you want to ask to be your cosigner, it’s important to come to the table with a clear explanation of why you need a cosigner and what costs the loan will cover. You’ll want to be prepared to share details on your own savings, debts, and credit history. This shows a cosigner why you need help and what kind of risk they would be taking on.

Providing a clear picture of what you have and what you need demonstrates that you’re taking your education and financial goals seriously. Having followed tip #1, you’ll be in a position to show the funding gap between your own funds plus any aid you’ve received and the cost of attendance at your chosen college.

3. Outline Your Plan for Repaying the Loan

When asking someone to cosign a student loan, it’s a good idea to let them know that you have a plan for repayment and exactly what that plan is. Some private lenders allow you to defer making payments until after graduation, while others require you start making interest-only payments while still in school. Either way, you’ll want to have an idea for how you will make those payments on your own.

Failing to make payments on time each month will impact both you and your cosigner, so it’s a good idea to also make a backup plan in case something doesn’t work out. This might be getting a part-time job in any field if you find that it takes longer than expected to get hired in your chosen field.

Demonstrating your plan for repayment can help build your potential cosigner’s confidence and help them feel more comfortable about entering into a cosigner agreement with you.

Recommended: 6 Strategies to Pay Off Student Loans Quickly

4. Make Sure They Understand What They’re Agreeing To

Before moving forward to a written agreement, it’s a good idea to go over the requirements and responsibilities for being a cosigner. For starters, your cosigner must meet a minimum credit score and demonstrate a certain minimum monthly income. The exact requirements will depend on the lender.

You’ll also want to let them know that, as a cosigner, they have a legal obligation to make sure the loan is repaid, and that any late or missed payments on the loan can impact both your and their credit scores.

While these risks can feel intimidating to bring up, outlining your plan to avoid loan default can help address their concerns and show you’re taking the commitment seriously.

Recommended: Ca$h Course: A Student’s Guide to Money

5. Make a Plan for a Cosigner Release

A cosigner release effectively removes a cosigner from a loan, freeing them from any continued responsibility for repayment of your loan. Private lenders may offer the option for a cosigner release if you, at a certain point down the road, meet certain credit requirements and have a strong track record of on-time payments.

Discussing a plan or timeline for when your cosigner will be released from their responsibilities shows that you’re being considerate of the risks of being a cosigner and the impact it can have on their finances. While you may not have the strongest qualifications as a borrower today, your creditworthiness can build over time as you consistently make on-time loan payments.

You might also have the option of refinancing your student loan and, in the process, releasing your cosigner from the original loan agreement.

6. Give Them Time to Think

Cosigning a loan is a serious commitment and whomever you ask may need some time to think over the decision. For this reason, it’s a good idea to approach your potential cosigner early on so you have plenty of time to talk through the agreement and, if necessary, pursue another option.

Handling Potential Concerns and Objections

Cosigners will likely have questions and potential concerns about how the agreement could impact their finances, as well as your relationship. After you’ve made your pitch, it’s important to hear them out and be open to their input to reach an agreement that works for you both.

If a cosigner has objections that you can’t resolve, it may be time to seek out a different cosigner.

Formalizing the Cosigner Agreement

If the person you ask to cosign your loan says “yes,” it’s time to find the right private student loan for your needs. It’s generally a good idea to shop around and compare rates and terms from different lenders, including banks, credit unions, and online lenders. Some lenders allow you to pre-qualify for a student loan online, without impacting your (or your cosigner’s) credit score. This allows you to compare offers, go over rates and terms with your cosigner, and decide which loan is the best fit.

When you officially apply for the loan, you and your cosigner will need to provide a number of financial documents to the lender, so be sure to give your cosigner time to gather all their paperwork.

Repaying the Loan Responsibly

When you take out a private student loan, you’ll typically have a choice of several repayment plans. Which one you choose can have a significant impact on both your monthly payment and total cost of the loan. Options may include:

•  Immediate repayment This means you make full monthly payments while still in school. Doing so will minimize the interest you pay, resulting in the greatest savings.

•  Interest-only repayment Here, you’ll pay only the interest on your loan while you’re still in school. Payments will be lower than immediate repayment but you won’t chip away at your loan balance (or save as much on interest).

•  Partial interest repayment This involves making a fixed monthly payment while still in school that only covers part of the interest you owe. Payments will be lower than interest-only plan but your loan balance will grow.

•  Full deferment Here, you’ll pay nothing while you’re enrolled in school. During this time, though, your loan balance grows.

Once you choose a plan, you’ll want to create a budget for the minimum payment you owe each month. It’s also a good idea to enroll in autopay, to ensure you never miss a payment. Some lenders also offer a rate discount if you enroll in autopay.

After you’ve graduated and your finances allow, you may be able to make extra principal-only payments — this can help lower the total interest you pay over the life of the loan.

The Takeaway

If you need a cosigner on your student loan, you have options. Whether you choose a parent, other family member, friend, or mentor, it’s important to be transparent about the requirements and risks that go into being a cosigner.

Coming to the conversation prepared can build trust and confidence with potential cosigners and put you on the path to funding your education.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

How do you convince someone to cosign a loan?

You’ll want to be transparent, as well as fully prepared for the conversation. Explain how the loan will support your long-term educational and financial goals, how you plan to make future loan repayments, and why you are a trustworthy borrower.

Who can I ask to be my cosigner?

It’s common for students to use parents or family members as cosigners, but there are no rules stating that your cosigner must be a relative. You can also ask mentors or family friends who are invested in your success. Just keep in mind that a cosigner will need to meet the lender’s financial and credit requirements.

Can I hire someone to be a cosigner?

There are businesses that advertise online that they will cosign your student loans for a fee, but borrower beware. These are often scams in which the “cosigner” requests cash payment in advance, then disappears. Or, the business might be legitimate but will require you to give them a portion of the loan in exchange for cosigning. Generally, it’s not worth the risk or cost.

What percentage of student loans are cosigned?

Roughly 92% of undergraduate private loans are cosigned. About 66% of graduate school loans from private lenders require a cosigner.

How do I assess my creditworthiness before seeking a cosigner?

To assess your creditworthiness, you’ll want to check your credit score and take a look at your credit reports.

You can often access your credit score for free through your bank or credit card company (check your statements on log into your online account). You can access your credit reports from the three main consumer credit bureaus (Equifax, Experian, and TransUnion) for free at AnnualCreditReport.com.

Photo credit: iStock/NoSystem images

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SOIS0723003

An initial public offering, or IPO, represents the first time a company makes its shares available for trade on a public stock exchange. The number of IPOs per year varies, depending on market conditions and the ease with which companies can raise capital via other methods.

Private companies can use IPOs to raise capital and fuel future growth, and hundreds of companies go public most years, presenting an opportunity for interested investors.

IPO statistics can offer some perspective on how frequently companies decide to go public and which sectors tend to see the most significant launches.

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Number of IPOs by Year

A look at IPO history shows that the number of initial public offerings fluctuates significantly by year and decade. Since 2000, there have been some 6,013 IPOs. Here’s a look at IPO filings by year for that time frame:

*As of June 30, 2023.

The number of IPOs in any given year tend to follow movements in the economic cycle. In 2008, for example, there were just 62 IPOs as the economy and stock market were in the midst of a historic downturn. IPO activity didn’t pick up the pace again until 2010, once the Great Recession had ended.


💡 Quick Tip: Access to IPO shares before they trade on public exchanges has usually been available only to large institutional investors. That’s changing now, and some brokerages offer pre-listing IPO investing to qualified investors.

Previous Year IPOs

Companies were more likely to go public in the 1980s and 1990s than in recent years. Between 1980 and 2000, an average of 311 firms went public each year.

IPO activity spiked in the mid-90s as entrepreneurs sought to join the growing dot-com bubble.

Meanwhile, an average of 187 firms went public annually between 2001 and 2011. In recent years, larger, more established companies are more likely to go public than smaller private firms.

However, a record number of companies — 1,035 — went public in 2021. Some analysts point to loose monetary policy and a booming stock market as reasons so many companies went public during the year.

Additionally, one of the factors driving IPOs during 2020 and 2021 was an increase in IPOs for special-purpose acquisition corporations (SPACs). SPACs are essentially holding companies that go public with the sole purpose of acquiring another company.

Recommended: What Is an IPO Pop?

Overview of IPOs in 2022 – 2023

Following the boom in IPOs in 2021, the number of companies that went public during 2022 and 2023 dramatically decreased, due to several factors, including tight monetary policy to combat inflation, and a dramatic decline in the stock market.

As of June 30, 2023, there have been only 79 U.S. market IPOs so far — a 37% drop compared with the number of IPOs in 2022 by this time. There were 125 IPOs by June 30, 2022.

Of the 79 that debuted this year, about 46.8% — 37 companies — showed negative returns as of June 30, 2023, and 42 showed positive returns (bearing in mind that 11 companies IPO’d in June, and their prices may fluctuate in the coming quarters).

That said, the IPO proceeds in Q1 of 2022 similar to Q1 of 2023: $2.5 billion and $2.4 billion respectively. But company valuations were higher in 2022, and the 24 IPOs in Q1 generated almost as much in proceeds that year as the 33 IPOs in Q1 of 2023.

Evaluating the performance of stocks after a company goes public can give you an idea of how successful IPOs tend to be overall. However, it’s important to remember that it’s impossible to predict whether a stock will boom or bust in the months and years after it starts trading.

IPO stocks are considered highly volatile, high-risk investments, and while some companies may present an opportunity for growth, there are no guarantees. Like investing in any other type of stock, it’s essential for investors to do their due diligence.


💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.

The Takeaway

Looking at IPO statistics and IPOs by year can help you track trends and understand just how often companies go public, and why some years have more IPOs than others.

While the low interest rates and rising stock market of 2021 helped create a record year for 1,035 new companies, the climate now has changed: rates are higher, there’s more market volatility, and the slowing number of IPOs reflects that.

If you’re interested in adding IPOs to your portfolio, it’s also important to know which sectors tend to have the most and least IPO activity.

Whether you’re curious about exploring IPOs, or interested in traditional stocks and exchange-traded funds (ETFs), you can get started by opening an account on the SoFi Invest® brokerage platform. On SoFi Invest, eligible SoFi members have the opportunity to trade IPO shares, and there are no account minimums for those with an Active Investing account. As with any investment, it's wise to consider your overall portfolio goals in order to assess whether IPO investing is right for you, given the risks of volatility and loss.

Photo credit: iStock/Inside Creative House

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Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. IPOs offered through SoFi Securities are not a recommendation and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation.

New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For SoFi’s allocation procedures please refer to IPO Allocation Procedures.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.