You may be able to refinance student loans without a cosigner as long as you meet specific lender requirements. Refinancing is when you replace some or all of your existing student loans with a new loan from a private lender like a bank, credit union, or online lender.
A cosigner is an individual with good credit who agrees to repay the loan if you, the primary borrower, cannot. A cosigner may give a student without a strong credit history a better chance of being approved for refinancing and also help them secure a better interest rate on the loan. However, it is possible to refinance loans with no cosigner if you meet certain conditions.
Read on for more information about how to refinance student loans without a cosigner and what the process involves.
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Key Points
• Refinancing student loans without a cosigner requires a good credit score, a solid credit history, and a stable income.
• A lower debt-to-income ratio increases the chances of qualifying for student loan refinancing.
• Refinancing student loans can potentially result in a lower interest rate. It also streamlines student loan payments by consolidating multiple loans into one.
• Refinancing federal student loans turns them into private loans and results in the loss of federal benefits like federal loan forgiveness programs.
• Alternatives to refinancing include income-driven repayment plans and loan forgiveness programs.
Understanding Student Loan Refinancing
With student loan refinancing, a private lender pays off your existing student loans — whether they are private student loans, federal student loans, or a mixture of both — and replaces them with a new private loan. The new loan has a new interest rate and loan terms.
Benefits of Refinancing Student Loans
Ideally, refinancing student loans allows you to get a lower student loan refinancing rate or more favorable loan terms, if you qualify. The loan interest rate, which is a percentage of your principal amount borrowed, is the amount you pay to your lender in exchange for borrowing money. A lower interest rate could help you save money on your monthly student loan payments.
Additionally, when you refinance, you may be able to change the repayment terms of the loan. For instance, if you need more time to repay the loan and smaller monthly payments, you may be able to get a longer loan term. However, this means that you will likely pay more in interest overall since you are extending the life of the loan.
Alternatively, if you are refinancing student loans to save money, you might be able to get a shorter loan term so that you can repay the loan faster, helping you save on interest payments. In this case, your monthly payments will likely be higher.
Refinancing can also help you manage your student loan payments by streamlining the process. Instead of having to keep track of multiple loans with different due dates and balances, you have just one loan to repay with refinancing.
Risks of Refinancing Federal Student Loans
You can refinance federal student loans, but there is one major drawback to be aware of. Refinancing federal student loans means that you’ll lose access to federal benefits such as federal loan forgiveness, income-driven repayment plans, and federal deferment.
Clearly, it’s important to consider when to refinance student loans — and when not to — for the best possible outcome. If you think you may use any of the federal programs and protections, refinancing federal student loans won’t make sense for you.
Refinancing Student Loans Without a Cosigner
When you refinance student loans without a cosigner, you have full control over your new loan and the responsibility of repaying it will be all yours. No one else will be financially liable for the loan. (On the other hand, when you refinance with a cosigner, that person is liable for the loan in the event that you are unable to repay it.)
To qualify for student loan refinancing on your own, you will need to meet specific requirements. These eligibility requirements include:
Qualifying With Your Own Credit
To get approved for student loan refinancing, you typically need a good credit score and a solid credit history. FICO®, the credit scoring model, considers a good credit score to be between 670 to 739. Different lenders have different credit score requirements — some may have a minimum credit score that’s slightly lower than 670 — but a higher score is usually better not only for approval, but also to get the best rates and terms.
Length of credit history — meaning the age of your credit accounts — comprises 15% of your credit score. A longer credit history typically has a positive impact on your credit score.
How to Improve Your Credit Score Before Applying
If your credit score needs some work, there are ways to help build your credit over time. First, make all your payments in full and on time. Payments account for 35% of your FICO score, so this is critical.
In addition, keep your credit utilization — the amount of debt you owe vs. the available credit you have — as low as you can. This can help show that you’re not overspending. And aim to have a balanced mix of credit, such as credit cards and loans, to demonstrate that you can successfully deal with different types of debt.
If your credit history is slim, you could help build it by getting a secured credit card. With this type of card, you put down a deposit to back the card. The deposit is also your credit limit. Use the card only for small purchases and pay the balance in full and on time each month. Establishing credit accounts and handling them responsibly over time shows that you have a track record of borrowing money and repaying it.
Recommended: Refinance Student Loans With Bad Credit
Debt-to-Income Ratio
A lender will also look at your debt-to-income (DTI) ratio. This is a percentage that indicates how much of your money goes toward your monthly debts versus how much money you have coming in each month.
You can calculate your DTI by adding up your monthly debts and dividing that figure by your gross monthly income (your income before taxes). Multiply the resulting number by 100 to get a percentage, and that’s your DTI. The lower your DTI is, the less risk you are to lenders because it indicates that you have enough money to pay your debts, including the new loan. Lenders typically prefer a DTI below 50% for student loan refinancing, but a DTI below 40% is even better.
If your DTI is high, such as above 50%, work on paying down the debt you owe before you apply for student loan refinancing. You could also work to boost your income by applying for a promotion or taking on a side hustle.
Employment Status
Generally, lenders look for borrowers who are currently employed and have a steady income, or, in some cases, those who have an offer of employment to start within the next 90 days, in order to approve them for student loan refinance. Check with your lender to learn their specific employment and income criteria.
How to Refinance Student Loans Without a Cosigner
If you’ve decided that refinancing is the right option for you — and you’ve worked on building your credit, lowering your DTI, and you have a stable job or a job offer as noted above— here are a few tips on how to refinance student loans without a cosigner.
• Gather your personal information. Although the information required varies from lender to lender, you’ll typically need to provide your name, address, employment details, income, and loan amounts, among other things.
• Shop around with different lenders. Most lenders will let you prequalify for refinancing with a soft credit check that won’t impact your credit score. That way you can review the projected interest rates and terms of a loan and compare it to offers from different lenders.
If your credit is slim and you haven’t had time to build it, you may want to look for a refinancing lender that uses an alternative credit screening process. Some lenders might consider factors such as your grades, degree, career path, and future earning potential to determine whether you qualify for refinancing. However, you may end up with a loan with a higher interest rate if you go this route.
• Choose a lender and a loan. After you’ve reviewed the offers and settled on the best one for your needs, you’ll need to fill out a formal application and provide supporting documentation such as proof of identity and citizenship, your Social Security number, pay stubs, and statements for the loans you’re refinancing.
• Sign up for autopay. Once you’re approved for refinancing, consider signing up for autopay if it’s an option. Many lenders offer a rate discount of about 0.25% for borrowers that opt for automatic payments.
Alternatives to Refinancing
If you can’t qualify for student loan refinancing without a cosigner, there are some other options to explore to help manage your student loan payments once your student loan grace period has ended.
Income-driven Repayment Plans
With an income-driven repayment (IDR) plan, your monthly student loan payments are based on your discretionary income and family size. Your monthly payments are typically a percentage of your discretionary income, which usually means you’ll have lower payments. The repayment period is 20 or 25 years, depending on the IDR plan. (Just be aware that with a longer loan term, you’ll pay more in interest overall.) On one of the current plans, the Income-Based Repayment (IBR) plan, your remaining loan balance is forgiven at the end of the repayment term.
Loan Forgiveness Programs
You might qualify for student loan forgiveness through a state-specific or federal program. For instance, borrowers with federal student loans who work in public service may be eligible for the Public Service Loan Forgiveness (PSLF) program. If you work for a qualifying employer such as a not-for-profit organization or the government, PSLF may forgive the remaining balance on your eligible Direct loans after 120 qualifying payments under an IDR plan or the standard 10 year repayment plan. There is also a federal Teacher Loan Forgiveness program for student loan borrowers who teach in low-income schools or educational service agencies.
Be sure to check with your state to find out what loan forgiveness programs may be available. Some state programs even offer forgiveness to private student loan holders.
Federal Student Loan Consolidation
One of the differences between student loan consolidation vs. refinancing is that consolidation is for federal student loans only. Consolidation might be something to consider if you want to take advantage of federal programs or protections.
A federal Direct Consolidation loan allows you to combine all your federal loans into one new loan, which can lower your monthly payments by lengthening your loan term. The interest rate on the loan will be a weighted average of the combined interest rates of all of your consolidated loans. Consolidation can simplify and streamline your loan payments, and your loans remain federal loans with access to federal benefits and protections. However, a longer loan term means you’ll pay more in interest over the life of the loan.
How SoFi Can Help You Refinance
If you want to refinance your student loans, you may want to consider refinancing your loans with SoFi. Borrowers will find competitive fixed or variable interest rates on refinanced student loans, no fees required, and flexible repayment options.
The refinancing process is simple and quick. You can view your rate in just two minutes. Then, you can choose a term and payment that makes sense for your situation. Just remember that refinancing federal student loans makes them ineligible for federal benefits such as income-driven repayment plans.
FAQ
Can I refinance my student loan without my cosigner?
If you can qualify for refinancing on your own, you typically won’t need to include the cosigner on the new loan which will have new loan terms. By qualifying on your own, you are essentially demonstrating to the lender that you have what it takes to make your loan payments. To qualify for refinancing without a cosigner, you’ll generally need a strong credit score and solid credit history, a low debt-to-income ratio, and a stable income.
Is there any way to get a student loan without a cosigner?
Getting a student loan without a cosigner depends on the type of loan it is and your financial situation. Most federal student loans, including Direct Subsidized and Unsubsidized federal loans, don’t require you to have good credit or to prove you have income, so you won’t need a cosigner for those loans. However, if you’re taking out a Direct PLUS loan and you have adverse credit, such as a recent loan default, you will likely need a cosigner for the loan.
If you’re interested in private student loans, private lenders generally have strict qualification requirements regarding your credit score and income. As a student without much of a credit history or a steady income, you may need a cosigner to qualify for a private student loan.
How easy is it to refinance student loans?
Refinancing student loans is quite easy today because in most cases you can do virtually all of it online. Here’s how: Research different lenders that offer refinancing and compare their loan terms and interest rates. Prequalify with a few lenders to see what rate you may be eligible for (this process involves a soft credit check that does not affect your credit score), and then choose the lender that makes the most sense for you. You can typically complete the entire loan application online. Just be aware that you will need to supply documentation like pay stubs and ID.
What credit score do I need to refinance student loans without a cosigner?
You typically need a credit score of at least 670 to qualify for refinancing without a cosigner. You’ll also typically need a low debt-to-income ratio and to be employed with a steady income — or have an offer for employment that starts within 90 days.
What happens to my cosigner when I refinance student loans?
When you refinance student loans without a cosigner, the original loan is paid off by the new loan, which releases the cosigner from all responsibility for the debt. Once you refinance, the cosigner has no responsibility for the new loan — you are solely responsible for repaying the refinanced loan.
However, if you choose to refinance with a cosigner, the cosigner is responsible for the loan if you can’t repay it.
About the author
Melissa Brock
Melissa Brock is a higher education and personal finance expert with more than a decade of experience writing online content. She spent 12 years in college admission prior to switching to full-time freelance writing and editing. Read full bio.
Photo credit: iStock/paulaphoto
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