How You Can Get Student Loans Without a Cosigner
Lending institutions are a business and, like any business, they want to control the risk that they take on with borrowers. One way that lenders avoid risk is by only lending to borrowers who have high credit scores and an established credit history. However, many students are just beginning to build their credit, and while attending school may not have a regular source of income.
In spite of their position as higher-risk borrowers in the eyes of many lenders, students are nonetheless in dire need of financial aid (like student loans) to help pay for college. This leaves students in somewhat of a financial paradox:
- College is expensive, so loans are often necessary to help manage the cost of going to school.
- It’s difficult to get loans without a strong credit history, which makes the task seemingly impossible for many students.
Student loan cosigners are the answer in many cases. A cosigner is someone who agrees to provide backup on a loan. If the original borrower isn’t able to pay the loan back, the cosigner has responsibility for the debt.
However, while cosigners can help many students get the loans that they need, not every student has someone who can serve as a cosigner. A cosigner should have a strong credit history that puts lenders at ease, as well as the willingness and means to put their own finances on the line if the student can’t pay back their loan.
If you don’t have someone like this in your life, don’t fret. It’s perfectly normal for students to have family who is either unable or unwilling to contribute financial support. The question then becomes: how can you get student loans without a cosigner? The answer depends on your personal situation and goals, so let’s look at the kinds of student loans that are available without a cosigner.
Federal Student Loans Without a Cosigner
Federal student loans come from the government. This is what most people think of when we talk about student loans — money furnished by the Department of Education and paid back to the government after graduation.
The federal government isn’t like other lending institutions. It has a wide variety of revenue streams outside of loan payments and its goal is to improve the public welfare, so it’s able to absorb the risk associated with lending in order to make college available to more people.
The only federal student loans that require a cosigner or a good credit score are PLUS Loans. These loans are available to graduate students and to the parents of undergraduate students. Other loans, such as Direct Subsidized and Unsubsidized Loans, are available without a credit check and without a cosigner.
Private Student Loans Without a Cosigner
Federal student loans make up the backbone of student financial aid. However, their broad scope makes them inflexible when it comes to fitting each student’s unique needs. For students with unusual family situations, outside-the-box degree programs, or non-traditional educational backgrounds, federal student loans don’t always provide the necessary help.
This is where private student loans come in. Private student loans come from private lenders, such as banks, credit unions, or specialized institutions that focus on student loans. However, unlike the federal government, these lenders have to be more careful with the risks that they take on in giving out student loans. For this reason, private student loans are more likely to require a cosigner, if you don’t already have a strong credit history.
The best way to get a private student loan without a cosigner is to improve your credit score before applying for loans. However, this isn’t always reasonable. If that’s too much, you may still be able to get private student loans without a cosigner as long as you’re willing to accept higher interest rates on your loans in order to help the lender offset the risk they’re taking.
One interesting thing when it comes to private student loans and cosigners is the fact that you can actually use private student loan refinancing to remove a cosigner from existing private or federal student loans. This process will leave you with a brand new loan in place of your old ones. Oftentimes this new loan may have better terms, such as a lower interest rate. A refinancing calculator is the quickest way to find out how your loan terms could change with student loan refinancing.
Even if you need a cosigner when you first take out your private student loan, you can include the option for cosigner release in your loan terms. This will release the cosigner from their obligations after certain conditions are met. These are conditions like 2 years of on-time payments or other conditions that indicate the primary borrower’s ability to handle the loan.
Getting Student Loans Without a Cosigner and No Credit
It can take years to build up credit. That’s years of taking on debt and repaying it that most students don’t have by the time they enter college. If you have a traditional student background and you have no credit history at all, then your best bet is to apply for federal student loans. Most federal student loans don’t require a cosigner, so a short credit history won’t change the amount of money that you receive or the interest rates that you pay.
Student Loans Without a Cosigner and Bad Credit
Not every student goes right from high school to college. Some students start careers before college and, as part of their lives beyond school, take on debt. This debt isn’t always repaid, so some students are looking for student loans with a bad credit score.
Federal loans should always be your starting point for financial aid and they do not require a credit check. Federal student loans are needs based and it doesn’t matter if you have bad credit or you have the best credit score in the world. This means that it’s easy to get federal student loans without a cosigner and with bad credit.
Applying for Financial Aid Without a Parent or Cosigner
The first step towards getting student loans is to apply for financial aid. If you don’t have a cosigner or your parents are absent for the financial aid process, then you should begin your application through FAFSA.
Cosigners are often necessary to make loans available to those without much credit history or with low credit scores. However, if you don’t have a cosigner, there are still many student loan options available to you.