These days, paying for college can be stressful. Even though both federal and private student loans are available, meeting the qualification requirements for these isn’t always easy. This may be especially true if you’re pursuing a graduate degree. Often as a graduate student, you are expected to “fend for yourself” and receive little-to-no help from family. Even qualifying for undergraduate loans or student loan refinancing may not be easy. This could leave you feeling stuck with high-interest rates or other unfavorable repayment terms.
The good news is that with private student loans, federal student loans, and student loan refinancing, you have the option of using a cosigner to qualify. A cosigner is a person who signs onto your loan and shares legal responsibility to pay it back. In this way, you’re essentially able to use your cosigner’s income, credit, and other financial information to qualify for a loan you otherwise would not have been able to qualify for. A cosigner can also help you secure more favorable repayment terms, such as a lower interest rate on a loan.
However, asking somebody to cosign a loan isn’t something that should be taken lightly. When someone agrees to cosign a student loan or refinance loan, they’re taking on a serious legal burden and doing you an enormous favor. It’s important to choose your potential cosigner carefully and approach the subject tactfully.
Choosing a Cosigner
The first step of the process is to decide who you want to cosign your loans. Keep in mind that a person will need to meet certain requirements in order to serve as your cosigner. Carefully consider how asking someone to cosign a loan will affect your relationship.
The Ideal Cosigner
Cosigner requirements will vary depending on whether you’re applying for a federal student loan, a private student loan, or even a refinance loan. The best way to find out about specific cosigner eligibility requirements is to check directly with your prospective lender.
A cosigner is a responsible person who:
- maintains a good credit score
- has established credit history
- earns a steady income stream
- is at least 18 years of age
Keep in mind that credit scores and credit history are not available to the public. This is private information that your cosigner may want to keep private.
Anyone who meets the cosigner eligibility requirements for your loan is a potential candidate. Cosigners don’t necessarily have to be family members, though many borrowers feel most comfortable asking parents, guardians or other close relatives, such as aunts and uncles, to cosign. A spouse or partner can also cosign a student loan, as can a friend.
No matter who you decide to ask, be sure to consider how having this person cosign on a loan, or even asking them to, could affect your relationship. If you have a falling out with your cosigner, they would still have the financial responsibility to pay off your loan. Cosigners can be removed from loans in some cases, but this can be a long and drawn-out process.
When choosing who to ask, you’ll also want to be careful not to make any assumptions. For example, a potential cosigner may appear to have their finances in order, but may actually have poor credit and a lot of their own debt. This can create an uncomfortable situation where they cannot help you.
Planning “The Talk”
Once you have a potential cosigner in mind, you need a detailed game plan for approaching the subject.
Do Your Research
Taking out a loan is a big enough obligation on its own. Start by doing research to ensure that you’ll be able to afford the loan for which you’re applying. Online calculators can help determine what your monthly payments may look like and how much interest you’ll pay over the entire repayment period.
From there, research average starting salaries for graduates in your field or factor in your current salary if you’re already working in the field. Make sure you’ll be able to comfortably afford your student loan repayments on this amount. Be prepared to share all this information with your potential cosigner.
Meet in Private
Whenever possible, approach the subject in-person and in a private location. Bringing it up around others may leave the person feeling obligated to say yes, even if they cannot help you. Discussing finances in the company of others is frowned upon, so it’s best to avoid this.
Keep the conversation light and do not pressure your potential cosigner into a decision. Reassure the person that they are under no obligation to say “yes” to your request.
What if They Say No?
There are many reasons a potential cosigner may decline your request. Perhaps they aren’t able to meet the requirements to cosign on your loan, or maybe they’re simply not comfortable with the idea. They could be worried about their current job status or ability to help you repay the loan in the future. Do not fret, as there are other options available to move forward.
Ask Somebody Else
Are there any other potential cosigners you could ask? If a parent is unable to help, perhaps an aunt or even a sibling could.
Explore Other Options
If you haven’t looked into your student loan or refinance options extensively, there may still be loan options that you can qualify for without a cosigner. Take some time to research these further. And remember that you can always take some time to build your credit, work and save money a bit before going to graduate school or refinancing your loans.
A cosigner can lower your rates and raise your chance of approval for student loans, but it’s good to have back-up options if your cosigner falls through. Just remember there are many roads to financing education and that you can achieve your goals even without a cosigner.