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Students looking to qualify for loans with lower interest rates will often add a cosigner – often a parent with a more established credit history – to their loan. A co-signer can help borrowers improve their chances of being approved for, or get lower interest rates on, their student loans.
But remember – by signing on to the loan with the borrower, the cosigner is agreeing to shoulder the responsibility of paying off the loan if the borrower is unable to repay it.
Read on to learn more about when you might need a cosigner and what to do if you don’t have access to one.
Who can be a cosigner on a student loan?
A co-signer can be a spouse, relative, parent, or any adult who is a U.S. Citizen or Permanent Resident Alien and has a stable credit history and a strong credit https://www.paydayloanadvance.net/payday-loans-sd/ score.
A cosigner takes on just as much responsibility for repaying the student loan as the primary borrower does, and is equally affected by any missed payments. As such, it’s important that there is a strong, positive relationship between the borrower and the cosigner.
If you are unable to repay your loan, your cosigner essentially agrees to take on payments on your behalf, so make sure you and your cosigner share a mutual trust.
Do you need a parent to cosign a student loan?
When you take out student loans, you can opt for federal student loans or private student loans. Generally speaking, you should take out as much as you need in federal loans and scholarships before turning to private loans.
You can apply for federal loans just by filling out the FAFSA – you do not need a cosigner and you won’t have to undergo a credit check.
Private loans, on the other hand, can be difficult to qualify for, since you must be able to demonstrate that you have the ability to pay off your student loans, that you have strong credit, and that you’re a U.S. citizen.
While it is possible to qualify for a private student loan without a co-signer, adding a co-signer can improve your chances of being approved or get you better rates, especially if you have a limited credit history.
How do I get student loans if my parents make too much money?
Some federal student loans, like Direct Unsubsidized loans, don’t require you to demonstrate financial need, so you can borrow more in unsubsidized loans than you can in subsidized student loans.
Unsubsidized student loans begin accruing interest from the date of your first loan disbursement, though you’re not required to pay that interest until you finish school. When you graduate, the amount of interest that accrued during your education is simply added to the principal loan amount and you begin paying off that new amount.
How can I get a student loan without a cosigner?
Federal student loans (except for PLUS loans, if the borrower has an adverse credit history) do not require a cosigner. However, you need to fill out the FAFSA in order to apply for federal student loans, and you may require some help from your parents to fill out the FAFSA if you are a dependent.
Disadvantages of receiving student debt without a guarantor
You can apply for federal loans without a cosigner, but if you’ve hit your federal loan limits or need to turn to private loans to cover any additional educational expenses, adding a cosigner can often be your best bet.
