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While cosigners aren’t necessary on most federal loans, it could be hard to qualify for a private student loan without one. If you find the right person willing to back your loan, you can save on rates and be approved for higher loan amounts.
But asking a friend or loved one to become a cosigner is no small favor — cosigners are responsible for your debt, and they’ll need to rely on you to make on-time payments.
Student loan applications aren’t universal, but you can generally expect to follow set steps when applying for a loan with a cosigner.
Many private student loan providers enforce minimum credit score requirements of around 640 and income requirements of about $25,000 a year. You might have an easier time qualifying for the amount you want to borrow with a competitive rate if you apply with someone who has good to excellent credit, works full time and has a low debt-to-income ratio (DTI).
Most students ask their parents or a relative to cosign their student loans. But if family isn’t an option, look to:
You might be tempted to turn to Craigslist or sites like Hire a Cosigner, but note the risks. On top of charging hefty fees, cosigners-for-hire get access to identifying personal and financial information. Some might also request that you share part of your loan.
Once you have a cosigner, calculate how much you need to borrow by looking at your expenses. Add up your tuition, fees and living expenses, and subtract from that total any other financial aid you receive — including federal loans, scholarships and grants and work-study programs. If your parents are footing part of the bill, subtract the amount they contribute too.
You don’t need to nail it down to the last cent, just a general idea to confirm your desired lender offers the loan amount you need. Most private student loan providers confirm your loan amount with your school so you don’t end up with extra money.
It might be tempting to go with the first lender you come across, but you won’t necessarily get the best deal. To position yourself for the best loan you’re eligible for, list out your priorities that consider:
After you’ve narrowed it down to a lender, learn what you need to apply. Most loans require:
Follow your lender’s directions to complete the application with your cosigner. Typically, you can do this online.
How your cosigner completes their portion of the application ultimately depends on your lender, but you might be asked to:
Generally, you’ll wait a few business days to hear back from a lender after you and your cosigner have submitted your application. If you’re eligible, the lender provides a tentative offer that includes loan amounts, rates and terms. This offer isn’t necessarily what you’ll get — it’s just what your lender thinks you might qualify for.
Discuss the offer with your cosigner to make sure that it’s something you both agree to. Then follow your lender’s directions to submit additional information or documentation to complete your application.
After you’ve completed the application, your lender sends you and your cosigner a final offer. Some private student loan providers send the offer after confirming costs with your school, while others do it before. If your lender hasn’t confirmed your costs, you could end up borrowing a different amount than what’s quoted on your final offer — but your lender will notify you before it disburses the funds.
If you and your cosigner agree to the lender’s terms and conditions, sign and submit your loan documents. You can typically do this online.
It used to be fairly common for lenders to include a clause in the contract that said the loan would go into automatic default if your cosigner declares bankruptcy or dies.
Most lenders have revised their contracts to exclude this law after a Consumer Financial Protection Bureau report brought this issue to light in 2016, but it’s possible that some have not. Carefully read the terms and conditions of your loan before signing your documents.
How and when you begin repaying your loan depends on the repayment option you choose. Many private student loan providers allow you to defer payments for up to six months if your course load drops below half time at school. But while deferment could be the least expensive option in the short term, you’ll end up paying more over the life of your loan because of something called interest capitalization.
With interest capitalization, your lender adds to your loan principal any interest that accumulated while you were in school or over your grace period. Because interest is based on your loan principal, you end up paying back a larger loan with larger interest payments after deferment.
To avoid capitalized interest, consider looking into whether you or your cosigner can afford to make full repayments as soon as the loan is disbursed. That way, you’ll save the most on interest. Many lenders also offer the option of interest-only repayments of $25 or more while you’re in school to reduce the interest added to your principal.
Cosigner release is a process by which you apply to remove your cosigner’s name from your student loan. Releasing your cosigner shows is an option after you’ve become financially independent and can afford your repayments. It also frees up your cosigner’s finances and lowers their DTI should they need to take out another loan.
Many lenders offer cosigner release after one to two years of consecutive, on-time repayments. Some allow you to keep the same loan terms, while others update your rates and terms depending on your credit score and income.
If your lender doesn’t offer cosigner release, you can refinance your student loan in your own name. This could be a particularly good option for former students who’ve built a strong credit history and have a higher income than their cosigner. You just might see more competitive rates and terms on your own.
A cosigner is a person who signs your loan documents and becomes equally responsible for paying back your student loan on time. Most cosigners are parents, relatives or somebody close to you. That’s because cosigning a loan can be a huge risk: If you’re late on a payment or default on your loan, it can damage your cosigner’s personal credit.
It depends on the type of loan you’re applying for. Most federal loans don’t require a cosigner. But you might have an easier time qualifying for a strong private student loan with a cosigner.
Typically, you could benefit from applying with a cosigner if:
When a person cosigns a student loan, they help the applicant meet specific credit, income and other eligibility requirements by taking on some of the risk that comes with borrowing. When it comes to student loans, lenders often consider only the higher credit score and income, though some look at the credit history of both borrowers.
When someone cosigns a student loan, it’s as if they take on that debt themselves. They undergo a hard credit check, which can temporarily lower their credit score, and the loan shows up on their credit report as a debt obligation. In this way, cosigning a student loan can make it difficult for the cosigner to qualify for credit until it’s paid off or the borrower removes them from the loan.
Even with a cosigner, you generally repay your student loan on your own. But it’s your responsibility to notify your cosigner if you find yourself unable to making payments — technically, they’re responsible for making sure your lender gets the repayment on time.
Cosigning a student loan can hurt your credit when the lender runs a hard credit check during the application or if the student is late on any repayments. There’s no way to avoid the hard credit check, but a cosigner can stay on top of the student’s loan repayments by regularly checking in on the account.
But it’s not all bad. If the cosigner or student makes all repayments on time, it can help boost both credit scores since it establishes a history of on-time repayment.
5 risks to consider before cosigning a student loan
Yes, but you might find limited options. If you’re eligible for federal funding, you might want to start there — federal loans offer more flexible repayment terms and highly competitive rates set by Congress each year.
Otherwise, you might be able to find a loan without a cosigner if you’re employed full time and have an established credit history. Students who don’t fit that description could have luck looking into student loan options for international students, like Mpower. These loans tend to rely on your academic performance and earning potential, rather than your personal credit history.
Applying with a cosigner on a student loan doesn’t add too many extra steps to your application. But asking a family member or close friend to cosign a loan is a serious request.
If you don’t know a trustworthy cosigner who’d be willing to help you, consider reaching out to your school’s financial aid office to learn about your other options.
Or read our comprehensive guide to student loans to learn more and compare lenders.
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