How to Get Student Loans Without a Cosigner
College is expensive. Many students have to use multiple sources of income to fund their college. Scholarships, money from parents, full and part time jobs, grants and work-studies can all contribute to your college funding. Nevertheless, many students still need access to student loan money to complete their education.
With an availability of loans to choose from how do you know what will work best for you?
Your best chance to get a private student loan at a good rate is to use a cosigner, however, not every student has someone who can cosign on the loan. It is possible to qualify for student aid without a cosigner though. Federal student aid is available on an as needed basis and a cosigner isn't required.
Why would I need a cosigner?
A cosigner is someone who also signs for the loan with the understanding that if the student does not pay on the loan, the cosigner will be responsible. Cosigner's are especially helpful for young students without credit history or a steady income. A cosigner with an excellent credit rating increases your chances of qualifying for a loan. A cosigner can also lower the interest of your loan and qualify you for more money.
To better understand how most families pay for college, check out the graph below.
Although it is helpful to have a cosigner for private loans, there are students who receive loans without one. To qualify for a private loan, you must have a solid credit history. You can also consider applying here.
To get a better idea of what is a good credit score, check out the graph on the right. A 678 is the average score. This is also close to what many lenders require as a minimum. Adding a cosigner with a high credit score greatly increases your chances of being approved for a student loan.cosigner
What is a credit score and why is it so important?
A "credit score" is a number that indicates your ability to borrow money. Credit unions calculate your credit score based on several factors including money borrowed (from banks or using credit cards), age of accounts, missing or late payments and the current amount of debt.
Banks and other financial institutions use this number to decide if you will be responsible in paying back your loan. A lower score can mean that you do not have borrowing experience, or you are not trustworthy in borrowing money. A higher score shows that you have proven your creditworthiness over time, and that you can probably be trusted to pay back the loan.
It is important to check your credit score once a year. You can check your score by visiting Free Credit Check. On a scale that usually goes from 300 to 850, a good credit score is anything above 720, with a U.S. average around 678. The following are tips on building a solid credit score:
- Maintain an active bank account in good standing. When you have active checking and savings accounts in good standing, you are proving you know how to handle your money. Sign up for accounts at a local bank and build a relationship with the bank.
- If you can qualify for a credit card with no monthly fee, use it. Make purchases on your card and pay balances monthly to avoid interest. The longer you responsibly use the card, the higher your scores will be. Long credit histories increase your score.
- Consider getting a department store or gas card. These cards usually have higher rates but are easy to obtain. Consider using one to establish a credit history. Pay balances monthly to avoid any charges.
If you already have a credit history but need to raise your score, try a few of these tips:
- Always pay your bills on time. Late payments negatively affect your credit ratings. If your bills are overdue, make a plan to catch up. Consider having automated payments directly withdrawn from your banking account on due dates.
- Pay down credit card balances and other loans. Your amount of debt can negatively affect your credit score. Begin paying down
- balances, mortgages and car loans. If possible, get a loan from a family member and pay down your credit cards. Although this does not decrease your amount of debt, it will decrease the amount of debt showing on your credit report.
- Do not close unused accounts. Having a long credit history can increase your score, so hang on to unused accounts and use them occasionally.
- Never max out your credit cards or store accounts. Keep your balances under 30 percent of the total limit. Use a couple of cards to spread the balance. It is better to have two cards with lower balances than one card maxed out.
- Get a credit report and look for errors. Protest unjust charges and collections. But don't pull your credit score too often as that will also have a negative impact over time.
How to Choose Your Student Loan Without a Cosigner
Should I get a federal or private loan?
Federal funding is the best option for students without a cosigner. There are many benefits to a federal loan over private as shown below.
- You do not have to make any payments on your loan until you graduate. Most federal loans also give you a grace period, where you do not have beginning making payments for up to 6 months after graduation.
- Most private student loans require you to make payments during college.
- Interest rates on federal loans are fixed and much lower than private loans or credit cards.
- Interest may be tax deductible.
- Students with greater financial need may even qualify to have their interest paid by the United States Department of Education while they are still in school.
- You do not need a credit record or a cosigner.
- Federal loans can help you establish a credit record.
- After graduation, your payment amount could be income based. The amount you pay is based on what you can truly afford.
- During tough times, you can sometimes postpone or lower payments.
- You may be able to have some of your loan forgiven for working in certain jobs or areas.
- Consider companies like Funding University
- Most private loans have a variable interest rate and most start higher than a federal loan.
- Interest may not be tax deductible.
- The government will not pay interest.
- As an undergraduate student, you usually need a cosigner unless you have a well-established credit history.
- It is difficult to qualify for a private loan without a credit history, but the loan will help you establish a credit record.
- Repayment options are specific to the lender. Contact your lender for options.
- Private loans usually do not offer postponement of payments.
- Private lenders usually don’t offer loan forgiveness programs.
Applying for a Federal Loan Without a Cosigner:
To apply for government funding whether you are applying with or without a cosigner, first complete the Free Application for Student Aid (FAFSA). The application calculates your need for financial assistance to attend college. Use the FAFSA4caster to help you understand your options for paying for college. By providing some basic information, the FAFSA4caster can give you an idea of what federal aid you may be eligible to receive (grants, loans and other financial assistance). Use the FAFSA on the web worksheet to help organize your information before beginning.
Follow this link to watch a series of videos from the FAFSA Help Channel on Youtube.
Before starting the application process, gather financial documents from the previous year including:
- Social Security Card
- Driver's license or ID
- W-2 forms and other records of money earned
- Federal Income Tax Return
- Parent's Federal Income Tax Return (if you are a dependent student)
- Untaxed income records
- Current bank statements
- Current business and investment mortgage information, stock, bonds and other investment records
- If you are not a US citizen, your alien registration or permanent resident card
Types of Federal Student Loans:
Direct Subsidized Loans Direct Subsidized Loans are only available to undergraduate students who have demonstrated greater financial need. They have slightly better terms than a Direct Unsubsidized Loan. Your loan amount is determined by your financial need to attend a particular school. The U.S. Department of Education pays some or all interest on your loan while you are in college and for 6 months after you graduate.
Direct Unsubsidized Loans Direct Unsubsidized Loans are available to undergraduate and graduate students. This loan is available regardless of financial need. You do not need to demonstrate financial need to receive a Direct Unsubsidized Loan. The cost of attendance and the availability of funds at your school determine the amount of the loan. You are responsible for all interest during the life of this loan but may choose not to pay during school. However, interest not paid will be added to the total of the loan.
Direct Plus Loans Direct Plus Loans are available to graduate or professional degree students and to parents of dependent undergraduate students. The cost of attendance and the availability of funds at your school determine the amount of the loan. The interest rate is fixed at 7.9 percent. You must have a credit history to apply for a Direct Plus Loan.
Federal Perkins Loans Federal Perkins Loans are available to undergraduates and graduates who have tremendous financial need. Perkins Loans are not available at all colleges. Since the college is the lender of this loan, the amount of loan depends on financial need and the availability of funds at the school. Interest rates are fixed at 5 percent and full-time students have 9 months after graduation before they begin making payments.
How much can I borrow?
- Direct Subsidized and Unsubsidized Loans – You can receive anywhere from $5,500 to $12,55 a year depending on certain factors.
- Perkins Loans – You can receive up to $5,500 a year depending on your financial need and available funds.
- Direct Unsubsidized Loans – You can receive up to $20,500 a year.
- Perkins Loans – You can receive up to $8,000 a year depending on your financial need and available funds.
- Direct Plus Loans – You can receive money to cover the remainder of your college costs that is not covered by other financial aid.
Parents of Dependent Undergraduate Students
- Parent Loans (Plus Loan) – You can receive money to cover the remainder of your college costs that is not covered by other financial aid.
- You would not be eligible for this loan if you don't have a cosigner
Private Student Loans Without a Cosigner
You may need to apply for a private loan if your federal amount does not cover all of your expenses. Few financial institutions offer loans that do not require a cosigner. However, Funding University is a great option. Graduate and Professional student loans are easier to get without a cosigner than the traditional undergraduate loans. Nevertheless, if you have an established credit history and a good to excellent credit score you may qualify for an undergraduate student loan without a cosigner.
The following list includes a few top-name financial institutions that offer competitive student loans.
The EdSucceed Private Student Loan Consolidation offered by cu includes many of the benefits the other companies offer. These benefits include a 15 year repayment program, 12 consecutive on time co-signer release and a 4 year interest only option.
Some of the requirements include a monthly salary of $2,000 and verifiable income for the co-signer.
The last 2 companies offer very similar loan consolidations.
Wells Fargo Wells Fargo offers graduate and professional student loans without a cosigner. They recommend a cosigner for best rates if you are an undergraduate student. However, with an established credit history, it may be possible to qualify without a cosigner.
It is very rare to receive a private student loan without using a cosigner. Private student loans without a cosigner are only available to graduate and professional students or undergraduates with a well established credit history.
Banks use your credit score and credit history to determine your ability to handle your money. Your credit score is determined by analyzing five major categories as shown in the chart below from myFico.com.
- Payment History (35 percent) – This is the most important category. Lenders want to know if you are reliable in making payments. Late payments, bankruptcies and past due accounts will negatively affect your score.
- Amounts Owed (30 percent) – This is the amount you owe on other accounts. The amount owed can affect your credit score when a high percentage of your available credit has been used. “Maxed out” credit cards will lower your score.
- Length of Credit History (15 percent) – A long credit history can increase your scores. Continue to use older accounts that have been open the longest.
- New Credit (10 percent) – Opening many new accounts and having a large amount of credit inquiries will negatively affect your credit score.
- Types of Credit Used (10 percent) – Having loans and credit cards with good repayment history will raise your score. People with no credit cards may be affected negatively because they have not proven that they can manage repayments successfully.
Private Loan Options for Undergraduates:
Banks and other financial institutions may provide student loans to borrowers with a solid credit history if they don't have a cosigner. A cosigner is almost always required for an undergraduate loan because most undergraduates are inexperienced in borrowing money.
Many banks do offer the option of releasing your cosigner after graduation. To qualify for a cosigner release, the borrower must successfully complete a specified number of payments after graduation. The chart below lists a few loan options with a cosigner release program.
|Bank or Financial Institution||Cosigner Release Requirements|
|Acumen Student Loans||24 months of consecutive on-time principal and interest payments|
|Charter One||36 months of consecutive on-time payments|
|Citizens Bank||36 months of consecutive on-time payments|
|Commerce Bank and Sallie Mae||12 months of consecutive on-time principal and interest payments|
|Sun Trust Education Loans||48 months of consecutive on-time payments|
Private Loan Options for Graduate and Professional Students:
Graduate and professional students without a cosigner may have an easier time qualifying for a private loan without a cosigner. Keep in mind that you must have a well-established credit history to receive good rates. Having a cosigner with a better credit history and a steady income may decrease interest rates and get you more money.
The chart below details a few private loan options available for graduate and professional students without a cosigner.
|Bank or Financial Institution||Graduate and Professional Student Loan Details|
|Citizens Bank Student Loan|
|Commerce Bank and Sallie Mae|