If you have poor credit or haven’t had enough time to build your credit file, it can be hard to find a student loan. Most private lenders require strong credit and a stable income before approving applicants. If you can’t get a loan on your own, a cosigner — someone who agrees to share responsibility for your debt — can help.
Cosigners are very common in education lending, with nearly 90% of private student loans cosigned in the 2022-23 school year, according to Enterval Analytics. Learn when you might need a cosigner and how to find one.
- What is a cosigner, and why do I need one?
- How to find a cosigner for student loans
- Approaching potential cosigners
- Cosigner alternatives
What is a cosigner and why do I need one?
“A cosigner is someone who puts their good credit on the line so that you can get approved for financing,” said Leslie Tayne, founder of the debt-relief legal firm Tayne Law Group. Cosigners can not only help you secure the loan you need at a better interest rate, but they also assume legal responsibility for the debt if you can’t or don’t pay.
You may need a cosigner if you have poor or limited credit and can’t qualify for private student loans or student loan refinancing on your own. While most types of federal student loans don’t require good credit, private student lenders do. Exact policies vary, but you’ll likely need a FICO credit score in the mid-600s or higher to be approved for a student loan. If you’re an international student, you may also need a cosigner that’s a United States citizen.
In addition to improving your odds of approval, a cosigner with excellent credit could help you qualify for a lower interest rate and better terms than you could alone.
While the arrangement has its benefits, you and your cosigner should be aware of potential pitfalls. If you don’t pay the debt as agreed, your cosigner’s credit score can be negatively affected. If you can’t afford your payments, your cosigner will have to make them for you. Plus, sharing responsibility for a loan could put a strain on the relationship you have with your cosigner.
How to find a cosigner for student loans
Generally, a cosigner is someone you trust and know well. Most borrowers ask a family member or close friend to cosign for them, according to Tayne. However, anyone can assume the role of cosigner.
There are two main requirements for a cosigner: a high credit score and a willingness to take responsibility for your debt. If you know someone who satisfies both requirements and have a close relationship with them, you can add them to your list of potential cosigners.
Note that whoever you choose will need to meet the lender’s basic requirements for applicants. This can include earning a minimum income amount, maintaining good credit, and holding U.S. citizenship or permanent residency. Review the lender’s cosigner requirements to be sure the person you ask is eligible.
Approaching potential cosigners
When you approach a potential cosigner, Tayne said, “It’s important to prove that you’re using the money for a worthwhile cause, and they can trust you to pay back your loan on time.”
You can help your case by preparing a repayment plan in advance and showing evidence of a steady income source. Outline what will happen if you miss a payment and the steps you will take to address it. You should also expect to answer questions about the potential risks of the loan, as well as eligibility requirements and the application process.
In addition, the person may be more willing to cosign if you select a student loan lender that offers a cosigner release. These programs allow you to remove your cosigner partway through the loan’s repayment. You typically must make a minimum number of consecutive payments and have good credit in your own name to qualify. Then, the cosigner can be removed and you assume sole responsibility for the debt.
Lastly, “Consider how problems with your loan could impact the relationship,” said Tayne. “If you think there’s any chance that failing to repay your loan could cause irreparable harm to your friendship or reputation, it’s best not to move forward.”
Cosigner alternatives
If you’re unable to find a creditworthy cosigner, try some of the following strategies to cover your higher education expenses.
Research other types of funding
Tayne said your first move is to ensure you take full advantage of federal student loans before approaching private lenders. “Federal loans come with many protections and benefits that private loans don’t, and they don’t require a traditional credit check.” That means you can qualify for most types of federal financing without a cosigner.
If you’ve exhausted that federal funding, take some time to research and apply for scholarships and grants. You may qualify for programs based on academic success, financial need, athletic ability, special talents, demographics, or other eligibility criteria. Your school’s financial aid office can likely give you information to help you get started.
Lastly, you can find specialized student loans that don’t require a cosigner. Some private lenders cater specifically to borrowers with low credit. These loans are generally easier to qualify for, but come with higher interest rates and less competitive terms.
Improve your credit
You can also work to build a strong credit score that meets the eligibility requirements for the student loans you want. Some steps you can take include:
- Open a secured credit card account and pay it off every month. That way, you can build a positive payment history.
- Ask a parent, guardian, older sibling, grandparent, aunt, uncle, spouse, or friend with good credit to add you as an authorized user to their credit card account. You don’t even need to make purchases on their account — you’ll benefit from their excellent credit simply by association.
- If you pay your bills on time, consider adding your rent and utility payments to your credit report to demonstrate your financial responsibility. Companies like RentTrack and Experian may be able to help you do so.
| Remember: You may still be able to qualify for an undergraduate or graduate student loan without a cosigner, even if you have bad credit. However, be prepared to pay a higher interest rate. |