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Do You Need a Cosigner for a Student Loan?

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A student loan cosigner is someone who agrees to make your loan payments in case of emergency. Done right, getting a cosigner can feel like having your own personal hype man: They make you look good, can boost your confidence during the loan process, and show the lender that someone’s got your back.

Needing a cosigner is extremely common–and sometimes unavoidable. According to a recent study by data analytics company MeasureOne, over 92% of undergraduate students got a cosigner for private student loans they took out during the 2021/22 academic year. The majority of graduate students–about 66%–also had cosigners.

These high percentages make sense if you think about it. After all, few new college students have built enough credit to apply for loans on their own. Having a cosigner can also help you unlock lower interest rates that lenders might not otherwise offer. However, it can be tricky to ask someone to tie their financial future to yours. Here’s what to consider first.

Do you need a cosigner for a student loan?

While most loans require a cosigner, not all do. You’ll need one for nearly all private student loans, especially if you have little credit history or a low credit score.

Federal student loans, on the other hand, don’t require a credit check and therefore don’t often require a cosigner. (Some federal graduate student loans, like grad PLUS loans, however, do require an endorser for borrowers who don’t meet the credit requirements.)

What is a cosigner?

A cosigner is an adult who takes legal responsibility for student loan payments alongside the primary borrower (you). If you miss a month or default on your loan, your cosigner agrees to cover the cost.

Even if you don’t plan to miss payments, having a cosigner helps you prove to your student loan lender that you’re good for your debt. That makes them more likely to offer you better deals and lower interest rates.

Who can be a cosigner?

Most students ask their parents to be their cosigners, but many don’t. According to data from financial institution Sallie Mae, as many as 26% of students ask a guardian, family friend, or other relative to cosign instead. Generally, a cosigner can be anyone you know and trust and who has a good credit score, stable financial footing, and reliable income.

What are the best student loans that don’t require a cosigner?

Having a cosigner both maximizes the loan options available to you and makes you eligible for lower interest rates. However, if you don’t know anyone willing to cosign, you still have a few options.

Getting federal student loans without a cosigner

Because the federal government doesn’t perform a credit check, most federal loans don’t require a cosigner. Federal student loans also provide other perks, like deferment and forbearance options.

They also offer fixed interest rates which, unlike variable rates, don’t change over time. However, most students will need a parent or guardian’s help to apply. (The Free Application for Federal Student Aid (FAFSA) requests parents’ financial information.)

Here are some of the best federal student loans you can get without a cosigner. The costs and benefits vary based on the type of loan, so consider carefully.

  • Direct subsidized loans: With these, the federal government pays your interest while you’re in school, during a post-graduation grace period, and during any deferments. You’ll also get other perks like low interest rates, and access to loan forgiveness and income-driven repayment options.
  • Direct unsubsidized loans: Most half-time to full-time students qualify for direct unsubsidized loans, which also offer income-driven repayment plans and loan forgiveness options. There’s no interest break, though, so max out subsidized loan options first.
  • Direct PLUS loans: These include graduate PLUS and parent PLUS loans, both of which require a credit check. Borrowing limits are higher for PLUS loans (up to the total cost of attendance), but the origination fee and interest rates are usually higher, too.

Getting private student loans without a cosigner

After you’ve applied for federal loans and school-sponsored financial aid, look to private loans or personal loans to help fill in any gaps. Keep in mind, if you don’t have a cosigner, you’ll generally need fair to excellent credit–usually a credit score of 650 or higher–to apply.

No credit history? Some private lenders will approve you based on your GPA. Others offer “secured loan” options. That means you offer up some kind of collateral, which the lender can claim if you’re unable to pay your loan. (Disclaimer: GPA-based loans and secured loans often have higher interest rates than credit-based or cosigned loans.)

How to pick a student loan cosigner

Picking a cosigner is tricky. It requires finding someone who’s eligible, willing, and capable financially. Here are a few tips to identify the best one for you.

Determine the loan requirements

First, figure out the requirements for a loan application from the lenders you are considering. Different institutions have different eligibility criteria. Some will require that your loan cosigner is a US citizen or permanent resident, so it is best to just know the basic requirements before having an awkward conversation. Lenders will also look for creditworthiness and steady income from a cosigner, so this may narrow down your list based on your knowledge of your family and close friends.

Choose based on trust and financial security

Just because someone can cosign for you doesn’t mean you should ask. Your cosigner should be someone you completely trust, and you expect to have a long, positive relationship with while repaying the loan—not the person who seems most likely to say yes.

It’s easy for money to ruin relationships, so don’t ask someone who may feel obligated to say yes but wouldn’t be able to make payments in the event of an emergency. While you should never take on a loan you aren’t positive you’ll be able to pay, life happens, and the last thing you want is to inadvertently pin a huge burden on someone who can’t afford it.

A financially responsible cosigner with an excellent or good credit score can help you get a lower interest rate for your loan amount.

How to show you’re a responsible borrower

Start by being transparent about your finances. Get a copy of your full credit report and bring it with you, along with your tax returns for the past few years and pay stubs to prove what you’re earning now. (You’re entitled to one free report every 12 months from each of the three credit reporting agencies in the US.)

While your potential cosigner will take more into account than your credit report, it will show a full picture of your credit history. This could include any missed monthly payments or bank accounts in default, but being open about past financial mistakes shows your commitment to transparency.

Ways to protect your cosigner and give them peace of mind

Getting a cosigner isn’t just a big responsibility for your cosigner; It’s one for you, too. After all, if for some reason you can’t make payments, it’s your cosigner who will be on the hook. Here are some ways to protect the people who are putting their finances on the line for you.

1. Know your loan’s cosigner release and missed payment policies

As you’re choosing a lender, make a list of all the questions you have. Call up the lender for any answers you can’t find online. A few good ones to get you started:

  • What are the fees for missed payments? How soon after a missed payment will the lender report it to the credit bureaus?
  • Does your lender offer hardship options, like deferment or forbearance, in case of an emergency? If so, what are the terms?
  • Does your lender offer refinance options or other resources in the event that you need to lower your payments?
  • How quickly can you apply for a cosigner release? (Usually, cosigner release allows you to take a cosigner’s name off your loan after you’ve made a certain number of qualifying payments.) What are the requirements to apply?
  • How easy is it to get a cosigner release? (You may want to ask what percentage of cosigner release applications the lender usually accepts.)

If you’re able to show your cosigner that you don’t need them for the full loan repayment term, that may minimize their risk and likely make it easier for them to say yes.

2. Have a plan B

Obviously, the plan is for you to make on-time payments and always pay in full. But what if you lose your job? What if your partner or spouse needs to move for work, and it takes you longer than expected to find a new gig?

Agreeing to be a cosigner is a big decision that involves a lot of trust, and so it’s important that you think through the worst-case scenario before your potential cosigner poses that “what if” question to you.

3. Set up account alerts for your cosigner

Make it easy to keep your cosigner up-to-date on your loan progress: when payments are due, when they’re made, and if they’re missed. If your loan servicer offers automatic alerts for your account, sign yourself and your cosigner up.

You could also set up automatic forwarding for any emails from your servicer to your cosigner’s inbox. That way, if you do end up having financial problems, your cosigner can come to you long before the lender goes to them.

4. Define the responsibilities between you and your cosigner

Before signing, have an in-depth conversation about all the ins and outs of the loan, including the loan term and your plan to pay for it, and then put it down in writing for later reference. Your loan payments might not be due for a few years, so having your expectations written down will avoid confusion when the first payment is due.

Lay out what’s expected from you, the primary borrower. For example, you might agree to set up automatic payments from your checking account each month. Also lay out a protocol in case you realize you won’t be able to make a payment. How soon will you communicate that to your cosigner? How will you move forward?

Finally, make a plan for cosigner release–what are the conditions, and how will you work towards that? The more explicit you can be, the more peace of mind it may offer.

How to start the conversation

Asking for help may be the hardest part of all of this. But there are some ways you can make it an easier conversation.

If you’re planning to ask a family member you only see a couple of times a year, consider calling or texting them well before Thanksgiving dinner to ask if they’re open to talking about being your cosigner.

Instead of asking “Will you cosign for me?” you can broach the topic by mentioning your financial goals. Try something like, “I’ve been doing some research to find the best ways to finance my education,” or “I’m looking into refinancing my student loans to lower my bills and pay them off faster so I can start saving to buy a house. Would you be willing to talk about this with me when I see you next week?”

If they’re open to it, make some notes about points you can hit, like your track record for paying your credit card bills, your current debt-to-income ratio, and any assets you have that you may be able to tap in the event of an emergency.

Open by explaining what you need the money for and be willing to answer any questions they may have about your fiscal situation and ability to repay the loan. Close by letting them know that you don’t need an answer right away (try to give them a couple of weeks to think it over, especially if they’ll need to consult with their spouse), and that you’ll respect their decision if they say no.

See how much you could save with Earnest

Getting a cosigner for your student loans will involve some serious conversations, but it can open up more loan options and qualify you for lower interest rates. Finding a cosigner is especially critical for most private loans.

Earnest offers private loans to graduate and undergraduate students both with and without a cosigner. You can check your eligibility online. It takes just two minutes, and it won’t affect your credit score. With Earnest, you can pick your own loan term, choose between fixed and variable interest rates, and select from a variety of repayment options. Check out the Earnest student loan calculator to find out how much you could save.

 

 

Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.

Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service for more information on our private student loan product. Earnest reserves the right to modify or discontinue the terms of this program at any time without notice. 

Before applying for private student loans, it’s best to maximize your other sources of financial aid first. It’s recommended to use a 3-step approach to assembling the funds you need: 1) Look for funds you don’t have to pay back, like scholarships, grant and work-study opportunities. 2) Next, fill out a FAFSA® form to apply for federal student loans. Federal student loans do not require a credit check or cosigner, and offer various protections if you’re struggling with payments. 3) Finally, consider a private student loan to cover any difference between your total cost of attendance and the amount not covered in steps 1 and 2. For more information, visit the Department of Education website at https://studentaid.ed.gov

Earnest Private Student Loans are made by One American Bank, Member FDIC. One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104. 

 Earnest loans are serviced by Earnest Operations LLC, 535 Mission St., Suite 1663 San Francisco, CA 94105, NMLS #1204917, with support From Navient Solutions, LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by agencies of the United States of America. 

 © 2022 Earnest LLC. All rights reserved.

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Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.