Are you headed to college or grad school this fall, and applying for loans to help finance your education? Most students find that they will need a cosigner to get a private loan. In fact, in 2018 around 90% of private student loan borrowers had a cosigner for their loan.
It is important to make a plan when borrowing for your education, and finding a strong cosigner to improve your loan application can be an important step in the process.
A cosigner is someone who applies for the loan with you (the primary borrower) and will be held responsible for making payments on the loan if you do not. Even if you leave school before graduating, these loans will still need to be paid. This isn’t a small ask.
So how can a cosigner help your loan application, and what makes a good cosigner?
Why Do I Need a Cosigner?
Before deciding who should cosign on your loan, it is important to understand why a lender would ask for a cosigner. When you apply for a student loan, the lender is essentially betting that you will make these payments after finishing school.
For some, applying for a student loan might be their first major step into the world of credit building. If you apply with an established borrower, who has a strong credit report, the lender could see this as a safer bet.
The benefits of applying with a cosigner
- Generally, you can increase your chances of your loan being approved if your cosigner has good credit.
- Depending on the lender, you may receive a lower interest rate – based on the cosigner’s credit history
- The opportunity to establish a credit history
- Depending on the lender, you may have more flexible repayment options that have a lower overall borrowing cost over the lifetime of the loan
Finding the Right Cosigner
Now that you know the benefits of adding a cosigner to your student loan application, it is time to find the right cosigner.
What makes a good cosigner?
- Someone you have a strong existing relationship with – Who will you invite to graduation in a couple years? That list of names is a good place to start looking for your future cosigner.
- A good credit report – You don’t want to apply for a loan with anyone whose credit score is sub-par, as this could impact the rates you are offered. If your potential cosigner isn’t sure what their credit rating is they can get a free credit report each year from Equifax, Experian, or TransUnion.
- Stable income and manageable debt – Not only will the lender want to see evidence of income, but you will also want to make sure your cosigner isn’t already straining to make other debt payments.
- Understands the risks of cosigning – Your cosigner understands their responsibility on the loan; they must pay it if you don’t.
Are these qualities bringing someone to mind? You can ask anyone you want but, typically, student borrowers first turn to their immediate family for support when borrowing for school. However, if you have a grandparent, long-term partner, or friend that is comfortable cosigning for you, these can be strong options as well.
The most important thing to keep in mind when working with a cosigner is that you should both trust each other and plan to be in the other’s life for the long-haul.
Check out Earnest’s Independent Student Loan eligibility guide to learn more.
How to Ask Someone to Cosign Your Student Loan
Asking for help can feel awkward, but if you pick a good time, and go into the conversation ready and self-assured, it will help remove some jitters.
Before you even start this conversation, it can be good to let your potential cosigner know you have been thinking about how you are going to finance your education, and if you can talk to them about your loan options. This is a great way to softly bring the subject up, so they can think a bit about it before you directly ask them. You don’t want to surprise someone with this request.
Pick a quiet place where you won’t be interrupted when you do sit down to talk. It is a good idea to meet in person when possible. Make sure you are ready for this conversation. Bring some proof that you understand what you are asking of your cosigner, and evidence that you are a financially responsible person. Explain why you need a cosigner for this loan and be willing to answer any questions they may have for you.
Your cosigner might ask more about the career options for your area of study, if you will be working while in school, if you will be repaying the loan on your own or are also asking for support on repayment. Be prepared for these questions and reinforce that you are a responsible borrower by having these answers ready.
The most important thing is to be open and honest about this financial commitment you both will be taking on. You are asking for their support in this next big step in your life, so make sure you make a strong case for yourself.