Private student loans can help pay for school but in the absence of a solid credit history, you may need a cosigner to qualify. Data from MeasureOne shows that approximately 92 percent of newly originated undergraduate private student loans had a cosigner during the 2019-20 academic year.
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Having a cosigner can improve your chances of being approved for private loans and qualifying for favorable interest rates. But what are your options when there's no one available to cosign?
The good news is, there are several things you can do to get a student loan without a cosigner.
How do I qualify for a student loan without a cosigner?
If you need student loans to pay for school but have no one to cosign, there are four possibilities for getting the funding you need.
1. Take out federal student loans first
Federal student loans can help pay for undergraduate or graduate school, and they don't require any cosigner at all. The types of federal loans you may consider include:
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Direct PLUS Loans
If your parents are helping pay for school, they can also take out Parent PLUS Loans in their name which wouldn't require anyone to cosign if they have good credit.
Qualifying for federal student loans to pay for school begins with completing the FAFSA, or Free Application for Federal Student Aid. The Department of Education uses the information you provide on this form about your household size, income and assets to determine your eligibility for federal student loans.
2. Build your credit
Federal student loans may not pay for your total cost of attendance and, in that scenario, you may need private student loans to make up the difference. Unlike federal loans, private student lenders can and do check both your credit score and credit history as part of the application and approval process.
If you're relatively new to using credit, that could be a hurdle to getting a private student loan without a cosigner. Working on building up your credit score could help to boost your odds of being approved for private student loans without a cosigner. If you already know your credit score, then you can plug your information into Credible's free online tools to view your options.
3. Get a steady job and income
While your employment history and income don't affect your credit score directly, they can still be important when applying for private student loans without a cosigner.
Some lenders have adopted alternative models for evaluating creditworthiness that place less emphasis on credit scores while taking into account your career path and earnings. If you have a steady job and are bringing in a paycheck consistently, that could make it easier to demonstrate to a private student lender your ability to pay back what you borrow.
4. Shop and compare student loan lenders
Every student loan lender is different when it comes to the loan terms they offer, their requirements for cosigners and what it takes to get approved.
If you're looking for a student loan without a cosigner, take time to dig into the specifics of each lender. For instance, consider:
- Cosigner requirements
- Minimum credit score and income requirements
- Borrowing minimum and maximum amounts
- Whether loans have a fixed interest rate or a variable interest rate
- The range of APRs available for private student loans
- Loan fees
- Other requirements, such as residency, citizenship or enrollment requirements
It's also helpful to consider the application process involved and how easy it is to apply for a loan. A simple way to make these comparisons is using a site like Credible to review loan options from different lenders.
How do I build my credit?
Building credit can take time but the sooner you begin working on it, the better. And the more effort you put in, the faster you may begin to see a positive shift in your credit score numbers.
Some of the best ways to build credit include:
- Opening a credit card account, either secured or unsecured
- Paying your bills on time each month
- Maintaining low balances on credit cards (or better yet, paying in full)
When applying for your first credit card, do your research to find one that's the best fit for your needs. Credible makes it easy to compare different credit card offers in one place without affecting your credit score.
If you're not able to qualify for a credit card because of a thin credit file, there is another option. You can ask someone with good credit to add you as an authorized user to one of their credit card accounts.
Their positive credit history for that account can effectively be transplanted onto your credit report, helping you to establish good credit.
What if I wanted to remove a cosigner from my student loan?
While getting a student loan without a cosigner may be ideal, it's not always possible. If you take out private student loans with a cosigner, you may be able to have them removed from the loan later.
There are two ways to do this:
- Apply for cosigner release
- Refinance private student loans
Cosigner release essentially means asking your private student loan lender or loan servicer to release your cosigner from the loan obligation. Typically, you need to meet certain requirements first, such as making 24 consecutive on-time payments.
Refinancing is something you may consider if cosigner release isn't an option or it will take time to meet the lender's release requirements. Student loan refinancing involves getting a new loan in your name only to pay off existing loans. You'd then make payments to the new loans going forward.
If you're interested in refinancing private student loans, you'll need good credit to qualify. And of course, you'll want to consider the new interest rate you might qualify for and your new loan payments. An online tool like Credible can be handy for comparing student loan refinancing rates from multiple lenders without affecting your credit score.
It's also helpful to run the numbers on costs through a student loan calculator to ensure that refinancing is the right move.