Do You Need a Cosigner for Your Student Loan? The Real Deal About Making this Deal
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From making pinky promises when you were young to rushing in right at curfew as a teenager, chances are you’ve been making deals with your parents your entire life. But now, it’s time for you to pay for college, and the stakes are higher than ever.
A student loan is essentially an agreement that you make with the federal government or a private lender to borrow (and eventually repay!) money. If you applied for FAFSA® (Free Application for Federal Student Aid) and qualified for federal student loans, but still need help covering your tuition and living expenses, you may consider private student loans as an additional option to help you pay for college.
But what happens if you don’t qualify for a private student loan on your own? Or, what if you only qualify for a loan with really high interest rates? It may be time to bring another person into this deal–a cosigner.
Unlike pinky promises, applying for a private student loan with a cosigner can have emotional, legal, and financial stakes. However, finding a creditworthy cosigner may help you get a private student loan that can both cover the costs of your college tuition and let you graduate without owing an overwhelming amount of interest.
What is a Student Loan Cosigner?
A student loan cosigner is someone who agrees to sign on the dotted line right next to your name when you apply for a school loan. Your cosigner agrees to have their financial history considered alongside yours so a lender can decide how much money to loan you to pay for school, at what interest rate on which other terms.
While student loan cosigners are often thought of as a financial “backup” in case you can’t make a payment, legally they’re just as responsible for your student loans as you are. Lenders can pursue both you and your cosigner for unpaid loans and can impact both of your credit, so make sure whoever you ask to cosign your private student loans is supportive (and committed) to you achieving your college dreams just as much as you.
Who Can Be a Student Loan Cosigner?
Your student loan cosigner must be a U.S. citizen or permanent legal resident who agrees to be your cosigner. To apply for a cosigned loan with Ascent, they’ll also need to meet the minimum income and credit score requirements with at least two years credit history. You can check out Ascent’s other eligibility requirements here.
If you decide to apply for a cosigned loan with Ascent, you only need one person to cosign your loan. For example, if both of your parents are willing to cosign your student loan, you will only need one of them. Cosigners can be a relative, like a parent, grandparent, aunt or uncle, but a cosigner can also be a mentor or teacher you trust, as well.
Just because nearly anyone can be your cosigner it doesn’t mean you should pick a name out of a hat. Later in this piece, we’ll talk about choosing the right cosigner and share some tips to help prepare you for this conversation.
Do Student Loans Require a Cosigner?
While most private lenders require student loans to have cosigners, especially for first-time borrowers, some lenders’ requirements will depend on your situation. As a starting point, you can check potential rates and terms for student loans with a cosigner without impacting your credit score for Ascent’s cosigned loans. Doing so can help you answer the big question: Do I need a cosigner for student loans?
You may be able to apply for federal student loans directly from the Department of Education without a cosigner, even if you’re under 18. As we mentioned before, if federal aid doesn’t fully cover your tuition and you’re considering a private student loan, you may need a cosigner if you don’t meet the loan and credit requirements on your own.
If you’re considering private student loans, your need for a student loan cosigner will depend on your situation. Several factors can help you determine if you need a student loan cosigner—or at least should consider one—including:
- Age: Private lenders may require students to meet the age of majority to take out a loan. This varies by state, but can typically be anywhere between 18 and 21.
- Credit Score: If you have no credit history or a low credit score (below 600), you may qualify for lower interest rates with a cosigner.
- Your Employment History: Working part-time at a local restaurant or retail store is great if your school schedule allows, but it may not meet a lender’s employment requirement.
- Your Income: As a college student, it is likely that your current income may not meet a lender’s minimum income requirement.
- Your Debt-to-Income Ratio: Debt-to-income ratio is a calculation used by many lenders when evaluating your loan application by dividing your monthly debt (bills) by your monthly income. A low debt-to-income ratio may indicate you can afford to pay the loan back, but a high ratio might require you to find a cosigner to qualify.
If you don’t meet some (or all) of the above factors, there are still ways you can qualify for a loan without a cosigner through Ascent. In addition to a credit-based option, student borrowers with an insufficient credit history or those who pass the minimum credit requirements but don’t meet the income or repayment requirements may qualify for a non-cosigned future income-based loan. These student loans are available to college juniors and seniors, and qualification criteria may include several alternative factors, including school, GPA, and cost of attendance. Check out our FAQs to learn more.
How Do I Choose a Student Loan Cosigner?
If you’ve decided you do need a cosigner for student loans, it is important to think carefully about choosing the right cosigner. Selecting a student loan cosigner isn’t easy, and there are many things to consider—some of which you may not know about until you talk to your potential cosigner.
Not only do private student loans often require a cosigner, but you may find yourself needing a cosigner for other loans in your life, such as car loans, bootcamp loans, or rental agreements. There are many things to factor in when choosing the right person as your cosigner, but the number one thing to consider is whether or not you’re comfortable being financially involved with this person for several years.
Before making a fast decision that may hurt you in the future, take some time to make a list of all the people in your life who would want to cosign your student loans. Once you have your list together, you can start to narrow it down based on your preferences.
How Do I Ask Someone to Be a Cosigner for My Student Loan?
Now that you’ve made your list of potential cosigners, it’s time to have the conversation. Conversations about finances can be stressful, so here are some helpful tips:
Keep Things Calm
Ask your potential cosigner to meet over a cup of coffee, either virtually or in person. Talking to someone you care for about important issues and asking for help can be emotional, so finding a neutral place to talk can help you stay level-headed.
It’s normal to feel a bit anxious about this conversation, so a little preparation can go a long way. Brainstorm a few talking points in advance with answers to potential questions that might come up. Not only will this help prepare you for the conversation, but it will show you have done your homework and are taking this seriously.
You may also want to let them know what other financial options you have already explored, if you have applied for federal aid, scholarships, or other loans. Consider keeping track of your financial options on a spreadsheet to show your potential cosigner that you have already exhausted other options before turning to them to cosign.
Avoid the Potential for Guilt
Start by making it clear that your potential cosigner may say “no,” and there will be no hard feelings. Even after this conversation, you want to make sure they will still be a part of your life.
There are many reasons someone may not be willing to cosign a loan, some of which they may want to keep private. It’s highly unlikely your potential cosigner is saying “no” because they suddenly don’t like you anymore!
Your potential cosigner may ask for some time to think about their decision – and that’s okay too! Be sure you give them time to weigh the pros and cons of cosigning a student loan before making a decision.
Make Sure They Know What They’re Agreeing To
An immediate reaction from some people is that they’ll want to help, especially if they’ve always supported you, but they might not know what is expected of them in taking on this responsibility.
Make sure your cosigner is 100% clear on what this means for their financial future, including potential implications to their credit and their obligation to make payments on your behalf if you’re unable to in the future.
It can also be helpful to know that many student loan providers, including Ascent, may allow you to remove your cosigner from your student loan once you have proven successful payment history and meet specific eligibility criteria. For more information on Ascent’s cosigner release requirements, please click here.
Create Your Own Agreement
Once your cosigner understands why you need a cosigner for your student loan, and agrees to be that person, let them know how you plan to make payments while in school or after graduation. Even if they don’t bring it up, you should.
Make sure both of you fully understand the terms and requirements of the loan. This includes knowing under what scenarios the lender might contact your cosigner, and what options are available if you need to pause your payments.
Having an agreement about what will happen if your cosigner needs to make any payments could avoid uncomfortable and emotional conversations down the road. You could even consider writing up a separate contract showing what you’ve agreed to do together.
What if I Can’t Find a Cosigner for Student Loans?
If you do need a cosigner for student loans, but can’t find a willing or eligible cosigner, not all hope is lost. Here are some tips on what to do if you can’t find a cosigner:
- Explore all of your financial options (you should always do this before taking out a loan, or making a serious financial decision)
- Apply for a smaller loan.
- Talk to your school’s financial aid office about other potential solutions.
- Reach out to your school’s alumni association to see if they have a program for students in your situation.
- See if you qualify for Ascent’s Non-Cosigned Credit-Based or Outcomes-Based Loans.
- Consider applying for a student scholarship.
If none of these options work for you, don’t throw in the towel! Instead, reframe your plans. For instance, see if you can attend classes part-time while building up your credit. While doing this, make sure you stick to a budget and find ways to improve your credit so you can apply for aid again in the future.
So, do you need a cosigner for student loans?
Having a cosigner may make you more appealing to lenders, improve your chances of qualifying for a loan, or get you a better interest rate than you’d be eligible for on your own.
A great way to decide if you need a cosigner before you even apply for a loan is to learn more about paying for college and determine if having a cosigner will help on your journey to financial wellness.
To learn more about Ascent’s undergraduate and graduate student loans, please visit the link below.