Why Do I Need a Cosigner for my Student Loan?
When looking for school loans to help you pay for college, you probably see the word “cosigner” over and over. You’ll probably find some lenders might not be as clear on what a cosigner is or why they might require you to have one, which adds extra stress to your research.
A student loan cosigner is someone who signs their name to your loan, agreeing to take equal responsibility for your payments if you are unable to in the future. Cosigners are often family members, close friends, or mentors willing and able to take on this financial obligation to help you achieve your goals.
Like you, cosigners take on a lot of financial responsibility when agreeing to cosign your loan. Not only does the loan show up on their credit report (as well as yours), but both of you will be impacted if you miss a payment. If, for any reason, you happen to miss a student loan payment, your cosigner will be held accountable to make a payment for you. This makes finding a cosigner a big ask, so make sure the person you ask to cosign your loan is someone you trust who equally trusts you.
For Ascent loans, your ideal student loan cosigner should be a U.S. citizen or permanent resident, at least 18+ years old (or the age of majority), with excellent credit and solid income (typically at least $24,000/year with 2+ years of employment), as these factors tend to play a role in your student loan rates and terms. The better their credit, the better your loan rate.
Continue reading to learn why you may need a student loan cosigner and find additional resources to help you on your journey.
5 Reasons Why You Need a Student Loan Cosigner
1. You have a short or no credit history.
Most lenders, including Ascent, consider the length of your credit history (whether you have one or not) into account when pre-qualifying you for a student loan. In addition to ultimately being used to determine eligibility for a student loan, your credit history can also influence the terms and rates you’re offered during your loan application process.
What does having no credit history mean?
It’s common for students to have no credit history because the chances of students taking out a loan before college or having a credit card are pretty low. This doesn’t mean your credit score is zero; your credit history is nonexistent.
Think of it like this: Just because you didn’t take a public speaking class in high school doesn’t mean your transcripts would show an “F” for public speaking. Instead, a record for that class simply doesn’t exist. However, if you apply for a job requiring public speaking skills, an employer may disregard your resume because it lacks evidence of your public speaking skills.
Lenders usually want to see that you’ve reliably made payments on things like credit cards, car loans, and rental agreements because this suggests you can be trusted to repay your student loan. If you’ve never been financially responsible for a loan or credit card before, it doesn’t mean you are not credit-worthy, but the loan may appear riskier to some lenders due to your lack of credit history.
If you have no credit history, having a cosigner with a long and positive credit history may expand your student loan options, reducing some of the risks from the lender’s perspective.
What does having a short credit history mean?
Having a short credit history means you haven’t had a credit history for very long.
Even if you’ve just recently taken out a loan or credit card, it may not be enough to qualify you for a student loan without a cosigner. Lenders will often look for a history of reliable payments over a longer period of time.
Going back to the public speaking class analogy: If you apply for a job requiring public speaking skills but only took one semester of public speaking, an employer may not be convinced of your skills—even if you got an A.
If you have a short credit history, you may need a cosigner to help you qualify for a student loan or to help you secure better interest rates.
2. Your credit score isn’t great.
Credit scores are usually an important factor in determining your loan terms and rates and overall eligibility for a loan. A high credit score typically makes lenders feel confident in your ability to repay a loan.
- Payment History: Your past payment history (credit cards, auto loans, rental payments, etc.)
- Amount Owed: How much you currently owe overall
- Debt-to-Income Ratio (DTI): Your DTI divides the total of all monthly debt payments by gross monthly income, giving you a percentage.
- Length of Credit History: How long you’ve had credit
- Diversity of Credit: How many different types of credit you have (credit cards, loans, etc.)
- Newly Opened Accounts/Recent Credit Checks: How many new lines of credit have been opened, or how many times your credit has been checked recently
You can check your credit score for free without a hard credit check via Experian, Credit Karma, or similar sites. Just make sure to always verify that a credit checking site is legitimate before using it.
Ascent is proud to have some of the lowest minimum FICO® requirements. Still, having a student loan cosigner may help you qualify for a loan if you do not meet our minimum credit score requirements, minimum income requirements or have at least two years of credit history.
Ascent allows you to see your rates and potential student loan terms without a hard credit check, so checking your rates and repayment options won’t affect your credit.
3. You don’t make much money.
Your part-time job at the campus student store, coffee shop, or restaurant is a great way to help you earn money while in school, but it may not be enough to help you pre-qualify for a loan on your own. Some lenders may evaluate your current income during your loan application process, even though you may not be required to make a payment until after graduation.
Not many lenders take your future earning potential into account when determining if you need to have a cosigner. At Ascent, we believe in empowering students to achieve their financial and educational goals, which is why we offer an Outcomes-Based student loan without a cosigner.
This loan option is available to eligible full-time college juniors and seniors (or those who plan to graduate within nine months of applying for the loan) with a minimum GPA of 3.0+. The type of school, major, your credit history (or lack thereof), and program are also considered during your loan application process.
Whether or not you qualify for one of our student loans with no cosigner, there may still be advantages to applying with a cosigner. Having a cosigner could allow you to pre-qualify with more favorable terms or lower your interest rates, regardless of your current or future income.
4. You’re an international student or DACA recipient.
If you’re an international student or DACA recipient, one of the main reasons you may need a cosigner is that many lenders won’t lend to international or DACA students without one. Applying with a U.S. citizen or permanent resident cosigner may provide extra security for the lender if you are unable to continue making payments in the future.
Ascent is proud to be one of the few lenders to make loans available to DACA students with or without a cosigner. If you are an international or DACA student, be sure to do your research and compare all of your options before selecting a loan type.
5. You want a lower interest rate or better terms.
There may be certain requirements or needs for a student loan cosigner that don’t apply to you but might still be benefits to applying for a loan with a cosigner. These include qualifying for a lower interest rate, a higher loan amount, or more favorable repayment terms.
If your loan offers’ rates and terms don’t meet your expectations or the amount you pre-qualify for isn’t enough to cover your college costs, adding a cosigner may improve these factors. This includes undergraduate or graduate student loans.
Of course, adding a cosigner doesn’t guarantee you’ll get a lower rate—but it can’t hurt to find out. With Ascent, you can check your rates for free, with and without a cosigner, without impacting your score.
Having a cosigner for your student loan may help you qualify for the best possible rates, but this will vary based on your qualifications.
Need more info about student loan cosigners?
Now that you have a better understanding of the reasons why you need a cosigner, here are some additional resources that might help you along your financial journey: