It’s a fact of life: Most college students simply don’t have the credit history to qualify for private student loans on their own. It’s also true that not everyone who needs a cosigner has someone who’s able to fill that role. For some, the only option is to get a student loan without a cosigner.
If that sounds like you, we’ve got your back. Read on for ideas you can use in this situation.
What to look for in a private student loan without a cosigner
If you don’t have a cosigner to help you acquire a privagte student loan you’ll want to see what loans are available to you — and of those, which ones are the best fit for you. When you look at lenders, consider each of the following aspects:
Loan terms — Your loan terms spell out exactly how long you have to pay off your debt, as well as the interest rate you’ll pay back. Shorter loan terms, around five years, will generally feature lower interest rates but require a higher monthly payment. Longer loan terms, usually around 20 or even 30 years, typically feature higher interest rates while requiring lower monthly payments.
Repayment terms & options —Most lenders offer a few different types of repayment terms and each has their pros and cons. Some of the most common repayment options include deferment while you’re in school, paying the full payment while you’re in school, and paying only the loan interest (or another small, fixed amount) while you’re in school and then ramping up payments once you graduate. Your monthly payment(s) and total amount of interest paid will vary greatly depending on which option you choose, so make sure you run the numbers carefully and understand all your options.
Refinancing options — Unlike federal loans, private student loans are generally a no-brainer to refinance — under certain conditions. If you can find a loan offer with a lower interest rate, it can save you a lot of money in the long run by refinancing.
Deferment options —There may be times when you can’t make your monthly payment because you’ve lost a job, had a health crisis, etc. Some lenders offer a temporary deferment option where you won’t have to pay your student loans for a short period of time while you get back on your feet. But who qualifies and for how long can vary a lot.
Fixed interest rate vs. variable rates — Private student loans can come with either a fixed interest rate or a variable rates. A fixed rate means you’ll have one interest rate for the life of your loan and therefore your monthly payment won’t change. Variable rates will shift up or down over time based on various economic factors. Variable rate loans can be a good option if you can get a low interest rate at the start of the loan and are likely to pay off (or refinance) the loan within a few years. But the longer you hold the loan, the more likely interest rates will rise which can balloon your monthly payment.
Loan discounts — With some lenders, you can get an autopayment discount or discounts for other actions such having other financial products with that lender. Typically the discount is around 0.25% off your interest rate.
Fees & penalties — Some (but not all) lenders charge application fees or origination fees (usually a percentage of the loan amount when you apply for and/or accept a loan.) Penalties generally apply when you miss a payment or if you have a bounced check. Some charge a fee if you repay your loan early. Hopefully, you’ll avoid most or all of these charges, but it’s worth checking the fine print to see what each lender charges — it can vary a lot.
1. Apply for federal student loans
Before you sign on with a private lender, make sure you actually need a private loan.
Federal student loans don’t require a cosigner, so first, max out any federal aid you qualify for. You can qualify for one of two types of federal student loans for student borrowers, subsidized loans and unsubsidized loans.
Federal student loan eligibility requirements include:
- You must to be a U.S. citizen
- You must be enrolled or accepted in a participating program.
- Both full-time and part-time students are eligible for federal student loans, though you must be enrolled no less than half-time.
- Complete the Free Application for Federal Student Aid (FAFSA), and sign the FAFSA’s certification statement.
- You must keep a minimum GPA of 2.0 in order to keep your federal student loans.
To be eligible for subsidized loans specifically, you must demonstrate financial need. Both types of federal loans feature fixed interest rates, plus a 6-month grace period after graduation before monthly payments begin. Plus, with federal student loans, you may be eligible for loan forgiveness programs down the road.
Your cost of attendance, books, room and board, and other college expenses may still be greater than the federal annual or aggregate loan limit. If this is the case, you can then turn to private loans to make up the difference.
2. Exhaust all of your scholarship & grant options
You should also spend time looking for — and applying to — scholarships and grants you may qualify for. These kinds of aid don’t have to be repaid, making them a far better choice than federal or private student loans.
Don’t assume you can’t qualify for scholarships or grants just because you weren’t at the top of your class. Grants and scholarships are available for students who have financial need, who have special skills in the arts or athletics (known as merit aid), and for just about any other reason you can think of.
Check out our scholarship hub for tons of searchable options. If you have a niche interest or hobby (pottery, fire safety, flying drones — you name it) or belong to certain groups (ethnic, religious, community service, etc.) there is likely a scholarship out there you qualify for — probably several of them.
Even better, the smaller the niche the scholarship benefits, the better your chances are of winning!
3. Get in touch with your school’s financial aid office
Another option many people overlook and you shouldn’t is talking to your financial aid office to see if they can amend your aid package.
We’ve got tons of resources on when/how to appeal your aid package. Check out these samples of different kinds of appeal letters and how to make them work for you.
4. Cut back on expenses
Reducing your living expenses reduces the amount you need to borrow to cover your college costs. That can help you make better use of the resources above and might make lenders more willing to approve you for a student loan without a cosigner.
If your tuition gap — the difference between what college will cost and what you can pay — isn’t that large, you may be able to get by with smaller changes to your finances, such as dropping some subscriptions, not bringing a car to school, and taking on an extra roommate.
If you have a significant tuition gap, you might have to consider taking more significant measures, such as living at home or even enrolling in a less expensive college that wasn’t your first choice.
See also: Personal Expenses for College Students
5. Build up your credit
There are two reasons a private student loan lender wouldn’t approve you for a student loan without a cosigner: Either your credit check reveals a limited credit history or a bad one.
A limited credit history means you haven’t been using credit long enough for lenders to evaluate your creditworthiness. This is true for most students entering college, since most have only been eligible for credit for a year or two.
A poor credit history means lenders are concerned because you’ve missed payments in the past or have defaulted on prior loans. This is more likely to apply to older students. Many private lenders require a minimum credit score, so a bad score can really hurt your chances of qualifying for a loan.
The good news: You can build credit as well as improve a less-than-ideal credit score. It just takes time. The steps for both are similar, so if you’re not sure which applies in your case (or think it might be both) the advice is similar. A few steps you can take to achieve a good credit score include:
Take out a credit card. You can definitely do damage to your credit with a credit card, but as long as you use it wisely and pay it on time (and ideally, in full), a credit card is a great way to build your credit.
Pay your bills on time. Lenders mostly want to see that you can be trusted to pay what you owe and do it on time. So even your regular bills, like the fees for your monthly streaming services, can help build your credit.
Ensure your credit report is accurate. Serious mistakes on credit reports happen more often than you might think. It can happen lots of ways: entries for someone with the same name as you can be included in your report, a bank could enter the wrong information regarding your account, or it could reflect undiscovered identity theft. At least once a year, get a copy of your credit report. (This is a free, government-authorized source.) Review it for any errors and if you find any, contact the relevant companies immediately to fix it.
Think creatively. If you don’t want, or can’t get, a credit card, consider getting a small credit line or cash-secured loan from a local bank. You can also ask a parent or other trusted person to make you an authorized user on their account. As long as you pay back what you owe on time, these all count toward building your credit score.
Get a job. We say that not because we think you’re slacking, but because having a steady source of income makes you a more attractive borrower even though it doesn’t directly impact your credit score. It has the added benefit of making it easier to save money, which means you may have to borrow less in the long term.
6. Shop around among private lenders
Not all lenders use the same formula to evaluate borrowers. Some use different models to rate borrowers and may give more weight to areas besides your credit history. They also have different criteria for when a cosigner is needed. Just because one lender wants you to have a cosigner doesn’t mean all lenders will.
Some routine eligibility criteria for private loans without cosigners include:
U.S. citizenship or permanent resident alien status
credit history & credit score
minimum income requirements
For example, Ascent has an option for college juniors and seniors that doesn’t require a cosigner. And if you opt to use a cosigner, you can easily release them after you’ve made the first 24 consecutive months of principal and interest payments on time.
Funding U is another lender who will approve student loans without a cosigner. In fact, that’s the only kind of loan they offer. Maximum limits for the loans are $15,000. Interests rates are fixed, but may be a bit higher than you would see on a cosigned loan. But, it is one more option in your college finance toolbox.
Bottom line: If you want (or need) a private student loan without a cosigner, you have multiple ways to reach that goal.
7. Look for alternative funding options
If your parents are willing, they may be able to use personal loans, home equity loans, and Parent PLUS loans to help bridge your tuition gap.
Just be aware these loans come with their own pros and cons so you (and your parents or guardian) should evaluate each of them carefully to see how they’d work for your specific financial circumstances. Remember: Just because you can take out a loan doesn’t mean you should.
8. Consider a gap year
A well-established tradition in some countries, gap years — a planned year between high school and college to work or pursue other goals — is becoming more common in the U.S.
Taking a year to work can improve your total finances so you have to borrow less and/or can qualify for a student loan with out a cosigner, thanks to your improved finances and credit history.
What is a cosigner?
A cosigner is someone who agrees to be responsible for paying back a student loan if the primary borrower (the student) fails to. A cosigner is usually a parent, guardian, or another relative such as a grandparent, aunt, or uncle, but it can be any legal adult who can qualify for the loan and agrees to take on the responsibilities of a cosigner.
A cosigner can make it easier to get approved for a student loan if you have a poor or limited credit history.
How can I pay for college without a cosigner?
If you don’t have someone who can be a cosigner for you, there are still ways you can pay for college. You just may have to get creative and use a lot of different resources.
Some of your options are finding as many scholarships and grants as you can, maximizing federal student loans (they don’t require a cosigner), looking at lower-cost colleges and/or making changes to limit your living expenses, and using parent PLUS loans, home equity loans, etc., to close the gap between what you need to have and the cash you have on hand.
Can I get a student loan with no cosigner if I have bad credit?
It depends. Federal student loans don’t require a cosigner. If you need a private student loan? Probably not — at least not right away. A bad credit history will get you rejected by most private lenders — but keep in mind that each lender uses different criteria to evalutate student loan applicants. Just because one lender turns you down doesn’t mean all the others will too.
If you really can’t get a private student loan with your credit, you’ll need to build up your credit and apply again. This is very doable, but it takes time. Ways to improve your credit include getting a steady job, opening a credit card or similar product and (paying it on time every time), and checking your credit report for any errors that may have incorrectly lowered your credit score and getting them resolved.
What is the application process for a non-cosigned loan?
Every lender’s loan application process is a little different, but overall they’re pretty similar. Besides running a check on your credit, most lenders will ask you to provide the following information when you apply for a non-cosigned loan:
your social security number
identification (often including proof that you’re a U.S. citizen or legal resident
school information and enrollment status (you must be enrolled at least half-time to qualify for most loans)
your estimated financial aid
employment information & proof of income
Most lenders offer a pre-approval process which is fast and gives you a quick idea of whether you’re likely to be approved and if so, an estimate of how much you can borrow. In this process, lenders run a “soft” credit check which won’t impact your credit score. Once you get an offer via preapproval that you like, the lender will run a “hard” credit check which will temporarily ding your credit by a small amount. Once this step is done, the lender can you final loan offer