The cost of tuition is higher than ever, which explains why 70% of students leave college with student loan debt.
But that doesn’t mean that student loans are always easy to get, especially when it comes to private loans. According to MeasureOne, nearly 93% of undergraduates who borrow private student loans do so with a cosigner. Typically a parent or a close friend, having a cosigner can boost your chances of qualifying for a student loan.
But not every student has someone willing to share debt with them. If you’re looking to go it alone, here’s what you need to know about taking out or refinancing student loans without a cosigner.
How to get a student loan without a cosigner: Start with federal loans
If you’re worried about how to get a student loan without a cosigner, here’s the good news: You certainly don’t need a cosigner for federal student loans.
Provided by Federal Student Aid, federal loans for undergraduates don’t have credit or income requirements. To be eligible, you just need to attend a Title IV school and be a U.S. citizen or eligible noncitizen.
On the other hand, PLUS loans for graduate students take your credit into account, but the standards to qualify are very agreeable. The only requirement is that you don’t have an adverse credit history — otherwise, their criteria is similar to that for undergraduate federal loans.
Federal student loans should always be your first stop for borrowing, and not just because they don’t require a cosigner. They also come with relatively low interest rates and protections like income-driven repayment plans and forbearance.
To take out federal student loans, you simply need to submit the Free Application for Federal Student Aid (FAFSA). After reviewing your information on the FAFSA, your college’s financial aid office will offer you a certain amount of federal student loans, as well as any grants or scholarships you qualify for.
At that point, you can choose what parts of your financial aid offer you want to accept, and which parts you’d rather leave on the table.
Types of federal student loans
So what types of federal student loans are available to borrowers? Here are the main ones:
- Direct subsidized loans are available to undergraduate students with financial need. The government covers interest during periods of deferment. As of July 2018, these carry a 5.05% interest rate and an origination fee of 1.062%.
- Direct unsubsidized loans are available to both undergraduate and graduate students. These loans accrue interest from the date of disbursement. For the current academic year, they have an interest rate of 5.05% for undergraduates and 6.60% for graduate students, as well as an origination fee of 1.062%.
- Direct PLUS loans are designed for graduate students. These currently come with a 7.6% interest rate and a 4.248% origination fee.
Direct subsidized and unsubsidized loans come with borrowing limits, so you might need additional funding for school, whether through private student loans or another source.
With PLUS Loans, you can borrow up to the full cost of attendance of your school, but you might need extra loans to cover living costs. Plus, PLUS Loans come with relatively high interest rates, so you might consider refinancing for lower rates.
And if you decide to refinance, or if you need to take out additional loans, here’s what you need to know about applying with a private lender without a cosigner.
Borrowing or refinancing private student loans without a cosigner
Private student loans come with stricter borrowing requirements than federal ones. A private lender wants to ensure you have the means to pay back your loan, so they check your credit and income before approving your application.
Since most undergraduate students don’t have much of an income or credit history, the majority end up applying with a creditworthy cosigner. By adding a cosigner who has strong credit and a steady income to your application, you can boost your chances of qualifying and probably get better interest rates than you would alone.
But a cosigner is just as responsible for the debt as you are, and their credit score could suffer damage if you fall behind on payments. Asking someone to share your debt is a big request, and in some cases, you might feel uncomfortable putting that burden on someone.
Or you might not have anyone you can ask who meets a lender’s requirements for credit and income. If this is the case, you’ll need to find ways to qualify on your own.
Boost your chances of qualifying for student loans without a cosigner
So how can you qualify for student loans without a cosigner? Well, private lenders look for a strong credit score, usually in the mid-600s or higher, and a steady income. Some also look to see that you have a certain amount in your bank account.
To boost your chances, these steps could help:
- Establish credit if you haven’t already. A number of factors go into a credit score, including your length of credit, mix of credit types, amounts owed and payment history. If you’ve never borrowed a loan or opened a credit card, you might not have any credit to speak of. So begin by getting a credit card (maybe a secured one at first).
- Make on-time payments on any loans or credit cards. Your debt repayment history is a big part of your credit score, so stay up-to-date with any debt in your name.
- Make moves to increase your income. Since private lenders often look at your income to determine if you have the means to pay back a loan, increasing your income is sure to help boost your chances of approval.
- Lower your debt-to-income ratio. Reducing the amount of debt in your name can boost your credit score, and lowering your debt-to-income ratio is also important to lenders. So if you’re looking to borrow or refinance a student loan, chipping away at your debt and boosting your income will help you get approved without a cosigner.
- Seek out reputable lenders with less strict requirements. When it comes to doling out loans, each private lender sets its own requirements. Look for one that’s not so strict about credit scores and income but still offers competitive interest rates. Earnest, for example, looks at a variety of factors when considering candidates for student loan refinancing, not just your credit score and income.
Building credit takes time, so you might have to wait to borrow or refinance until you can meet a lender’s requirements. But by taking these steps, you’ll move closer to becoming a strong candidate for a loan.
Can’t qualify for a loan? Seek alternative ways to afford tuition
If you find yourself unable to qualify for private student loans without a cosigner, look for alternative ways to cover the costs of college. Here are a few strategies that could help:
- Find a job to earn money. Working a part-time job might be enough, or you could find full-time employment as you pursue your degree part-time. But be careful about restricting your enrollment too much, as you could lose eligibility for federal student loans if you drop below half-time as a student.
- Seek out companies that offer tuition reimbursement. Some companies will cover the costs of classes for their employees, which could be a huge help if you’re struggling to pay for tuition.
- Contact your school’s financial aid office about your options. Some schools have emergency loans for students in need, while others might help you renegotiate your aid package or direct you to additional grants or scholarships. Plus, your financial aid office might be able to hook you up with work-study opportunities.
- Apply to scholarships far and wide. Regardless of your student loan status, make it a priority to apply for grants and scholarships. The more “free money” you can earn for college, the less debt you’ll have to take on.
Because private lenders check your credit and income, it can be tough to qualify for student loans without a cosigner. But if you can boost your financial credentials on your own, you could make yourself eligible for private student loans or student loan refinancing.
And if you’re not eligible right now, keep making moves to build your credit and boost your income. Whatever steps you can take will improve your chances of qualifying for a student loan, and fortify your overall financial health.