When it comes to the total cost of college, a private student loan can help fill in gaps that other forms of financial aid don’t cover. However, most students enrolling in college have little to no credit history, so they are considered risky loan candidates.
To mitigate this risk, lenders may require students to apply with a cosigner.
What is a private student loan cosigner?
A cosigner is a creditworthy individual who agrees to share repayment responsibility for the student loan alongside the primary borrower. This brings assurance that the loan will get repaid in full and on time, should the student borrower become unable or unwilling to make payments
Both you and your cosigner bear equal responsibility for your student loan, so a cosigner is not necessarily someone who is meant to pay your loan bills for you. Rather, it is someone to help you secure the opportunity to make good on your own commitment to repay the loan.
Why do I need a cosigner for a private student loan, but not a federal student loan?
Federal student loans are provided and funded by the federal government and do not require a cosigner, while private student loans are awarded on the basis of creditworthiness. Creditworthiness helps lenders assess an individual’s ability to pay back a loan based on their demonstrated financial history.
How do I know if I need a cosigner?
Your lender will let you know for sure, but it is likely you will need one. Recent high school graduates rarely have credit histories and incomes that qualify them to secure private student loans on their own.
There is no shame in needing a cosigner, though. In fact, learning about creditworthiness is good practice for building and caring for your own personal credit history, which is vital for securing loans for other investments, like a home or a car.
Who should I ask to be my cosigner?
It is important that your cosigner have a good credit score, a solid debt repayment history, and a steady income. The stronger your guarantor’s creditworthiness, the more they can help you secure a lower interest rate, which will affect the total amount of money you owe on your loan.
Often, it is a parent, guardian, or other family member who will act as your cosigner. If a family member is not available, consider approaching a close family friend or mentor.
What risks are associated with being a cosigner?
Cosigners are equally responsible for the repayment of the loan, so they are risking quite a bit if you default on your payments. So, keep in mind that you are benefiting directly from this individual’s good credit history and their belief in you, and do everything you can to uphold your end of the arrangement.
Your own credit and your relationship to your cosigner will strengthen as a result.
To check if you or your cosigner pre-qualify, use our free credit pre-qualification tool without impacting your credit score.