Do I Need a Cosigner for My Student Loans?

Qualifying for federal student loans is pretty simple. Citizens and eligible noncitizens only have to complete the FAFSA and most will receive approval in a few weeks.

But qualifying for private student loans can be challenging. Unlike with federal loans, private lenders evaluate borrowers based on their credit report even though many students have little or no credit history. 

If you’re struggling to qualify for a private student loan, one option is to find a cosigner.

What Is a Student Loan Cosigner?

A cosigner is a person who agrees to repay your debt if you become unable to. Cosigners offer your lender an extra guarantee that they’ll get their money back if they loan it to you.

Lenders take on a risk any time they loan money, and they evaluate that risk by looking at a potential borrower’s credit history. If someone has a history of not repaying their debts on time, then the lender considers them high-risk. 

But someone can also be high-risk if they have no history for the lender to evaluate. Lenders are more likely to take a chance on someone with no credit history if there’s a promise that someone else will pay back the loan if the borrower doesn’t.

Cosigners Are Not Co-borrowers

A co-borrower is someone who takes out a loan with you and agrees to split the responsibility for repaying it. Both you and a co-borrower are required to make payments on any loans you take out together.

But a cosigner is different. A cosigner won’t make payments on a loan unless the primary borrower fails to pay. Getting someone to cosign with you doesn’t mean you don’t have a responsibility to pay back what you borrow. And even if your cosigner pays off your debt for you, you can still damage your credit by not paying that debt off yourself.

Do You Need a Cosigner for a Student Loan?

Whether you need a cosigner depends on the kind of student loans you’re taking out and the lender you choose to work with.

Approval for undergraduate federal student loans isn’t based on your credit history, so you won’t need a cosigner for those. However, you may benefit from a cosigner if you’re taking out: 

• Federal student loans for graduate school

• Private student loans for undergraduate or graduate education

If you’ve been in the workforce for a while and have an established credit history, then you might be approved for student loans with good terms on your own. However, a cosigner can help you get approved for loans or score a lower interest rate if:

• You have little or no credit history

• You have a short work history or don’t currently have a job

• You have a small income compared to the amount you need to borrow 

• You’re already carrying some debt

Another option is to borrow from a private lender who specializes in making private student loans without a cosigner. Not all borrowers will qualify, and you may end up paying more this way, so it’s important to investigate potential lenders carefully and be aware of your options.

Do Parents Have to Cosign Student Loans?

Parents commonly cosign student loans for their children, but a cosigner doesn’t have to be a parent. You can ask anyone — other family members, a friend, siblings, or a spouse. The important thing is that your cosigner meets your lender’s criteria, which usually includes:

• Being a U.S. citizen or permanent resident

• Being over the age of majority for your state (usually 18, 19, or 21)

• Having good credit and a good payment history

Beware of Online Cosigners

It’s never a good idea to look for cosigners online. Some websites charge fees to find you a cosigner, but most will take your money and never match you with anyone. 

There are also online forums or classified advertisement websites where you can hire someone to cosign your loan for a price. This might seem like a great option if you’re struggling to find a cosigner, but it’s not. Strangers who are willing to cosign a loan with you charge high fees or expect part of your loan as payment.

There are better solutions if you’re struggling to find a cosigner for a loan such as:

• Working to improve your credit score so you don’t need a cosigner

• Reducing the amount you need to borrow by using grants and scholarships or attending school part-time instead of full-time

• Using the FAFSA to apply for federal instead of private student loans

• Asking your employer if they offer financial aid for college students

Pros and Cons of Getting a Cosigner

Getting a cosigner for a private student loan offers some great advantages, but there are consequences, too, especially for your cosigner. Here are a few things you should think about.

Pros of Getting a Cosigner

Student borrowers reap important benefits from having someone cosign their private student loans. They include:

• Getting approved — Students with little or no credit are more likely to be approved for student loans if they have a cosigner. This is especially true for students who don’t have strong credit or a steady income.

• Landing lower interest rates — Students whose cosigners have a higher credit score than them can qualify for a lower interest rate on their loan. That means they’ll pay less interest overall and have smaller monthly payments.

• Building credit — Students who take out loans in their own name (instead of having a parent borrow for them) can start building credit while they’re in school. That credit will help them later when they apply for things like auto loans, mortgages, or apartment leases.

Cons of Getting a Cosigner

Most cons of having a cosigner impact the person who cosigns with you. Cosigning is a big responsibility, and some people you ask may not be in the right place financially to help you. Before they cosign, they’ll need to consider that cosigning:

• Lowers credit scores — Cosigning a loan impacts your credit score even though you’re not the primary borrower. Lenders do a hard credit inquiry on a cosigner as well as the primary borrower, which can temporarily lower your credit score. Approved loans can also change your credit utilization, lowering your credit score more.

• Impacts new credit — Loans you have cosigned will appear on your credit report. Because they alter your credit utilization and debt-to-income ratio, they can impact your ability to take out new loans or credit cards. 

• Creates financial risk — Your credit history could be impacted if the primary borrower misses payments for a loan you’ve cosigned. And if the primary borrower becomes unable to pay the loan, you could be held responsible for their remaining balance.

• Requires a long-term commitment — Student loans often take between 10 and 25 years to repay. That means a cosigner is making a long-term financial commitment without any personal benefit. While cosigners can be released from loans in some cases, the primary borrower has to make this request and it could have consequences for their loan.

How to Add a Cosigner to Your Student Loan

The first step in adding a cosigner to your student loan is finding a lender who allows cosigners. While not all lenders allow cosigners, most companies specializing in private student loans do. Just be sure they offer competitive loan terms, too.

Next, you’ll need to find a cosigner. A good candidate is someone whom you trust, who consistently pays their bills on time, and isn’t planning to take on large amounts of debt soon. (For example, if your brother is planning to buy a house, cosigning your student loan could make it harder for him to get a mortgage.)

A potential cosigner is more likely to say yes if you show that you’re taking your student loan seriously. When you ask them to cosign, be able to tell them:

• How much you plan to borrow

• The estimated terms your lender is offering

• How you plan to repay the loan

• Whether you’ll be able to release them from your loan in the future

If they say yes, they’ll need to provide information and sign paperwork for your lender before you’ll be able to finalize your loan.

Add Cosigners When You Apply for Your Loan

Cosigners should be added to your student loan when you apply for the loan. Adding a cosigner to an existing loan won’t lower your interest rate or change your terms.

How to Remove a Cosigner From Your Student Loan

Cosigners can be removed from your student loans in some cases depending on the terms of your loan. You might want to remove a cosigner to remove their financial risk, improve their credit utilization, or allow them to borrow for themselves.

Some lenders allow borrowers to release a cosigner after they graduate, make a certain number of payments, or otherwise prove their creditworthiness. It’s smart to ask your lender about removing cosigners from your loan before you finalize your loan paperwork.

Request a Release from Your Lender

To release your cosigner, contact your lender and ask about their cosigner release policy. Most lenders have a cosigner release process, but it may not be available on their website or included in your loan paperwork. Ask for each step of the process, relevant deadlines, and an estimated timeline of the procedure. Usually it requires a few steps:

• Provide any documentation your lender requests. This might include proof of your income or proof of payments you’ve made on your loans.

• Send a written request and your documentation to your lender through certified mail, email, or the lender’s website. (Use whichever method your lender prefers.)

• Follow up with your lender in a few weeks if you don’t hear from them.

Once your cosigner has been released, make sure you both keep copies of documents showing your cosigner has been removed from your loan.

Release Through Refinancing

Another way to release a cosigner is through refinancing your student loans. 

Refinancing is a process of taking out a new loan with better terms and using it to pay off an old loan. Borrowers use refinancing to get a lower interest rate, smaller monthly payments, or a longer repayment term. 

Because refinancing involves closing out your old loan, it releases your cosigner from your debt. Of course, you’ll have to qualify for refinancing, which is similar to qualifying for a loan and involves an application process and credit check. 

The Takeaway

Even if you don’t have great credit or have struggled to qualify before, you may still be able to borrow private student loans with the help of a cosigner. Working with a cosigner can get you in the classroom and help you start building credit — and start building a brighter future.