Your Guide to Student Loans Without a Cosigner
According to USA Today, national student loan debt has swelled to $1.2 trillion. And the average credit score of borrowers between age 18 and 35 is 640. A credit score of 640 is considered below average and could mean paying a premium for the loans. One way many students get around this problem is by getting a cosigner.
But securing a cosigner comes with its own set of problems. You may not want to ask someone to be held responsible for your loans if you cannot pay. Or you don't know anyone with a better score. Or perhaps you have asked everyone you know and have come up dry. Whatever the concern, it's okay. Getting student loans without a cosigner can be accomplished. This is how it's done.
First, you need to fill out the Free Application for Federal Student Aid (FAFSA). Then you need to look at your Federal student loan options. Why? It's because you don't need a credit check or a cosigner for Federal student loans. This includes Stafford loans, Perkins loans and even PLUS loans. You're not at a disadvantage when you pursue Federal student loans without a cosigner. Use Federal student loans to their fullest potential.
Private student loans, on the other hand, often require a cosigner. In fact, according to the Consumer Financial Protection Bureau (CFPB), 90 percent of private student loans require a cosigner. However, 10 percent is still a good amount of options – especially when you know the strategies for getting a student loan without a cosigner.
How to Get Private Student Loans Without a Cosigner
As mentioned earlier, most student loan borrowers have a 640 credit score. To get a private student loan without a cosigner, you'll need to do better. Most lenders want you to have a 660 score or above. Having no credit history will make you ineligible. You must also be a U.S. citizen.
Not for all lenders, but for most, you'll want to be able to prove a decent income. Most banks want to see at least $25,000 per year. This will be difficult as a student, but not impossible.
If you are approved without a cosigner, expect to pay a higher interest rate. It's nothing personal, banks just see an individual to be more of a risk than two people who accept the debt burden. Remember, student loan debt is high. Banks have plenty of people applying for loans, so they have the opportunity to mitigate risk, rather than accept everyone who knocks.
By following this criteria, you have a very high chance of getting approved. Even if you don't meet the income target of $25,000, you may still be okay. Popular private lenders who don't always require cosigners include Sallie Mae, Wells Fargo, U-fi, Discover, Citizens Bank, and others. And, as always, to get the best rate you should shop around for the best deal.
One final option is to get a cosigner but then apply for release. You can apply for release typically after you've made 12-48 on-time payments.
However, that 90 percent number rears its ugly head once again. According to the aforementioned industry analysis done by the CFPB, borrowers who apply for a cosigner release are rejected 90 percent of the time. However, all hope of getting private student loans without a cosigner should not be lost. The investigation by the CFPB also found that most of the cosigner releases were filed by people who were confused about their eligibility for obtaining a cosigner release.
Through inductive reasoning, we can see that the reason so many people get rejected from cosigner release may be because they were simply ignorant of the process. But that won't be the case for you. You're about to find out how to get private student loans without a cosigner.
Getting a Cosigner Release on a Private Student Loan
Step 1: Start with a Request
Private lenders usually require you to keep a cosigner unless you ask otherwise. You must ask because the ability to opt out is not well advertised. To further increase your chances of approval, increase your clout. With your cosigner release request, submit a Consumer Financial Protection Bureau form letter.
Step 2: Submit Proof of Financial Responsibility
If you want cosigner release, you need to prove you have the money to handle the debt on your own. You'll want to submit documents, such as proof of employment, income information, income-to-debt ratio and credit scores.
Step 3: Wait for Approval
Not many borrowers request a cosigner release. Don't be surprised if the process seems clunky. The better off you're doing, relative to when you first applied for the loan, will determine if you are approved or denied. Good luck getting a student loan without a cosigner!
Your Strategy Moving Forward
Start with Federal student loans. Most people even max out their Federal student loan availability without so much as a thought to getting a cosigner. Next, try to obtain a private student loan without a cosigner. Make sure your credit score is at least a 660 and that you're making an income. The final option is to get a private student loan with a cosigner – and then have them released. You can start that process typically after 12 on-time payments.
And that's how you can get student loans without a cosigner. You can do it. It just takes patience and maybe a little extra money. But it is definitely a worthy goal.