In many situations, students have to pay for school on their own and the reality is that there’s a good chance you’ll need a student loan to help cover the cost of your education. Even if you have a scholarship, you might need to use a student loan to help close that funding gap.
When you take out student loans, there are different options available to you. Many of these loan options, however, require you to have a cosigner. A cosigner is, typically a parent for students, someone who signs a loan agreement alongside you and is essentially a backup repayment source for the lender. This ensures that you can actually qualify for a loan when you otherwise couldn't and that the lender takes on less risk by having a backup in case you can't pay back the loan. But what if you can’t get a cosigner for a student loan? The good news is, there are several things you can do to get a student loan without a cosigner.
How Do I Get a Federal Student Loan without a cosigner?
The first step in any federal student loan application, for both graduate, and undergraduate students, is to complete the Free Application for Federal Student Aid, or FASFA. The FAFSA is the form you need to fill out to get any financial aid from the federal government to help pay for college. Keep in mind the difference between Student loans (which you do have to pay back) and grants (which you don’t have to pay back).
To fill out the FAFSA, you may need cooperation from your parents if you’re a dependent. This does not mean that your parents cosign your federal loan, it just means that your parents’ income will be taken into consideration when deciding how much federal student aid you qualify for.
If you don’t want to include your parents’ information on the FAFSA, see if you’re eligible to declare independent student status; you can do this through your college’s financial aid office. This status will allow you to fill out the FAFSA using your information, not your family’s.
Once the FAFSA is complete, you’ll receive a Student Aid Report several days to several weeks later. This sums up the information you filled out on your forms — double-check and make sure all the information on the report is correct.
After that, you’ll receive an award letter (electronically or by mail) from your school telling you how much aid you qualify for. When exactly this happens varies per school.
With the exception of PLUS loans, federal student loans don't require a credit check or a co-signer to get approved. Direct Subsidized and Direct Unsubsidized loans, also known as Stafford Loans, are available for students who can and can't demonstrate financial need, respectively. Perkins loans are another option, but these are reserved for borrowers with the greatest financial need. Check out the different types of Federal Student Loans here.
If you’ve exhausted your federal financial aid, where to next?
Income Share Agreements Do Not Require a Cosigner
Income Share Agreements (ISA) have emerged as an alternative to student loans. Under an ISA contract, you are provided with a deferred tuition option to cover costs in exchange for a promise to pay a percentage of your income after you’ve graduated. The money advanced is not a loan. It is an investment in the student’s future earning potential.
Besides the absence of growing interest and generally, no upfront payments, a significant benefit of Income Share Agreements is the fact that there are certain instances when your payments are paused or deferred. Read more about them here.
Income share agreements are easier than some types of student loans for students to obtain on their own. With an ISA you don’t need a cosigner or good credit to be approved. While you may not need good credit to be approved for an ISA, it is ultimately up to the school's ISA terms and policy that determines whether you can obtain an ISA through them.
In some cases, ISAs are available directly from your school, who partner with companies, such as Meratas, to administer and organize the ISA. But if your school doesn’t offer an Income Share Agreement it may be more difficult for you to find one. Before you decide on an Income Share Agreement make sure you know exactly what an ISA is and if it is a good option for you.
Compare different options for Income Share Agreements here.
How to Get a Private Student Loan Without a Co-Signer
Before turning to private lending, prospective students should exhaust federal financial options including grants and scholarships. But sometimes they just don’t provide enough money to complete your education. The Consumer Financial Protection Bureau reports that about 90% of new private loans require a cosigner, so this can be a much more difficult avenue to find financing.
It's best to exhaust all of your federal student loan options before even considering private student loans. Private student loans don’t require a FAFSA form, but rather individual applications for each lender you’re interested in borrowing from.
Here are some common private student loan eligibility criteria:
- U.S. citizenship or national or permanent resident alien status.
- An approved school or enrollment level, such as at least half-time enrollment in a four-year program.
- Age, generally the age someone legally becomes an adult in your state.
- Credit history, usually at least two years of established credit history verified by a credit check.
- Credit score, usually in the mid 600s range, but you won’t get the best rates unless your score is around 720 or higher
- Income requirements, generally based on your debt-to-income ratio after taking out the loan.
Not everyone has relatives willing to cosign a loan application with them, making it difficult to qualify for a loan. If that's the case for you, here's what you need to know about getting a private student loan without a cosigner.
Before You Sign a Loan
Before accepting a loan be sure to check out these different things to make sure your loan is fair and affordable:
- Origination fees
- Application fees
- Repayment terms
- Repayment options
- Interest rates
- Minimum loan amount and maximum loan amount
Building Credit to Get Approved
The simplest way to get a student loan without a cosigner is to build your credit and maintain a steady income. Private student loan companies will use these factors to approve your loan. But many undergraduate students don’t have an established credit history or steady income, which can make it difficult to qualify for a private student loan on your own. And if you do, a lack of credit or income could result in loan offers with high interest rates.
According to Experian, good credit means a 700 or above FICO credit score.
You can improve your credit score and report by always making debt payments on time, whether that’s clearing your credit card balance each month or paying what’s due on an auto loan. Missing even one payment could harm your credit score significantly.
Learn more ways to build credit as a college student here.
Choosing your financial aid is an important decision. Think about where you want to be when you graduate, specifically what career you’re thinking about, and make sure to do your research before deciding on one.Whether you decide to try and get loan approval without a cosigner or not, make sure you're completely aware of the terms and conditions of the loan you want to sign and do the math to ensure you can make your payments when it comes time to pay the loan back.
As mentioned above, Income Share Agreements are a great alternative to student loans to finance your education. With benefits to help with repayment and payments that are indexed to a portion of your income, ISAs can be a great option that also don't require a co-signer. Interested in learning more about Income Share Agreements or how to fund your education with one? Check out more on the Meratas blog.
Although every effort has been made to provide complete and accurate information, Meratas Inc. makes no warranties, express or implied, or representations as to the accuracy of content contained herein. Meratas Inc. assumes no liability or responsibility for any error or omissions in the information contained herein or the operation or use of these materials.